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Mohit P. Sharma (Roll No. 261) | Vishwas Gowrinathan (Roll No. 298) | 05 April, 2017
Introduction
Having chosen Tata Motors (We still dont know why) as our company
for analysis, we started brainstorming on various analytical parameters
as sought. The core crux of this analysis is based on the KISS (Keep it
Simple Sweetheart) principle where both the maker (we) and the
checker (you) can be on the same page of understanding.
This report analyses Tata Motors performance over the last 15 years
(Yes! Under promise, Over Deliver) and tries to review and analyse its
financial statements to make better economic decisions as potential
investors.
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INDEX
3. Profitability
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1. COMMON-SIZE BALANCE SHEET & INCOME STATEMENT
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Liabilities Vs Equity (Balance Sheet)
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Sales Vs Expense (Income Statement)
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2. LIQUIDITY AND SOLVENCY
Liquidity in simple terms means the degree to which an asset can be quickly bought or
sold in the market and convert it to cash.
A higher ratio implies a healthier short term liquidity level. If we look at the below bar
diagram, for Tata Motors, the current ratio is at 1.04 and quick ratio at 0.74. This indicates
that the company will be able to meet all its long-term and short-term financial
obligations respectively.
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3. PROFITABILITY
Profitability is measured relative to costs & expenses. In simple terms, there are certain
ratios (Profitability Ratios) that assesses an entitys capabilities to generate earnings as
compared to its expense.
From the Management effectiveness percentage, we can understand that Return on Assets
(ROA) is 16% which is considered to be good as per industry standards. Return on Equity at
57% shows that Tata motors generates profit from its shareholders investment.
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4. ECONOMIC VALUE ADDED (EVA)
Economic Value Added [EVA] is a performance measures developed by Stern Steward &
that attempt to measure the true economic profit produced by a company. A metric is
useful for investors who wish to determine how well a company has produced value for its
investors.
Source: http://www.attainix.com/ICTrackerDetail.aspx?stockcode=TATAMOTORS.IN
From the above data table and graph we can observe that EVA for Tata motors is in
negative since the operating profits is less than the capital employed in the business.
Thereby, indicating reduced efficiency.
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5. MARKET VALUE AND EFFICIENCY ANALYSIS
Below is a trend on how Tata Motors has performed in the NSE for the past 52 weeks.
From the above graph we can infer that the company hit the 52-week high of Rs. 598.40 on
7th Sep 2016 and went to 52-week low of Rs. 363.05 on 29th March 2016.
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6. DEBT INVESTORS PERSPECTIVE (LEVERAGE RATIOS)
The Leverage ratio of Tata Motors is at 87.23%. This indicates that the company is facing a
high financial risk, which suggest that the company is not fully utilizing the cheaper
source of finance (i.e. Debt).
Financial Strength
Parameter LFY
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7. EQUITY INVESTORS PERSPECTIVE
Below is an excerpt taken from Tata Motors Financial Statement for FY 2015 2016
During the year, the free cash flows for Tata Motors Group were Rs. 6,543 crores,
post spend on capex, design and development of Rs. 32,623 crores. Tata Motors
Group's borrowing as at March 31, 2016 stood at Rs. 70,468 crores (as at March 31,
2015: Rs. 73,610 crores). Cash and bank balances and investments in mutual funds
stood at Rs. 52,091 crores (as at March 31, 2015: Rs. 46,174 crores). With healthy
profitability and cash flow generation, the Consolidated Net Automotive Debt to
Equity Ratio stood at (0.01) as at March 31, 2016 as compared to 0.19 as at March 31,
2015.
The Cash flows from operations were positive Rs. 2,346 crores for standalone
operations of the Company. Spend on capex, design and development were Rs. 2,982
crores (net). The borrowings of the Company as at March 31, 2016 stood at Rs. 15,887
crores (as at March 31, 2015: Rs. 21,134 crores). Cash and bank balances including
mutual funds stood at Rs. 2,188 crores (as at March 31, 2015: Rs. 945 crores).
The valuation below confirms the above. Hence the stock is a good investment from a
long term perspective.
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8. REFERENCES
1. www.capitaline.com
2. www.moneycontrol.com
3. www.wikipedia.com
5. http://www.attainix.com/ICTrackerDetail.aspx?stockcode=TATAMOTORS.
IN
6. http://www.tatamotors.com/investors/financials/71-ar-html/boards-
report2.com
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