The project assigned to us was to study the financial health of any organization in thecountry. We decided to choose one of India’s largest companies in the automobile sector that has rapidly grown over the last few years and a company where leaders like Mr. Ratan Tata, or rather, a company that has been made Mr. Ratan Tata. Through this report, we try and analyze the financial environment in which TATA MOTORS & MARUTI SUZUKI is operating. Through a thorough financial analysis, our aim to understand the financial factors is influencing the company and its decision making.
Later, we try and evaluate the various ratios to appreciate their impact on company’s performance over the last 5 years. The financial statements of last 5 years are identified, studied and interpreted in light of company’s performance. Critical decisions of buying and selling of shares has been done by us through Technical analysis. and other current news are analyzed and their impact on the bottom line of the company is assessed ABOUT TATA MOTORS Tata Motors Limited (NSE: TATAMOTORS, BSE: 500570, NYSE: TTM) is an Indian multinational automotive corporation headquartered in Mumbai, India.
Part of the Tata Group, it was formerly known as TELCO (TATA Engineering and Locomotive Company). Tata Motors is India’s largest automobile company, with consolidated net profit of 9,274 crore (US$2. 07 billion) in 2010–11. It is the leader in commercial vehicles and among the top three in passenger vehicles. Tata Motors has products in the compact, midsize car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer, the world’s second largest bus manufacturer, and employs 50,000 workers.
Tata Motors has produced and sold over 4 million vehicles in India since 1954. Established in 1945, when the company began manufacturing locomotives, the company manufactured its first commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969. Tata Motors is a dual-listed company traded on both the Bombay Stock Exchange and New York Stock Exchange. In 2010, Tata Motors surpassed Reliance to win the coveted title of ‘India’s most valuable brand’ in an annual survey conducted by
Brand Finance and The Economic Times. Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow, Sanand, Dharwad and Pune in India, as well as in Argentina, South Africa, Thailand and the United Kingdom. ABOUT MARUTI SUZUKI Maruti Suzuki India Limited (NSE: MARUTI, BSE: 532500) is a subsidiary company of Japanese automaker Suzuki Motor Corporation. It is India’s largest passenger car company, accounting for over 45% of the domestic car market.
The company offers a complete range of cars from entry level Maruti 800 and Alto, to hatchback Ritz, A-Star, Swift, Wagon-R, Estillo and sedans DZire, SX4, in the ‘C’ segment Maruti Eeco and Sports Utility vehicle Grand Vitara. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India, and on 17 September 2007, Maruti Udyog Limited was renamed as Maruti Suzuki India Limited. The company’s headquarters are located in New Delhi.
Sanjay Gandhi owned the Maruti Technical Services Limited, which ran into trouble and was liquidated. After the death of Sanjay Gandhi, the Indira Gandhi government assigned a delegation of Indian technocrats to hunt for a collaborator for the project. Initial rounds of discussion were held with the giants of the automobile industry in Japan including Toyota, Nissan and Honda. Suzuki Motor Corporation was at that time a small player in the four wheeler automobile sector and had major share in the two wheeler segment. Suzuki’s bid was considered negligible. PEST ANALYSIS OF TATA MOTORS
POLITICAL Since Tata Motors operates in multiple countries across Europe, Africa, Asia, the Middle East, and Australia, it needs to pay close attention to the political climate but also laws and regulations in all the countries it operates in while also paying attention to regional governing bodies. Laws governing commerce, trade, growth, and investment are dependent on the local government as well as how successful local markets and economies will be due to regional, national and local influence. On March 26, 2008, Tata Motors reached an agreement with Ford to purchase Jaguar and Land Rover.
In order to be capable of this acquisition, Tata Motors must have a full comprehension of the governing bodies and laws regulating commerce in the home country, the United Kingdom, but also in countries Jaguar and Land Rover operate in. ECONOMIC Operating in numerous countries across the world, Tata Motors functions with a global economic perspective while focusing on each individual market. Because Tata is in a rapid growth period, expanding or forming a joint venture in over five countries world-wide since 2004, a global approach enables Tata Motors to adapt and learn from the many different regions within the whole automotive industry.
They have experience and resources from five continents across the globe, thus when any variable changes in the market they can gather information and resources from all over the world to address any issues. For instance, if the price of the aluminum required to make engine blocks goes up in Kenya, Tata has the option to get the aluminum from other suppliers in Europe or Asia who they would normally get from for production in Ukraine or Russia. Tata Motors also has to pay close attention to shifts in currency rates throughout the world.
Currency fluctuations can equate to higher or lower demands for Tata vehicles which in turn affect profitability. It can also mean a rise in costs or a drop in returns. They also have to pay attention to not just the domestic currency, the rupee, but also to the dollar, euro, pound etc. Just because the rupee is strong against the dollar does not mean it is strong against all the other currencies. Attention to currency is important because it influences where capital investment will develop and prosper. SOCIAL
Undoubtedly, the beliefs, opinions, and general attitude of all the stakeholders in a company will affect how well a company performs. This includes every stakeholder from the CEO and President, down to the line workers who screw the door panel into place, from the investor to the customer, the culture and attitude of all these people will ultimately determine the future of a company and whether they will be profitable or not. For this reason, Tata Motors tends to use an integration and rarely separation technique with foreign companies they acquire.
On the other hand, some economic issues that Tata Motors face must also be looked at from a more localized perspective. For instance, the market in India for cars is much different than the market for cars in Italy. First, India has over one billion more people than Italy does, thus the market is much larger or not as limited. TECHNOLOGY Tata Motors and its parent company, the Tata Group, are ahead of the game in the technology field. The Tata Group as a whole has over 20 publicly listed enterprises and operates in more than 80 countries world-wide.
This equates to Tata Motors having lots of experience and resources to draw from for research and development purposes. “The foundation of the company’s growth is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D” (Tata). Employing 1,400 scientists and engineers, Tata Motors’ Research and Development team is ahead of the pack in India’s market and right with the rest of the field internationally.
Among Tata’s firsts are “the first indigenously developed Light Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata Indica, India’s first fully indigenous passenger car,” as well as the increasingly famous Tata Nano, which is projected to be the world’s cheapest production car (Tata). In the automotive industry, it is becoming increasingly crucial for manufacturers to stay on top of the technology curve with new problems always rising such as escalating gas prices and pollution problems.
Tata recognizes this and dedicates lots of resources and time into research and development to be even with or preferably ahead of other competitors, global trends, and changing economies. In all, an automobile manufacturer must change, adapt, and evolve to stay competitive in the automotive game, and this is exactly what Tata is doing with their rapid growth, and extensive research and development. PEST ANALYSIS OF MARUTI SUZUKI INDIA LTD. POLITICAL The political environment favored Maruti to enter the Indian market with tie up with Suzuki at the time in 1983.
The government was lifting sanctions and making it easier for foreign players to enter the market. In 1983, the government permitted Suzuki – for some time, the only FDI player – to enter the market in a joint venture with Maruti – a state operated enterprise at the time. Ten years later, as part of a broader move to liberalize its economy, India de-licensed passenger car manufacturing and opened it up further to foreign participation. The 800, being a Maruti model, enjoyed a number of benefits from the government. There were other sops too specifically for Maruti, which helped the company keep prices down for the 800.
The Indian government is alleged to have curbed competition in order to promote state-owned Maruti. Consequently, several new car projects like Premier Automobiles planned tie-up with Nissan to manufacture the Sunny in the mid-80s did not receive government approval. ECONOMICAL The economic conditions in India where favoring Maruti Suzuki because the people were willing to spend more on automobile sector. The Indian economy was doing better and after the last decade’s emergency rule under Indira Gandhi the eighties was a time of development and stabilization for the economy and people.
The disposable income of the middle class was rising and they could now think of investing in things like better homes and cars so Maruti’s entry at the time was perfect. SOCIAL Socially the Indian middle class was gaining in repute and spending power. The common man wanted to buy a family car that gave him mobility and didn’t cost a bomb and was easier to own and maintain. The population was rising and there was a serious shortage of options as far as car models in the nation was concerned we were not exactly spoilt for choice as far as cars was concerned.
TECHNOLOGICAL With the presence of only two players in the industry The Hindustan Motors “AMBASSADOR” and the Premier Padmini (PAL) “FIAT”, it is safe to say that technologically the cars being sold in the era were dated and old. Maruti entered India with Suzuki (Japan) and brought with itself latest technology that included PROFITABILITY RATIO NET PROFIT MARGIN This ratio is the indication of overall profitability and efficiency of the business. high net profit ratio would only means adequate returns to the owners.
It also enables a firm to withstand in cut-throat competition when the selling price is falling or cost of production is rising . the ratio in the year 2011, 2010, 2009, 2008, and 2007 are 3. 78%, 6. 33%, 3. 90%, 7. 05%, and 7. 18% respectively it shows loss of the company. RETURN ON ASSET The ratio can be used to judge the borrowing policy of the enterprise. The enterprise is having the ratio of return on investment in the year 2007 was 11. 49% which came to 3. 75 % in the year 2011, it would indicate that it is borrowing at a rate higher than its earning.
ASSETS TURNOVER RATIO The asset turnover ratio simply compares the turnover with the assets that the business has used to generate that turnover. ratio in the year 2011, 2010, 2009, 2008, and 2007 are 99. 25%, 91. 56%, 97. 80%, 152. 60%, and 160. 14% respectively. This ratio started declining in the years after 2007 but in 2011 it rose a little and reached to 99. 25%. Reference: http://seminarprojects. com/Thread-project-report-of-investment-management-on-the-financial-analysis-of-tata-motors#ixzz2H5NgC8kJ