A (PV) segment has 14 per cent market

A STUDY ON RATIO ANALYSIS OF TATA
MOTORS

1.INTRODUCTION

 

    Meaning of automobile

Automobile (or car) – wheeled passenger vehicle that carries its own motor. Most definitions of the term specify that automobiles
are designed to run primarily on roads, to have seating for one to six people,
typically have four wheels and be constructed principally for the transport of
people rather than goods. As of 2002 there were 590 million passenger cars
worldwide (roughly one car for every eleven people), of which 140 million were
in the U.S. (roughly one car for
every two people).

 

    Automobile industry in India

The
Indian auto industry is one of the largest in the world. The industry accounts
for 7.1 per cent of the country’s Gross Domestic Product (GDP). The Two Wheelers
segment with 80 per cent market share is the leader of the Indian Automobile
market owing to a growing middle class and a young population. Moreover, the
growing interest of the companies in exploring the rural markets further aided
the growth of the sector. The overall Passenger Vehicle (PV) segment has 14 per
cent market share.

India
is also a prominent auto exporter and has strong export growth expectations for
the near future. In April-March 2017 exports of PV and Commercial Vehicles (CV)
registered a growth of 16.20 per cent and 4.99 per cent respectively, over
April-March 2016. In addition, several initiatives by the Government of India
and the major automobile players in the Indian market are expected to make
India a leader in the 2W and Four Wheeler (4W) market in the world by 2020.

 

 

 

    Market Size

Production
of passenger vehicles, commercial vehicles, three wheelers and two wheelers
grew at 5.41 per cent in FY17 to 25,316,044 vehicles from 24,016,599 vehicles
in FY16.The sales of passenger vehicles, commercial vehicles and two wheelers
grew by 9.23 per cent, 4.16 per cent and 6.89 per cent respectively, during the
period April-March 2017.

India’s
electric vehicle (EV) sales increased 37.5 per cent to 22,000 units during FY
2015-16 and are poised to rise further on the back of cheaper energy storage
costs and the Government of India’s vision to see six million electric and
hybrid vehicles in India by 2020.

 

    Investment

In
order to keep up with the growing demand, several auto makers have started
investing heavily in various segments of the industry during the last few
months. The industry has attracted Foreign Direct Investment (FDI) worth US$
17.40 billion during the period April 2000 to June 2017, according to data
released by Department of Industrial Policy and Promotion (DIPP).

Some
of the major investments and developments in the automobile sector in India are
as   follows:

1. JSW Energy, a
subsidiary of Jindal Group, has signed a Memorandum of Understanding (MoU) with
the Gujarat government to set up an electric vehicle-manufacturing company at a
cost of Rs 4,000 crore (US$ 613 million) which will have the capacity to
produce 2,00,000 electric vehicles every year.

2. Tata Motors will
invest Rs 4,000 crore (US$ 612 million) in the year 2017 and a major portion
will go to passenger vehicles i.e. Rs 2,500 crores (US$ 375 million) and the
remaining Rs 1,500 crore ($225 million) will be invested in the business over
the next few years.

3. Electric car
maker Tesla Inc. is likely to introduce its products in India sometime in the
summer of 2017.

4. Kia Motors is
expected to sign a memorandum of understanding (MoU) with the Government of
Andhra Pradesh (AP) to set up a factory in Penukonda in Anantapur district and
the company will invest around US$ 2 billion on this plant and it will have
manufacturing capacity of the 3 lakhs car per annum.

5. Several
automobile manufacturers, from global majors such as Audi to Indian companies
such as Maruti Suzuki and Mahindra & Mahindra, are exploring the possibilities
of introducing driverless self-driven cars for India.

6. BMW plans to
manufacture a local version of below-500 CC motorcycle, the G310R, in TVS
Motor’s Hosur plant in Tamil Nadu, for Indian markets.

7. Hero MotoCorp Ltd
seeks to enhance its participation in the Indian electric vehicle (EV) space by
pursuing its internal EV Programme in addition to investing Rs 205 crore (US$
30.75 million) to acquire around 26-30 per cent stake in Bengaluru-based
technology start-up Ather Energy Pvt Ltd.

8. Ford Motor Co.
plans to invest Rs 1,300 crore (US$ 195 million) to build a global technology
and business centre in Chennai, which will be designed as a hub for product
development, mobility solutions and business services for India and other
markets.

 

Government Initiatives

The
Government of India encourages foreign investment in the automobile sector and
allows 100 per cent FDI under the automatic route.

     Some of the major initiatives taken by the
Government of India are

1.    
Government is planning to introduce
biofuel vehicles for road and water transportation. India needs to cut fossil
fuel imports and look for alternative and cheaper fuels like methanol.

2.    
Government of India extended support
to the industry by increasing custom duty on CBUs of commercial vehicles from
10 per cent to 40 per cent and reducing duty on chassis for ambulance
manufacturing from 24 per cent to 12.5 per cent.

3.    
The Government of India plans to
introduce a new Green Urban Transport Scheme with a central assistance of about
Rs 25,000 crore (US$ 3.75 billion), aimed at boosting the growth of urban
transport along low carbon path for substantial reduction in pollution, and
providing a framework for funding urban mobility projects at National, State
and City level with minimum recourse to budgetary support by encouraging
innovative financing of projects.

4.    
Government of India aims to make
automobiles manufacturing the main driver of ‘Make in India’ initiative, as it
expects passenger vehicles market to triple to 9.4 million units by 2026, as
highlighted in the Auto Mission Plan (AMP) 2016-26.

5.    
The government has formulated a
Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in
India, under the National Electric Mobility Mission 2020 to encourage the
progressive induction of reliable, affordable and efficient electric and hybrid
vehicles in the country.

MAJOR COMPANIES IN  AUTOMOBILE INDUSTRY:

Ø  Mahindra & Mahindra

Ø  Ashok Leyland

Ø  General motors’ India

Ø  Bajaj auto

Ø  Force motor

Ø  Volkswagen group sales India private limited

§  Audi Ag

§  Skoda auto

Ø  Fiat automobiles

Ø  Premier automobiles limited

Ø  Tata motors limited

·      
Tata motors

·      
Jaguar cars and
Land Rover

    Growth of the Industry

Growth
of the industry is taking place in clusters. The automotive industry is
developing in clusters. There are four major clusters in the automotive
industry in India. They are in and around New Delhi, Gurgaon and Manesar in
North India, Pune, Nasik, Halol and Aurangabad in West India, Chennai,
Bangalore and Hosur in South India and Jamshedpur and Kolkata in East India. Of
course there are several manufacturing units in many other parts of India but
these four clusters are expected to become the main hubs for manufacturing in
the automotive industry. The Government of India (GOI) is taking initiatives to
develop the automotive clusters. For example, the GOI, in its 11th Five Year
Plan (2007–2012), is planning to create the Specialized Education and Training
Institute for the automotive industry. It is also taking measures to enhance
transportation, communication, and infrastructure facilities in these clusters.

    Factors determining the growth of the
industry

·
Fuel economy and demand for greater fuel efficiency is a major factor that
affects consumer purchase decision that will bring leading companies across
two-wheeler and four-wheeler segment to focus on delivering
performance-oriented products.

·
Sturdy legal and banking infrastructure

·
Increased affordability, heightened demand in the small car segment and the
surging income of the Indian population.

·
India is the third largest investor base in the world

·
The Government technology modernization fund is concentrating on establishing
India as an automanufacturing hub.

·
Availability of inexpensive skilled workers

·
Industry is perusing to elevate sales by knocking on doors of women, youth,
rural and luxury segments

·
Market segmentation and product innovation.

     Road
Ahead(vision)

The
automobile industry is supported by various factors such as availability of
skilled labour at low cost, robust R centres and low cost steel
production. The industry also provides great opportunities for investment and
direct and indirect employment to skilled and unskilled. The Indian automotive
aftermarket is estimated to grow at around 10-15 per cent to reach US$ 16.5
billion by 2021 from around US$ 7 billion in 2016. It has the potential to
generate up to US$ 300 billion in annual revenue by 2026, create 65 million
additional jobs and contribute over 12 per cent to India’s Gross Domestic
Product.According to Mr Guillaume Sicard, president, Nissan India Operations,
the income tax rate cut from 10 per cent to 5 per cent for individual tax
payers earning under Rs 5 lakh (US$ 7,472) per annum will create a positive
sentiment among likely first time buyers for entry level and small cars.

Exchange
Rate used INR 1 = US$ 0.015 as of January as of 2018.

 

    Demonetisation effect on Auto Industry

According
to the reports of manufacturers, dealers and bankers ,demonetisation has badly
affected the market with demand weakening in Gujarat , Punjab , the National
Capital Region.

·
Used cars sale is also expected to plummet by by 50% leading to the loss of
revenue of Rs.3,900 crore.

·
Footfall at Showroom of Hero MotoCorp has dropped by 15% in the first two days
of demonetisation drive

·
The largereffect is seen in the unorganised used car market, which is driven
mostly by cashbased deals10.

 

 

 

 SWOT
Analysis of Automobile Industry

       Strengths


Large domestic market


Sustainable labor cost advantage


Competitive auto component vendor base


Government incentives for manufacturing plants


Strong engineering skills in design etc

 Weaknesses

       • Low labor productivity


High interest costs and high overheads make the production uncompetitive


Various forms of taxes push up the cost of production


Low investment in Research and Development

• Infrastructure bottleneck

Opportunities


Commercial vehicles: SC ban on overloading


Heavy thrust on mining and construction activity


Increase in the income level


Cut in excise duties

• Rising rural demand.

     Threats


Rising input costs


Rising interest rates


Cut throat competition

 

 

Indian Automobile Industry –
Challenges Ahead

Research And Development-
In India research and development program is low as compared to other parts of
the world.

Fluctuations in fuel prices-
Fluctuation in prices of the fuel affect the demand for the vehicle. The price
of fuel affect the driving habits of consumers and the type of the car they
buy. Change in the price of petrol have changed the preference of people to
switch to more efficient cars.

Poor Infrastructure – Poor
roads infrastructure is the biggest issue by far in the Indian automotive
industry.Traffic laws are not well enforced and followed leading to one of the
highest per capita accident rates in the world.

Innovation – The
competitiveness of any sector depends on the capacity to innovate and upgrade.
It is also significant to understand that labour cost, duties, interest and
economies of scale are regarded as the determinant of competitiveness. It also
involves core products and technology innovation apart from productive human
resource. The automakers will have to look for the policies of the state that
encourages innovation.

Stiff Competition – There exists a
tough competition among the automobile players and all desire to capture a big
share of the market. The margins of the manufacturers are squeezed out and
which in turn they cut cost to be profitable and competitive.

Taxes, Duties and Tariffs –
In India the tax laws are supposed to be one of the most complex due to
plethora of associated process. High tariff restrict the flow of trade but
attracts investment if domestic market has scope of growth.

   

 

 

 

    Objective of the Study

     Primary Objective

1.     To
analyse the financial statements of TATA Motors Limited from 2015 to 2017.

2.     To
interpret the analysis and the trends of financial results of TATA Motors
Limited.

3.     To
use various ratios to find out the assets and liabilities and financial
position of the company.

      Secondary
Objective

1.     To
standardize financial information for comparison.

2.     To
evaluate current operation and financial information for comparison.

3.     To
compare performance with past performances.

 

    Scope of the Study

     The study covers the overall performance
of the company. Financial area is the main coverage

     of the study. Analysing the ratios of the
company is taken into account under the study. Period

     of the study is 3 years. (2014-15,
2015-16, 2016-17)                                    

    

      Limitations
of the Study

Under
this study, a comparative study is not taken. The study did not cover the
entire financial management. Except finance area, all the other areas of the
business are not covered. Primary Data is not used in the study. The period of
the study is restricted to 3 years.

 

 

 

 

                                             METHODOLOGY

 

Type
of research

The research methodology used for this study is
Analytical Research. The researcher has to use facts or information already
available, and analyze these to make a critical evaluation of the material.

Sources
of Data

The study is mostly based on the secondary data,
obtained from the annual report and analysis of other supported financial
statements of TATA MOTORS.

Period
of study

The analysis of financial performance was done for a
period of three years from 2015-2017.

Tools
and Techniques used

Ratio Analysis is the main tool used for the analysis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVIEW
OF LITERATURE

 

S.vijayakumarBharathy

In this study the financial position of the company was found to        be sound. And that there is hardly any
chance of getting into bankrupt in the near future. The company’s short term
liquidity position was found to be satisfactory.

Mr.NazismJAhammed
– He
made an attempt to study the financial position of the tyre company. His
objectives were to analysis te solvency and liquidity of the company. The
comparative statement. The study revealed that the firm’s financial position
was found to be satisfactory.

 

MuhammedZbrahim –  In his study he analyzed the financial performance
of kaleeswarar mills. He analyzed some ratio’s like fixed asset turnover ratio,
current ratio, working capital ratio, profitability ratio, etc..

 

Vasanthamani –
She
studied the financial performance of Lakshmi machines works limited. The
objective of this study was to evaluate the financial performance of Lakshmi
machines works with a view to analyze the future of performance potentials, The
study covered the period from 2003-2007. The liquidity position of the company
showed that the company was able to meet the creditors out of its own current
assets. The quick ratio also revealed that the quick liabilities were met at of
quick assets without any efficiency

Abhijeet
Singh (2011) Tata
Motors uses a customer relationship management and dealer management system
(CRM-DMS) which integrates one of the largest applications in the automobile
industry, linking more than 1200 dealers across India.CRM DOS has helped Tata
Motors to improve its inventory management, tax calculation and pricing. This
system has also proved to be beneficial to dealers because it has reduced their
working capital cost.