1

“Financial Statement Analysis of Tata Motors Ltd.”

Project Report submitted to

SAVITRIBAI PHULE PUNE UNIVERSITY

IN THE PARTIAL FULFILMENT OF TWO YEARS FULL TIME

MASTERS DEGREE IN BUSINESS ADMINISTRATION (MBA)

ASHA KITTURKAR
(BATCH -2021-2023)

UNDER THE GUIDANCE OF

Prof. Niji Shajan

THROUGH

KES’s
PRATIBHA INSTITUTE OF BUSINESS MANAGEMENT
CHINCHWAD.411019
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DECLARATION

I hereby declare that the Project titled “A STUDY ON THE FINANCIAL PERFORMANCE OF
TATA MOTORS LTD” at “ TML Business Services Ltd .” to business service in Pimpri-Chinchwad
under the guidance and supervision of Prof. Niji Shajan.

The information has been collected from genuine and authentic sources. The information and data given
in the report is authentic to the best of my knowledge. The project is submitted in partial fulfilment of
the requirement of “Master of Business Administration” to Savitribai Phule Pune Universtiy

Place: Chinchwad, Pune Asha Kitturkar

Date:
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ACKNOWLEDGEMENT

I would like to take the opportunity to express my sincere gratitude to all people who have helped me
with sound advice and able guidance.
Above all, I express my eternal gratitude to the Lord Almighty under whose divine guidance;
I have been able to complete this work successfully.

I would like to express my sincere obligation leader ‘Prof. Niji Shajan’, PIBM for providing various
facilities.

I am thankful to Dr. Sachin Borgave, Director, PIBM, for giving me the privilege to be associated with
such an esteemed organization and carry the college’s name forward
I acknowledge my gratitude to Prof. Niji Shajan, PIBM who motivated me a lot in carrying out this
project.

I would like to express my gratitude to all the faculties of the Department for their interest and
cooperation in this regard.

I extend my hearty gratitude to the librarian and other library staffs of my college for their wholehearted
cooperation.

I express my sincere thanks to my friends and family for their support in completing this report
successfully.

Asha Kitturkar

M.B.A(2021-2023)

PIBM- Pune
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CONTENTS

CHAPTER PARTICULARS PAGE NO.

1 INTRODUCTION 6

2 REVIEW OF LITERATURE 13

3 RESEARCH METHADOLOGY 22

4 DATA REPRESENTATION AND ANALYSIS 25

5 RESULTS AND CONCLUSION 43

REFERENCES 47

ANNEXURE 51
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CHAPTER 1: INTRODUCTION
1.1. Rationale of study
1.2. Introduction to automobile industry
1.2.1. Indian Automobile Industry
1.2.2. Major companies
1.3. Introduction to Company
1.3.1. Background
1.3.2. Joint ventures
1.4. Justification of the topic
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CHAPTER 1: INTRODUCTION

2.1. RATIONALE OF STUDY

Financial Analysis is a process of evaluating the relationship between component parts of a
financial statement to obtain a better understanding of a firm’s position and performance. The
analysis of the balance sheet of a company, income statement, and cash flow statement, as well
as the interpretation of trends and identification of weaknesses and strengths, may provide
enough information for management to make sales and profit projections for the next three to
five years. They can make a reasonable estimate of how well the company will fare in the
coming years based on knowledge of general economic and industry trends. Businesses that
need to plan equipment purchases and other initiatives can benefit from such analyses.
Financial analysis aids in evaluating whether an organization's investment is adequate, whether
its management is competent, and whether its employees are effective. Finally, organization
can identify its progress, profits and growth. Profitability is critical to any organization.
Growth, expansion, and diversification are all required for survival. Profit is necessary to
satisfy investors, repay debts or loans, pay wages and salaries to employees, and cover other
day-to-day costs. Profit is a strong indicator of a company's overall performance. (Crawford)

2.2. INTRODUCTION TO AUTOMOBILE INDUSTRY

The automobile industry is a major contributor to the global economy. The automobile industry is
mainly comprised of the world's largest passenger car and light truck suppliers. Most members of
the industry sell vehicles in the global market, including both developed and developing countries,
through vast dealership networks. Automobile manufacturers offer a wide range of makes and
models, but brand integration is often limited at the marketing, advertisement, and dealership
 7

levels. The bulk of these companies operate production facilities in multiple geographic regions.
(Ferro, 2015)

1.2.1 INDIAN AUTOMOBILE INDUSTRY

India became the fourth largest auto market in 2019 surpassing Germany with approximately 3.99
million passenger and commercial vehicles sold in 2019. By2021, India is predicted to overtake
Japan and become world's third largest auto market. The Government of India encourages foreign
investment in the automobile sector and has allowed 100% foreign direct investment (FDI) under
the automatic route. (2020) The Indian automobile industry is a major economic engine,
accounting for nearly half of the country's manufacturing GDP and 7.5 percent of its total GDP.
The value chain of the sector employs roughly 32 million people. (Ind)

1.2.2 MAJOR COMPANIES IN THE INDUSTRY

• Tata Motors

• Maruti Suzuki

• Mahindra & Mahindra

• Hyundai Motors

• Hero MotoCorp

• Honda Motor Company

• Kia Motors

• Bajaj Auto

• Ashok Leyland

• Eicher Motors
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2.3. INTRODUCTION TO COMPANY

Tata Motors is an Indian multinational car manufacturer that was founded in 1945. It’s headquarter
is situated in Mumbai, Maharashtra, India. Tata Motors is among the world’s leading
manufacturers of automobiles, producing buses, trucks, sports cars, and coaches. It is also a
manufacturer of military vehicles. The company makes one of India's safest vehicles, with
excellent safety features and high quality. The price range is between 4.70 lakhs and 16.25 lakhs.
Tata Motors, a $35 billion organization and a subsidiary of the USD 113 billion Tata group, has
operations in the, South Korea, United Kingdom ,Thailand, ,Indonesia and South Africa through a
solid worldwide network of 113 subsidiary and associate companies, including Tata Daewoo in
South Korea and Jaguar Land Rover in the United Kingdom. (TAT) With 9 million cars on Indian
streets, Tata Motors is the market leader in commercial vehicles and one of the largest passenger
vehicle manufacturers. Tata Motors strives to pioneer new technologies that spark the interest of
GenNext consumers, with design and R&D centres in India, the United Kingdom, Italy, and Korea.

1.3.1 BACKGROUND
Tata Motors was established as Tata Engineering and Locomotive Co. Ltd. in 1945 to manufacture
locomotives and other engineering products. It is a leading global automobile manufacturing
company. It is the market leader in commercial vehicles in all segments, and it ranks among the
top three in passenger cars, with winning products in the compact, midsize, and utility vehicle
segments. (Tat) In the year 1954 they made collaboration with Daimler Benz AG West Germany
for manufacturing medium commercial vehicles. It started producing passenger vehicles in 1988.
Over 4 million Tata vehicles have been sold in India since the first model was launched.

Lucknow (Uttar Pradesh),Pune (Maharashtra), Jamshedpur (Jharkhand), Dharwad (Karnataka)

and Pantnagar (Uttarakhand) are the company's manufacturing bases in India. It has established an
industrial joint venture with Fiat Group Automobiles in Ranjangaon (Maharashtra) to manufacture
both Fiat and Tata vehicles as well as Fiat powertrains, following a strategic alliance with Fiat in
 9

2005. Tata Motors became the first company from engineering sector of India to be listed on the
New York Stock Exchange in September 2004.

Tata Motors produced India's first indigenously manufactured Light Commercial Vehicle, India's
first Sports Utility Vehicle, and India's first entirely indigenous passenger vehicle, the Tata Indica,
in 1998. Tata Indica became India's best-selling vehicle in its segment just two years after its
launch. Tata Motors launched the Tata Ace, India's first indigenously constructed mini–truck, in
2005, starting a new segment. In 2008, Tata Motors acquired Jaguar Land Rover, the English car
manufacturer that produces the Land rover and Jaguar, from Ford

Tata Motors revealed its People's Car, the Tata Nano , the world's cheapest car, in January 2008.
In March 2009, the Tata Nano was officially unveiled in India. The Nano is a world-first for the
automotive industry, bringing the comfort and safety of a vehicle within reach of tens of thousands
of households. The standard version was priced at Rs.1,00,000 in India. In March 2017, Tata
Motors and Volkswagen signed a Memorandum of Understanding to collaborate on car
development for India's domestic market.

Tata Motors is traded on the New York Stock Exchange, the National Stock Exchange of India,
and Bombay Stock Exchange. It is a part of the BSE SENSEX index. As of 2019, the company is
ranked 265th on the Fortune Global 500 list of the world's most powerful companies.
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1.3.2 JOINT VENTURES

Fiat-Tata

Fiat Group Automobiles and Tata Motors formed an industrial joint venture in Ranjangaon,
Maharashtra, India, to produce passenger vehicles, engines, and transmissions for the Indian
and international markets.

Tata Marcopolo

Tata Marcopolo Motors Limited (TMML) is a 51:49 joint venture between Tata Motors Ltd.
(TML) India and Marcopolo S.A., a Brazillian company for bus production in India.The joint
venture develops mass rapid transportation systems by manufacturing and assembling fully
constructed buses and coaches. It relies on Tata Motors' technology and expertise in chassis and
aggregates, as well as Marcopolo's expertise in bodybuilding and bus body design processes and
systems. Tata Marcopolo has introduced a low-floor city bus that is already in use by many Indian
cities' public transportation systems. The company's manufacturing facility is in Dharwad,
Karnataka, India.

Tata Hitachi Construction Machinery

It is a venture between Tata Motors and Hitachi for manufacturing excavators and other
construction equipment. The company was formerly known as Telcon Construction Solutions.

Hyundai-Tata

Tata Motors partnered with Hyundai to develop the transmission for the Tata Harrier.
 11

Tata Motors European Technical Centre

Tata Motors European Technical Centre PLC (TMETC), headquartered in Coventry, UK, is a
wholly owned subsidiary of Tata Motors. TMETC is an active participant in a number of
collaborative ventures in low carbon technology, as well as electric and hybrid vehicle
technologies for future passenger and light commercial vehicles, as a centre of excellence for
automobile design and engineering.

2.4. JUSTIFICATION OF THE TOPIC

Tata Motors is chosen for this study because it is an indigenous company with a global presence
and is one of the best car manufacturing companies in India. Furthermore, as a result of the
global economic slowdown in the automotive market, the company is currently operating at a
loss.
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CHAPTER 2: REVIEW OF LITERATURE

2.1. National Reviews
2.2. International Reviews
 13

CHAPTER 2: REVIEW OF LITERATURE

3.1. National Reviews

TITLE AUTHOR DESCRIPTION

 14

A Study on Financial Status of A. Moses Joshuva Daniel Using a variety of financial instruments, this
Tata Motors Ltd study examined TATA MOTORS LTD's
overall financial situation. The research was
carried out over a five-year period, from 2006-
07 to 2010-11. Various accounting ratios have
been used to measure financial status in terms
of profitability, solvency, operation, and
financial stability. (Daniel,
2013) found that that the company’s financial
performance is satisfactory. The business is
growing steadily and has a higher status in all
of the markets where it operates.

Financial Analysis of Tata Suman Rana

Motors & Maruti Suzuki
In this study the financial statement of Tata
Motors & Maruti Suzuki was examined using
ratio analysis from 2013-14 to 2017-18. In
comparison to Maruti Suzuki, Tata Motors had
a greater capacity to pay liabilities. Maruti
Suzuki has a high debt-to-equity ratio,
indicating the company's poor performance.
Maruti Suzuki has a higher inventory turnover
ratio, indicating that stock is selling quickly.
Tata Motors has lower earnings per share than

Maruti Suzuki.

(Rana, 2019)
 15

Profitability Analysis Of Select Dr. K. Gandhi They discovered that Tata Motors' net profit
Companies In India – With decreased during the study period, while
Special Reference To Tata Mahindra and Mahindra's profit increased
Motors And Mahindra And significantly. The operating profit ratio and
Mahindra return on investment of the sample companies
did not show any major variations in the
ANOVA test.

(Gandhi, 2017)

A Study on Profitability Analysis Dr.M.S.Ranjithkumar This research aims to determine the

of Indian Selected determinants of profitability in the Indian
C.Eahambaram
Automobile Industry in India automotive industry by examining a sample of
all automobile firms from different segments
of the industry. They discovered that
improvements could be made to the industries'
liquidity positions in order to boost
profitability. As a result, liquidity has an effect
on profitability.

(Ranjithkumar, et al., 2018)

Liquidity and Profitability Vikas Garg

(Garg, 2018) found out that in terms of
Analysis of Selected Automobile
Pooja Tewari operating profit ratio, net profit ratio, and gross
Companies
profit ratio, Maruti Suzuki India was doing
Shalini Srivastav
exceptionally well. Mahindra and
Mahindra's return on net worth and long-term
 16

funds were below average, and Tata Motors'

output during the same time was also similar.

Financial Performance Of Kanagavalli G. Using ratio analysis, the paper analyses the
Selected Automobile Companies financial results of major selected automobile
Saroja Devi Rajendran
companies over a five-year period from 2013
to 2017. The study's aim is to assess and
compare the financial results of three
companies in order to rank their financial
performance. After examining all of the factors
relevant to this study, they concluded that TVS
Motors and Bajaj Auto are satisfactory, while
Hero Motocorp maintains a strong market
position.

(Kanagavalli, et al., 2018)

Financial Analysis Of Indian Dr. Nishi Sharma (SHARMA, 2011) examines the financial
Automobile Industry performance of selected units using 11
financial variables that reflect four different
parameters of the organization: liquidity,
profitability, activity, and long-term solvency.
The paper also tries to figure out if the success
of different firms is identical or whether there
is a major difference between them. It also
assigns various companies ranks based on their
results and recommends some steps for the
sector's further progress.
 17

A Study On Comparative T.Bhargavi (BHARGAVI, et al., 2020) found that the

companies passivities are more than their assets
Financial Statement Analysis On
K.S.G.Chandravath and that the business has a good working capital
Hero Motor Crop.
position and can meet its contractual
Dr. K.Veeraiah obligations.

A Study on Financial Statement Dr. Ashok Kumar Rath The objective of this paper is to evaluate the
Analysis of Tata Steel Odisha financial strength and weaknesses of the Tata
Project, Kalinga Nagar Steel Orissa project using various financial
statement analysis methods and techniques
during the study period, which is from 201011
to 2014-15.

(Rath, 2016)
 18

A Study On Financial Dr. M. Ravichandran This study aims to identify the individual ratios
Performance Analysis Of Force that influence market profitability and to
M. Venkata Subramanian
Motors Limited categorize the financial ratios into a small
number of latent variables that represent a
compact view of financial performance over
time. The financial performance is fair,
according to the study. It has maintained strong
financial results and can gain more if the
business focuses on its operating,
administrative, and marketing expenses, as well
as on cutting costs.

(Ravichandran, et al., 2016)

A Study On Financial Analysis J.Pavithra , Dilip The project's goals are to identify BSNL's
Of BSNL Gurukrishnan various assets in relation to the company's
annual reports.

To investigate the finance department's

operations through a comparison of past
twoyear annual reports.

(J.Pavithra, et al., 2018)

 19

A Study On Financial S.Saigeetha and This paper took the analysis of Bharat Heavy
Electricals Limited’s financial performance to
Performance Using Ratio Dr.S.T.Surulivel
assess the cash fluctuations in profitability and
Analysis Of BHEL, Trichy BHEL's liquidity status. (S.Saigeetha, et al.,
2017)

A Study On Financial Analysis Of Dr. G. Prabhakaran (Prabhakaran, et al., 2014) looked at TATA
Tata Motors Ltd., Navi Motors' entire financial picture, including
Miss. J. Nazirin Banu
Mumbai India liquidity, financial ratios, activity, profitability
and solvency. The research only spans seven
years, from 2006–07 to 2012–13.

3.1. International Reviews

TITLE PARTICULARS DESCRIPTION

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Financial Statements Analysis Anupam Mehta (Mehta, et al., 2018) found that while the
On Tesla company's Gross Profit was rising in absolute
Ganga Bhavani terms, when measured as a percentage of
revenue, it had declined from 23 percent in
2015 and 2016 to 19 percent in 2017. Higher
maintenance, research and development,
general, selling and administrative
expenditures have all contributed to the
company's Net Loss.

Financial Analysis Of A Dušan BARAN, (BARAN, et al., 2016) revealed that financial
analysis is an important tool for supporting the
Selected Company
Andrej PASTÝR, decision-making of different stakeholder
groups and is an important part of monitoring
Daniela BARANOVÁ the company subject. It also provides a picture
or input on the overall state of the company
subject and its growth, as well as the state of
individual activity areas.

Role of Ratio Analysis in Mohammed Nuhu

Business Decisions: A Case
The aim of this study was to determine the role
Study NBC Maiduguri Plant of ratio analysis in business decisions. They
came to the conclusion that ratio analysis aids
in the discovery, comparison, and
interpretation of key features of financial
statements. They aid in determining a
company's strengths and weaknesses. It aids
 21

in determining a company's past success,

current state, and potential prospects.

(Nuhu, 2014)

Liquidity-Profitability Afia Akter , The relationship between liquidity as measured

Relationship in Bangladesh by the current ratio and profitability as
Khaled Mahmud
Banking Industry measured by the return on assets in
Bangladesh's banking industry was
investigated in this report, which looked at
twelve banks from four different sectors. They
concluded that there is no significant
relationship between liquidity and profitability
in Bangladeshi banks of various sectors based
on their sample and category.

(Akter, et al., 2014 )

Relationship Between Working Ioannis Lazaridis and (Lazaridis, et al., 2006) Investigated the
Capital Management And relationship of corporate profitability and
Dimitrios Tryfonidis working capital management for firms listed at
Profitability Of Listed Athens Stock Exchange. They reported that
Companies In The Athens Stock there is statistically significant relationship
between profitability measured by gross
Exchange
operating profit and the Cash Conversion
Cycle. Furthermore, Managers can create
profit by correctly handling the individual
components of working capital to an optimal
level.
 22

Trade-Off between Liquidity and A. Nishanthini, (A. Nishanthini, 2015) Found that both State
Profitability: A Comparative Banks and Private Banks had an insignificant
J. Meerajancy correlation between liquidity and profitability.
Study between State Banks and In addition, regression shows that liquidity has
Private Banks in Sri Lanka a negative effect on profitability in a few Sri
Lankan banks.

Liquidity and Profitability Georgeta Vintilă, The emphasis of this paper was not on testing
Analysis on the Romanian a specific model, but rather on examining the
Elena Alexandra Nenu relationships between the variables.
Listed Companies Accounting metrics such as return on assets
and return on equity were used to assess
financial results. The findings showed a
negative relationship between liquidity and
financial performance. (Nenu, et al., 2016)
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CHAPTER 3: RESEARCH METHODOLOGY

3.1 Objectives of the Study
3.2 Research Hypothesis
3.3 Scope of the Study
3.4 Limitation of the study

CHAPTER 3: RESEARCH METHODOLOGY

3.1 OBJECTIVES OF THE STUDY

 To analyze the financial position of the company.

 To make comparative study of financial statements of different years.
 To compare the Impact of ratios on the performance of company.

3.2 RESEARCH HYPOTHESIS

The following hypothesis was framed to conduct the analysis:-

H1 - Performance of Tata Motors Ltd. is not satisfactory.

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3.3 SCOPE OF THE STUDY

This study aims at analyzing the overall financial position of the Tata Motors by using accounting
ratios. The analysis covers the years 2016-2017, 2017-2018, 2018-2019 and 20192020 for
examining financial statements such as income statements and balance sheets. The study's scope
includes the numerous variables that influence the company's financial position.
The research takes into account data from the previous four years.

3.4 LIMITATION OF THE STUDY

This study has the following limitations:

• We only analyzed last four years’ financial statements which does not represent the whole
profitability of the company.
• The data used in the analysis is based on the company's own published past results. As a
result, ratio analysis metrics are not always indicative of future company performance.
(Lim)
Financial statements used for financial analysis are prepared based on a going concern
concept, so they do not always reflect the current situation. (Sta)
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CHAPTER 4: DATA REPRESENTATION &

ANALYSIS
4.1 Data representation and Interpretation
4.2 Hypothesis testing
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CHAPTER 4: DATA REPRESENTATION & ANALYSIS

4.1 DATA REPRESENTATION & INTERPRETATION

2019-2020 2018-2019 2017-2018 2016-2017

Item/Year
Current Assets 1,195,835,700 1,228,275,200 1,362,648,300 1,163,336,400

Current Liabilities 1,397,398,500 1,447,750,600 1,427,782,700 1,152,886,200

Inventories 374,527,800 390,015,900 424,296,200 352,953,800

Cash 441,588,100 410,723,400 492,394,200 509,206,700

Receivables 111,726,900 189,961,700 198,933,000 140,755,500

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Total Assets 3,140,802,100 2,987,119,900 3,235,937,200 2,666,646,000

Total Liabilities 2,542,767,400 2,429,052,500 2,321,989,900 2,127,803,800

Total Equity 589,801,200 552,738,700 908,589,800 534,197,000

2,594,251,200 2,993,662,400 2,882,951,100 2,656,495,100

Sales
Cost of Goods Sold 1,651,970,900 1,978,855,800 1,869,682,900 1,670,895,400

-201,422,500 -203,091,700 -115,737,500 -63,956,100

EBIT
72,553,100 57,586,000 46,365,000 42,365,700
Interest
-113,940,300 -293,142,700 66,660,800 61,210,500
Net Income/Loss
*Amounts in Thousands

4.1.1 LIQUIDITY ANALYSIS

Liquidity analysis aims to determine the ability of a business to meet its financial obligations during
the short-term and to maintain its short-term debt paying ability. (Thakur) The liquidity ratios
 28

answer the question of whether a business firm can meet its current debt obligations with its current
assets. (CARLSON, 2020)

1. Current Ratio
The Current ratio is also known as working capital ratio or banker’s ratio. It expresses the
relationship of a current asset to current liabilities.

Current Ratio = Current Assets / Current Liability

Current Current
Financial Year Current ratio
Assets Liabilities

2020 1,195,835,700 1,397,398,500 0.85

2019 1,22,82,75,200 1,44,77,50,600 0.85

2018 1,36,26,48,300 1,42,77,82,700 0.95

2017 1,16,33,36,400 1,15,28,86,200 1.01

 29

Current ratio
1.05

1.00

0.95

0.90
Current ratio
0.85

0.80

0.75
2020 2019 2018 2017

INTERPRETATION: Out of the four years, 2016-2017 had the highest current ratio. As shown
in the graph, it has fallen at a constant rate to 0.85. It demonstrates how liquidity has dropped
significantly since 2017, with a ratio difference of 0.169.

2. Quick Ratio

Quick ratio is also known as the Acid test ratio. The quick ratio measures whether the firm can
meet its short-term debt obligations without selling any inventory. (CARLSON, 2020)

Quick Ratio = Current assets – Inventories / Current liabilities

assets –
Financial Current Current Quick
Year Inventory Liabilities Ratio

2020 82,13,07,900 1,397,398,500 0.58

 30

2019 83,82,59,300 1,44,77,50,600 0.58

93,83,52,100 1,42,77,82,700 0.65

2018

2017 81,03,82,600 1,15,28,86,200 0.7

Quick Ratio
0.8
0.7
0.6
0.5
0.4
Quick Ratio
0.3
0.2
0.1
0
2020 2019 2018 2017

INTERPRETATION: This diagram shows the drastic fall of quick ratio of the corporation from
0.7 to 0.28 since 2016-2017. It means that the company's ability to meet its short-term obligations
is deteriorating.

3. Cash Ratio
This ratio gives a more conservative view of the firm's liquidity since it uses only cash and cash
equivalents, such as short-term marketable securities, in the numerator. It indicates the ability of
the firm to pay off all its current liabilities without liquidating any other assets. (CARLSON, 2020)
 31

Cash Ratio Formula = Cash + Marketable Securities / Current Liability

Year end Total Cash Current Total

Liabilities

2020 44,15,88,100 1,39,73,98,500 0.31

2019 41,07,23,400 1,44,77,50,600 0.28

2018 49,23,94,200 1,42,77,82,700 0.34

2017 50,92,06,700 1,15,28,86,200 0.44

Cash Ratio
0.5
0.45
0.4
0.35
0.3
0.25
Cash Ratio
0.2
0.15
0.1
0.05
0
2020 2019 2018 2017

INTERPRETATION: This graph shows that liquidity has declined over time from 0.44 to
0.28, which can cause problems with bill repayment, but it has marginally recovered in 2020.
 32

4.1.2 EFFICIENCY ANALYSIS

Efficiency analysis measures activity or turnover ratios to assess how effectively a company's
assets are being used to produce revenue and increase profit or shareholder capital. They assess
the internal and short-term efficiency of a company's operations.

1. Inventory Turnover Ratio

This ratio indicates how easily inventory is sold, restocked, or turned over during the year. The
inventory turnover ratio helps to see if the company is running out of stock or has obsolete
inventory.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

Financial COGS Inventory Inventory turnover

year Ratio

2020 1,65,19,70,900 37,45,27,800 4.41

2019 1,97,88,55,800 39,00,15,900 5.07

2018 1,86,96,82,900 42,42,96,200 4.4

2017 1,67,08,95,400 35,29,53,800 4.73

 33

Inventory turnover Ratio

5.2

4.8

4.6
Inventory turnover Ratio

4.4

4.2

4
2020 2019 2018 2017

INTERPRETATION: In this graph, the company's operations are seen to be inconsistent. With
a rate of 4.40 in 2017-2018, it fell slightly before rapidly rising to 5.07 and then dropping to 4.41
in 2019-2020. It demonstrates that the company's operation has been volatile and that consistency
is needed.

2. RECEIVABLES TURNOVER RATIO

The Receivable turnover ratio also called the Debtor’s turnover ratio shows how many times the
receivables were turned into cash during the period.
 34

Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable

Year Sales Receivables

Receivable
Turnover Ratio

2,59,42,51,200 23.22
2020 11,17,26,900

2,99,36,62,400 18,99,61,700 15.75

2019

2,88,29,51,100 19,89,33,000 14.49

2018

2,65,64,95,100 14,07,55,500 18.87

2017

Receivable TO Ratio
25

20

15

Receivable TO Ratio
10

0
2020 2019 2018 2017
 35

INTERPRETATION: This figure shows the average amount of time needed to collect accounts
receivables for the company has increased. The ratio fell from 18.87 in 2016-2017 to 14.47 in
2017-2018, the lowest in the last four years, and has since improved dramatically to 23.22 in 2019-
2020, indicating that the business is handling credit more efficiently.

4.1.3 PROFITABILITY ANALYSIS

Profitability ratios are the summary ratios for the business firm. When profitability ratios are
calculated, they sum up the effects of liquidity management, asset management, and debt
management on the firm. (CARLSON, 2020)

1. Return On Equity Ratio

This ratio indicates how much money shareholders make on their investment in the business firm.
The ROE ratio is most important for publicly traded firms.

ROE = Net income / Common equity

Year end Net income Equity
Return on Equity
(%)

-11,39,40,300 58,98,01,200 -19.3

2020

-29,31,42,700 55,27,38,700 -53.03

2019

6,66,60,800 90,85,89,800 7.33

2018
 36

6,12,10,500 53,41,97,000 11.4

2017

Return on Equity (%)

20

10

0
2020 2019 2018 2017
-10

-20 Return on Equity (%)

-30

-40

-50

-60

INTERPRETATION: This figure shows that the return on equity rate has had a massive decline
since 2017 from positive 11.4% to negative 19.3%, though it has risen marginally in 2019-2020.
Its equity is performing extremely poorly.

2. Return On Total Assets Ratio

Return on assets is a financial ratio that shows the profit a company earns in relation to
its overall resources. It is commonly defined as net income divided by total assets. Net
income is derived from the income statement of the company and is the profit after
taxes. (Staff, 2021)
 37

ROA = Net income/ Total Assets

Year end Net income Total assets

Return on
assets (%)

-11,39,40,300 3,14,08,02,100 -3.6

2020

-29,31,42,700 2,98,71,19,900 -9.81

2019

6,66,60,800 3,23,59,37,200 2.06

2018

6,12,10,500 2,66,66,46,000 2.2

2017

Return on assets (%)

4

0
2020 2019 2018 2017
-2

-4 Return on assets (%)

-6

-8

-10

-12
 38

INTERPRETATION: This graph shows that the company's return on total assets ratio has
deteriorated significantly over the last few years. It was stable in 2017 and 2018 before it fell to
3.62 percent, indicating that the company's assets are not being used efficiently to generate profit.

3. Profit Margin Ratio

The net profit margin is a profitability ratio that expresses the profit from business operations as a
percentage of revenue or net sales. It compares a company's profits to the total amount of money
it brings in. It measures how effectively a company operates. (CARLSON, 2020)

Net profit margin ratio = Net income / Net Sales

Year Net Income Sales

Profit margin
(%)

-11,39,40,300 2,59,42,51,200 -4.3

2020

-29,31,42,700 2,99,36,62,400 -9.7

2019

6,66,60,800 2,88,29,51,100 2.31

2018

6,12,10,500 2,65,64,95,100 2.30

2017
 39

Profit margin (%)

4

0
2020 2019 2018 2017
-2

-4 Profit margin (%)

-6

-8

-10

-12

INTERPRETATION: This figure indicates that the business made a profit in 2017 and 2018,
with a consistent rate of 0.023. While they were able to maintain a consistent profit margin for two
years, it plummeted in 2019 to -0.97, rising slightly in 2020 to -0.043, indicating a significant shift
in the profit margin as seen in the chart.

4.1.4 LEVERAGE ANALYSIS

Here we measure how leveraged the company is and how it is placed with respect to its debt
repayment capacity.

1. Fixed Interest Coverage Ratio

This ratio measures how well a business can service its total debt or cover its interest payments on
debt. It is used to measure business profitability and its ability to repay the loan.
 40

Interest coverage ratio = Earnings before interest and taxes (EBIT) / Interest expense

Financial EBIT Interest Interest Coverage

Year Ratio

2020 -20,14,22,500 7,25,53,100 -2.78

2019 -20,30,91,700 5,75,86,000 -3.52

2018 -11,57,37,500 4,63,65,000 -2.49

2017 -6,39,56,100 4,23,65,700 -1.5

 41

Interest Coverage Ratio

0
2020 2019 2018 2017
-0.5

-1

-1.5

-2 Interest Coverage Ratio

-2.5

-3

-3.5

-4

INTERPRETATION: This figure shows that the company’s ability to make contractual interest
payments is massively negative and decreasing. From negative 1.50 in 2017 to negative 2.78 in
2020 which shows that the company isn’t in a good position to make payments.

2. Debt Ratio

The debt-to-asset ratio shows the percentage of total assets that were paid for with borrowed
money, represented by debt on the business firm's balance sheet. It is an indicator of financial
leverage or a measure of solvency. It also gives financial managers critical insight into a firm's
financial health or distress. (CARLSON, 2020)

Debt Ratio = Total Liabilities / Total Assets

Year Total Liabilities Total assets Debt Ratio

2,54,27,67,400 3,14,08,02,100 0.809

2020
 42

2,42,90,52,500 2,98,71,19,900 0.813

2019

2,32,19,89,900 3,23,59,37,200 0.717

2018

2,12,78,03,800 2,66,66,46,000 0.797

2017

Debt Ratio
0.84

0.82

0.8

0.78

0.76

0.74 Debt Ratio

0.72

0.7

0.68

0.66
2020 2019 2018 2017

INTERPRETATION: This figure shows the proportion of total assets financed by Tata
Motor’s creditors. The debt ratio is at its highest in 2019 and lowest in 2018. It shows that
debtfinanced is more now.

4.2. HYPOTHESIS TESTING

H1 - Performance of Tata Motors Ltd. is not satisfactory.
 43

Ratio 2017 2018 2019 2020 Mean

Current Ratio 0.85 0.85 0.95 1.01 0.915

Quick Ratio 0.58 0.58 0.65 0.7 0.6275

Cash Ratio 0.31 0.28 0.34 0.44 0.3425

4.41 5.07 4.4 4.73

Inventory Turnover
Ratio
4.6525

23.22 15.75 14.49 18.87

Receivable
Turnover Ratio
18.0825

-19.3 -53.03 7.33 11.4

Return On Equity
(%)
-13.4%

-3.6 -9.81 2.06 2.2

Return On Total
Assets (%)
-2.2875%
 44

Profit Margin (%) -4.3 -9.7 2.31 2.3 -2.3475%

-2.78 -3.52 -2.49 -1.5

Fixed Interest
Coverage Ratio
-2.5725

Debt Ratio 0.809 0.813 0.717 0.797 0.784

INTERPRETATION

In general, a current ratio of 2:1 is considered ideal, while a quick ratio of 1:1 is considered ideal.
The fact that the average current ratio is less than one indicates that the company is unable to meet
its short-term obligations. The company's quick ratio indicates that it is cash-strapped. The
company's cash ratio reflects that too. Overall, the company's liquidity situation is very poor.

The profitability ratios of the company are negative; indicating that the company’s income is less
than its expenditure, implying that the company is making losses.

Tata Motors has a negative fixed interest coverage ratio, which is concerning because it indicates
that the company is having trouble servicing its debt. Furthermore, the company's debt ratio is
greater than 0.5, implying that debt is used to fund the company's assets.

From the above findings we can conclude that the performance of the company is not satisfactory.
 45

CHAPTER 5: RESULTS & DISCUSSION

5.1 Major Findings
5.2 Discussions and Suggestions
5.3 Conclusion
 46

CHAPTER 5: RESULTS & DISCUSSION

5.1 MAJOR FINDINGS

At this stage, the financial analysis has been done in order to draw some broad conclusions about
Tata Motors Limited results. One of the most important things to understand about financial
analysis is that the financial statements provide all of the details needed to make a definitive
decision about what is going on in the business. From the brief explanation and illustrations of four
years, financial statements of Tata Motors have been used to analyze the financial performance for
the years under study (2016-2019).

PROFITABILITY ANALYSIS

• Net profit margin which measures how profitable a company’s sales are after deducting all
expenses interest, taxes & preferred stock dividends declines from 2.3% to -4.3% during
the given period, which implies lower level of profitability of company.

• Return on total assets is a pure measure of the efficiency of a company in generating returns
from its assets. So here there are declines from 2.2% to -3.6% during the given period,
which shows negativity of the profitability of the company.

• Return on equity which measures the returns earned on the common stock holder’s
investment in the company which is decrease from 11.4% to -19.3% within given periods.
 47

This indication reflects the bad performance of the management on the invested financial
resources.

• The overall performance of TATA motors regarding profitability was bad, despite the fact
that the company's customer base was increasing.

LIQUIDITY ANALYSIS

• In the year 2017 the company had the current ratio 1.01 which is highest but since then it
has fallen. It demonstrates how liquidity has dropped significantly since 2017, with a ratio
difference of 0.169.

• Since 2016-2017, the corporation's quick ratio has dropped dramatically from 0.7 to 0.28.
It indicates that the firm's ability to fulfill short-term obligations is declining.

• The company’s cash ratio which measures its ability to cover its short-term obligations
using only cash and cash equivalents has also declined from 0.44 to 0.31.

• Overall the liquidity position of the company is not good.

EFFICIENCY ANALYSIS

• In terms of Inventory turnover ratio, the company's operations are seen to be inconsistent
indicating that company's operation has been volatile and that consistency is needed.

• The receivable turnover ratio fell from 18.87 in 2016-2017 to 14.47 in 2017-2018, the
lowest in the last four years, and has since improved dramatically to 23.22 in 2019-2020,
indicating that the business is handling credit more efficiently.
 48

LEVERAGE ANALYSIS

• Fixed interest coverage ratio shows that the company’s ability to make contractual interest
payments is massively negative and decreasing. From negative 1.50 in 2017 to negative
2.78 in 2020 which shows that the company isn’t in a good position to make payments

• A debt ratio greater than 1.0 tells you that a company has more debt than assets. A debt
ratio less than 1indicates that a company has more assets than debt. (HAYES, 2021) The
debt ratio has increased over the years indicating that the business now has more debt.

5.2 DISCUSSIONS & SUGGESTIONS

From the above findings we can say that the company is making losses or, more accurately,
decreasing its profitability, but it has promising potential prospects. To avoid meeting tough
financial conditions in the future, it must closely monitor prices, reduce expenditures, and manage
its finances.

5.3 CONCLUSION

To conclude, the Tata Motors Company has maintained its influence on the industry. We can see
Tata Motors' downfall, but it is expected to rebound because it is such a big company. We can see
from this study that Tata Motors’ willingness to make contractual payments has been severely
harmed. Looking at all four years, 2016-2017 is regarded as the strongest financial year of the four.
Company had the highest current and quick ratio in 2016-2017, and the rate has since fallen,
indicating that liquidity has declined over time. It is expected that the company will rebound from
the loss if its assets are well managed and its debts are adequately financed.
 49

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 53

ANNEXURE

INCOME STATEMENT
Consolidated Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar 20 Mar-19 Mar-18 Mar-17

12 months 12 months 12 months 12 months

INCOME

Revenue From Operations [Gross] 2,58,594.36 2,99,190.59 2,89,386.25 2,70,298.08

Less: Excise/Service Tax/Other Levies 0 0 790.16 4,799.61

Revenue From Operations [Net] 2,58,594.36 2,99,190.59 2,88,596.09 2,65,498.47

Other Operating Revenues 2,473.61 2,747.81 6,023.09 4,194.04

Total Operating Revenues 2,61,067.97 3,01,938.40 2,94,619.18 2,69,692.51

Other Income 2,973.15 2,965.31 888.89 754.54

Total Revenue 2,64,041.12 3,04,903.71 2,95,508.07 2,70,447.05

EXPENSES

Cost Of Materials Consumed 1,52,671.47 1,81,009.08 1,71,992.59 1,59,369.55

 54

Purchase Of Stock-In Trade 12,228.35 13,258.83 15,903.99 13,924.53

Operating And Direct Expenses 4,188.49 4,224.57 3,531.87 3,413.57

Changes In Inventories Of FG,WIP And

Stock-In Trade
2,231.19 2,053.28 -2,046.58 -7,399.92
Employee Benefit Expenses 30,438.60 33,243.87 30,300.09 28,332.89

Finance Costs 7,243.33 5,758.60 4,681.79 4,238.01

Depreciation And Amortization

Expenses
21,425.43 23,590.63 21,553.59 17,904.99
Other Expenses 58,826.20 63,144.03 58,998.93 59,340.16

Less: Amounts Transfer To Capital

Accounts
17,503.40 19,659.59 18,588.09 16,876.96
Total Expenses 2,71,749.66 3,06,623.30 2,86,328.18 2,62,246.82

Profit/Loss Before Exceptional,

Extraordinary Items And Tax
-7,708.54 -1,719.59 9,179.89 8,200.23
Exceptional Items -2,871.44 -29,651.56 1,975.14 1,114.56

Profit/Loss Before Tax -10,579.98 -31,371.15 11,155.03 9,314.79

Tax Expenses-Continued Operations

Current Tax 1,893.05 2,225.23 3,303.46 3,137.66

Deferred Tax -1,497.80 -4,662.68 1,038.47 113.57

 55

Total Tax Expenses 395.25 -2,437.45 4,341.93 3,251.23

Profit/Loss After Tax And Before

Extraordinary Items
-10,975.23 -28,933.70 6,813.10 6,063.56
Profit/Loss From Continuing Operations -10,975.23 -28,933.70 6,813.10 6,063.56

Profit/Loss For The Period -10,975.23 -28,933.70 6,813.10 6,063.56

Minority Interest -95.62 -102.03 -102.45 -102.2

Share Of Profit/Loss Of Associates -1,000.00 209.5 2,278.26 1,493.00

Consolidated Profit/Loss After MI And

Associates
-12,070.85 -28,826.23 8,988.91 7,454.36
OTHER ADDITIONAL
INFORMATION

EARNINGS PER SHARE

Basic EPS (Rs.) -35 -85 26 22

Diluted EPS (Rs.) -35 -85 26 22

DIVIDEND AND DIVIDEND

PERCENTAGE

Equity Share Dividend 0 0 0 73

BALANCE SHEET
 56

Consolidated Balance Sheet ------------------- in Rs. Cr. -------------------

Mar 20 Mar-19 Mar-18 Mar-17

12 months 12 months 12 months 12 months

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 719.54 679.22 679.22 679.22

Total Share Capital 719.54 679.22 679.22 679.22

Reserves and Surplus 61,491.49 59,500.34 94,748.69 57,382.67

Total Reserves and Surplus 61,491.49 59,500.34 94,748.69 57,382.67

Money Received Against Share Warrants 867.50 0.00 0 0

Total Shareholders’ Funds 63,078.53 60,179.56 95,427.91 58,061.89

Minority Interest 813.56 523.06 525.06 453.17

NON-CURRENT LIABILITIES
Long Term Borrowings 83,315.62 70,817.50 61,199.50 60,629.18

Deferred Tax Liabilities [Net] 1,941.87 1,491.04 6,125.80 1,174.00

 57

Other Long Term Liabilities 17,780.94 16,871.09 13,904.33 28,802.14

Long Term Provisions 14,736.69 11,854.85 10,948.44 9,004.46
Total Non-Current Liabilities 1,17,775.12 1,01,034.48 92,178.07 99,609.78

CURRENT LIABILITIES
Short Term Borrowings 16,362.53 20,150.26 16,794.85 13,859.94
Trade Payables 63,626.88 68,513.53 72,038.41 57,698.33
Other Current Liabilities 50,135.60 46,596.89 46,432.71 38,263.49
Short Term Provisions 10,329.04 10,196.75 7,953.50 5,807.76
Total Current Liabilities 1,40,454.05 1,45,457.43 1,43,219.47 1,15,629.52
Total Capital And Liabilities 3,22,121.26 3,07,194.53 3,31,350.51 2,73,754.36
ASSETS

NON-CURRENT ASSETS
Tangible Assets 84,158.17 72,619.86 73,867.84 59,594.56
Intangible Assets 42,171.91 37,866.74 47,429.57 35,676.20
Capital Work-In-Progress 8,599.56 8,538.17 16,142.94 10,186.83
Intangible Assets Under Development 27,022.73 23,345.67 23,890.56 23,512.01
Fixed Assets 1,61,952.37 1,42,370.44 1,61,330.91 1,28,969.60
Non-Current Investments 5,446.94 6,240.89 5,651.65 5,296.77
Deferred Tax Assets [Net] 5,457.90 5,151.11 4,158.70 4,457.34
Long Term Loans And Advances 782.78 407.42 495.41 753.66
Other Non-Current Assets 28,116.96 28,845.64 23,624.55 17,483.92
Total Non-Current Assets 2,02,534.01 1,83,763.37 1,95,377.67 1,57,634.61

CURRENT ASSETS
 58

Current Investments 10,861.54 9,529.83 15,161.10 15,041.15

Inventories 37,456.88 39,013.73 42,137.63 35,085.31

Trade Receivables 11,172.69 18,996.17 28,294.95 20,885.67

Cash And Cash Equivalents 33,726.97 32,648.82 34,613.91 36,077.88

Short Term Loans And Advances 935.25 1,268.70 2,279.66 710.45

Other Current Assets 25,433.92 21,973.91 13,485.59 8,319.29

1,19,583.57 1,22,827.52 1,36,264.83

Total Current Assets 1,16,119.75
Total Assets 3,22,121.26 3,07,194.53 3,31,350.51 2,73,754.36

OTHER ADDITIONAL
INFORMATION

CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 15,590.75 17,148.64 13,456.66 22,591.70

BONUS DETAILS

Bonus Equity Share Capital 111.29 111.29 111.29 111.29

NON-CURRENT INVESTMENTS
 59

Non-Current Investments Quoted Market

Value
316.46 726.53 36.64 285.38
Non-Current Investments Unquoted Book
Value
711.59 770.98 727.12 405.38

CURRENT INVESTMENTS

Current Investments Quoted Market Value 0 0.92 303.28 0

Current Investments Unquoted Book

Value
10,861.54 8,937.41 14,360.47 15,041.15