Capital Structure

of Tata Motors

MBA- B Section - Previous

Vineeth N (Roll No.260)

Vijay (Roll No.259)

Shariff (Retail Management, Roll No

103)
 Introduction
Profile
• Tata Motors Limited is India’s largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8
billion) in 2007-08.
• It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with
winning products in the compact, midsize car and utility vehicle segments.
• The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus
manufacturer.
• The company’s 23,000 employees are guided by the vision to be “best in the manner in which we
operate best in the products we deliver and best in our value system and ethics.”
• Established in 1945, Tata Motors’ presence indeed cuts across the length and breadth of India.
• Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954.
• The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune
(Maharashtra), Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand).
• Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in
2008.
• In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea’s second largest truck maker.
The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the
Korean market, while also exporting these products to several international markets. Today two-thirds of
heavy commercial vehicle exports out of South Korea are from Tata Daewoo.
• In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant
Company of Thailand to manufacture and market the company’s pickup vehicles in Thailand. The
new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the
Xenon having been launched in Thailand at the Bangkok Motor Show 2008.

Milestones
1945 • Tata Engineering and Locomotive Co. Ltd. was established to manufacture
locomotives and other engineering products.

1948 • Steam road roller introduced in collaboration with Marshall Sons (UK).

1954 • Collaboration with Daimler Benz AG, West Germany, for manufacture of medium
commercial vehicles. The first vehicle rolled out within 6 months of the contract.

1959 • Research and Development Centre set up at Jamshedpur.

1977 • First commercial vehicle manufactured in Pune.

1983 • Manufacture of Heavy Commercial Vehicle commences.

1985 • First hydraulic excavator produced with Hitachi collaboration.

1986 • Production of first light commercial vehicle, Tata 407, indigenously designed, followed
by Tata 608.

1991 • Launch of the 1st indigenous passenger car Tata Sierra.

• One millionth vehicle rolled out.
1994 • Launch of Tata Sumo - the multi utility vehicle.

1995 • Mercedes Benz car E220 launched.

1996 • Tata Sumo deluxe launched.

1997 • Tata Sierra Turbo launched.

1998 • Tata Safari - India's first sports utility vehicle launched.

• 2 millionth vehicle rolled out.
• Indica, India's first fully indigenous passenger car launched.

2001 • Indica V2 launched - 2nd generation Indica.

• 100,000th Indica wheeled out.
• Launch of the Tata Safari EX

2002 • 2,00,000th Indica rolled out.

• Launch of the Tata Sumo'+' Series
• Launch of the Tata Indigo.
• Tata Engineering signed a product agreement with MG Rover of the UK.

2003 • On 29th July, J. R. D. Tata's birth anniversary, Tata Engineering becomes Tata Motors
Limited.
• 3 millionth vehicle produced.
• First CityRover rolled out

2004 • Tata Motors and Daewoo Commercial Vehicle Co. Ltd. sign investment agreement and
completes acquisition of Daewoo Commercial Vehicle Company
• Tata Daewoo Commercial Vehicle Co. Ltd. (TDCV) launches the heavy duty truck
'NOVUS' , in Korea
• Sumo Victa launched
• Indigo Marina launched
• Tata Motors lists on the NYSE

2005 • Tata Motors rolls out the 500,000th Passenger Car from its Car Plant Facility in Pune
• The Tata Xover unveiled at the 75th Geneva Motor Show
• Branded buses and coaches - Starbus and Globus - launched
• Tata Ace, India's first mini truck launched
• The power packed Safari Dicor is launched
• Tata Motors launches Indica V2 Turbo Diesel.
• One millionth passenger car produced and sold
• Inauguration of new factory at Jamshedpur for Novus
• Launch of Tata Novus
• Launch of Novus range of medium trucks in Korea, by Tata Daewoo Commercial
Vehicle Co. (TDCV)

2006 • Tata Motors vehicle sales in India cross four million mark
• Indica V2 Xeta launched
• Passenger Vehicle sales in India cross one-million mark
• Tata Motors first plant for small car to come up in West Bengal
• Tata Motors and Fiat Group announce three additional cooperation agreements
2007 • Construction of Small Car plant at Singur, West Bengal, begins on January 21
• New 2007 Indica V2 range is launched
• Tata Motors and Thonburi Automotive Assembly Plant Co. (Thonburi), announce
formation of a joint venture company in Thailand to manufacture, assemble and
market pickup trucks.
• Roll out of 100,000th Ace
• Tata-Fiat plant at Ranjangaon inaugurated
• Launch of a new Upgraded range of its entry level utility vehicle offering, the Tata
Spacio.
• Launch of Magic, a comfortable, safe, four-wheeler public transportation mode,
developed on the Ace platform
• Launch of Winger, India’s only maxi-van
• Fiat Group and Tata Motors announce establishment of Joint Venture in India
• Launch of the Sumo Victa Turbo DI, the new upgraded range of its entry-level utility
vehicle, the Sumo Spacio
• Tata Motors launches Indica V2 Turbo with dual airbags and ABS
• Launch of new Safari DICOR 2.2 VTT range, powered by a new 2.2 L Direct Injection
Common Rail (DICOR) engine.
• Rollout of the one millionth passenger car off the Indica platform.

2008 • Latest common rail diesel offering- the Indica V2 DICOR, launched.
• Indigo CS (Compact Sedan), world’s first sub four-metre sedan, launched.
• Launch of the new Sumo -- Sumo Grande, which combines the looks of an SUV with
the comforts of a family car.
• Tata Motors unveils its People's Car, Nano, at the ninth Auto Expo.
• Xenon, 1-tonne pick-up truck, launched in Thailand.
• Tata Motors signs definitive agreement with Ford Motor Company to purchase Jaguar
and Land Rover.
• Tata Motors completes acquisition of Jaguar Land Rover.
• Tata Motors introduces new Super Milo range of buses.
• Tata Motors is Official Vehicle Provider to Youth Baton Relay for The III
Commonwealth Youth Games Pune 2008.
• Indica Vista – the second generation Indica, is launched.
• Tata Motors launches passenger cars and the new pick-up in D.R. Congo.
Profit And Loss Account
(Rs in Crs)
Mar Mar Mar Mar Mar Mar
Year 08(12) 07(12) 06(12) 05(12) 04(12) 03(12)
INCOME :
32,885. 31,611. 23,673. 20,152. 15,165. 10,585.
Sales Turnover 03 21 43 03 85 43
4,355.6 4,425.4 3,380.1 3,063.4 2,270.3 1,743.7
Excise Duty 3 4 3 4 0 9
28,529. 27,185. 20,293. 17,088. 12,895. 8,841.6
Net Sales 40 77 30 59 55 4
Other Income 972.93 574.11 693.92 560.29 427.79 323.65
Stock Adjustments -40.48 349.68 256.91 144 -141.98 119.74
29,461 28,109 21,244 17,792 13,181 9,285.
Total Income .85 .56 .13 .88 .36 03
EXPENDITURE :
20,190. 19,374. 14,263. 11,929. 8,341.3 5,699.5
Raw Materials 19 93 86 48 9 8
Power & Fuel Cost 325.19 327.41 258.51 237.81 214.52 193.51
1,534.4 1,361.2 1,141.4 1,037.9
Employee Cost 1 0 8 3 879.49 720.37
1,847.4 1,618.6 1,251.0 1,017.1
Other Manufacturing Expenses 3 8 2 1 722.95 510.39
Selling and Administration 1,442.9 1,322.8
Expenses 1 8 985.74 795.03 645.73 606.25
1,598.7 1,153.5
Miscellaneous Expenses 3 3 784.56 673.78 644.75 529.6
Less: Pre-operative Expenses 1,131.4
Capitalised 0 577.05 308.85 218.13 144.89 156.46
25,807. 24,581. 18,376. 15,473. 11,303. 8,103.2
Total Expenditure 46 58 32 01 94 4
3,654.3 3,527.9 2,867.8 2,319.8 1,877.4 1,181.7
Operating Profit 9 8 1 7 2 9
Interest 425.61 368.51 293.49 217.81 202.48 309.29
3,228.7 3,159.4 2,574.3 2,102.0 1,674.9
Gross Profit 8 7 2 6 4 872.5
Depreciation 652.31 586.29 520.94 450.16 382.6 362.13
2,576.4 2,573.1 2,053.3 1,651.9 1,292.3
Profit Before Tax 7 8 8 0 4 510.37
Tax 139.01 476 363.35 363.82 96 19.71
Deferred Tax 401.54 177.22 142.15 51.13 386 190.55
2,028.9 1,913.4 1,528.8 1,236.9
Reported Net Profit 2 6 8 5 810.34 300.11
Extraordinary Items 149.49 37.4 145.42 24.77 -29.95 4.94
1,879.4 1,876.0 1,383.4 1,212.1
Adjusted Net Profit 3 6 6 8 840.29 295.17
Adjst. below Net Profit 0 0 0 0 0 0
1,013.8
P & L Balance brought forward 3 776.76 585.6 365.8 123.71 0
Statutory Appropriations 0 0 0 0 0 0
 1,659.6 1,676.3 1,337.7 1,017.1
Appropriations 8 9 2 5 568.25 176.4
1,383.0 1,013.8
P & L Balance carried down 7 3 776.76 585.6 365.8 123.71
Dividend 578.43 578.07 497.94 452.19 282.11 127.91
Preference Dividend 0 0 19.94 0 0 0
Equity Dividend % 150 150 130 125 80 40
Earnings Per Share-Unit Curr 50.52 47.1 37.59 32.44 21.93 8.87
Book Value-Unit Curr 202.68 177.57 143.93 113.64 101.69 81.2
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Balance Sheet

(Rs in Crs)
Mar Mar
Year Mar 08 Mar 07 06 05 Mar 04
SOURCES OF FUNDS :
Share Capital 385.54 385.41 382.87 361.79 353
7,453.9 6,484.3 5,154. 3,749.
Reserves Total 6 4 20 60 3,236.77
7,839. 6,869. 5,537. 4,111. 3,589.7
Total Shareholders Funds 50 75 07 39 7
2,461.9 2,022.0
Secured Loans 9 4 822.76 489.81 942.65
3,818.5 1,987.1 2,114. 2,005.
Unsecured Loans 3 0 08 61 317.12
6,280. 4,009. 2,936. 2,495. 1,259.7
Total Debt 52 14 84 42 7
14,120 10,878 8,473. 6,606. 4,849.5
Total Liabilities .02 .89 91 81 4
APPLICATION OF FUNDS :
10,830. 8,775.8 7,971. 6,611.
Gross Block 83 0 55 95 5,985.40
Less : Accumulated 5,443.5 4,894.5 4,401. 3,454.
Depreciation 2 4 51 28 3,023.69
5,387.3 3,881.2 3,570. 3,157.
Net Block 1 6 04 67 2,961.71
Lease Adjustment 0 0 0 0 0
5,064.9 2,513.3
Capital Work in Progress 6 2 951.19 538.84 286.09
4,910.2 2,477.0 2,015. 2,912.
Investments 7 0 15 06 3,056.77
Current Assets, Loans &
Advances
 2,421.8 2,500.9 2,012. 1,601.
Inventories 3 5 24 36 1,147.44
1,130.7
Sundry Debtors 3 782.18 716.6 798.58 614.99
2,397.3 1,119. 2,005.
Cash and Bank 1 826.76 43 04 770.49
4,433.9 6,402.1 5,639. 2,681.
Loans and Advances 1 6 54 05 1,162.78
10,383. 10,512. 9,487. 7,086.
Total Current Assets 78 05 81 03 3,695.70
Less : Current Liabilities and Provisions
8,667.2 6,363.6 5,726. 5,414.
Current Liabilities 0 8 82 61 4,228.13
1,989.4 1,364.3 1,215. 1,126.
Provisions 3 2 04 06 430.64
10,656. 7,728.0 6,941. 6,540.
Total Current Liabilities 63 0 86 67 4,658.77
2,784.0 2,545.
Net Current Assets -272.85 5 95 545.36 -963.07
Miscellaneous Expenses not
written off 6.05 10.09 14.12 18.16 22.19
Deferred Tax Assets 397.45 176.6 150.75 102.69 135.06
1,373.1
Deferred Tax Liability 7 963.43 773.29 667.97 649.21
- -
Net Deferred Tax -975.72 -786.83 622.54 565.28 -514.15
14,120 10,878 8,473. 6,606. 4,849.5
Total Assets .02 .89 91 81 4
2,953.5 2,527.7 1,558. 1,102.
Contingent Liabilities 7 8 65 68 839.45

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Year Dividend Per Share(DPS) in Rs.
2003-04 8
2004-05 12.50
2005-06 13.00
2006-07 15.00
2007-08 15.00

OBJECTIVE
• To calculate Weighted Average Cost of Capital (WACC)
• To calculate Return on Investment(ROI)
• Compare WACC and ROI.
If ROI is greater than WACC, then the company is getting returns
more than the capital employed. Vice Versa.
Capital Structure
Rs in Crs

Year 2008 2007 2006 2005 2004

DPS(Rs) 15 15 13 12.5 8
Book Value(Rs.) 202.68 177.57 143.93 113.64 101.69
Payout(%) 29.7 31.85 34.6 38.66 36.44
Retention Ratio 0.703 0.6815 0.654 0.6134 0.6356
PBT 2576.47 2573.18 2053.38 1651.9 1292.34
Tax 139.01 476 363.35 363.82 96
PAT 2437.46 2097.18 1690.03 1288.08 1196.34
Preference Divident 0 0 19.94 0 0
Equity 385.54 385.41 382.87 361.79 353
Reserves 7453.96 6484.34 5154.2 3749.6 3236.77
P & L Account(Dr
Balance) 0 0 0 0 0
Equity Shareholder Fund 7839.5 6869.75 5537.07 4111.39 3589.77
ROE 0.31 0.31 0.30 0.31 0.33
Growth Rate(%) 21.86 20.80 19.73 19.22 21.18
Cost of Equity(%) 29.26 29.25 28.76 30.22 29.05
Interest 425.61 368.51 293.49 217.81 202.48
Total Debt 6280.52 4009.14 2936.84 2495.42 1259.77
Cost of Debt(%) 6.78 9.19 9.99 8.73 16.07
PBIT 3002.08 2941.69 2346.87 1869.71 1494.82
Capital Employeed 14094.51 10852.94 8447.52 6606.81 4849.54
ROI(%) 21.30 27.11 27.78 28.30 30.82
Weighted Average Cost of Capital
Year 2008
Weight
ed
Proportio Cost(% Cost(%
Source Amount n(%) ) )

Equity 385.54 6.14 29.26 1.80

Debt 6280.52 94.22 6.78 6.38
6666.06 100.36 8.18
Year 2007
Weight
ed
Proportio Cost(% Cost(%
Source Amount n(%) ) )

Equity 385.41 9.61 29.25 2.81

Debt 4009.14 91.23 9.19 8.39
4394.55 100.84 11.20
Year 2006
Weight
ed
Proportio Cost(% Cost(%
Source Amount n(%) ) )

Equity 382.87 13.04 28.76 3.75

Debt 2936.84 88.47 9.99 8.84
3319.71 101.50 12.59
Year 2005
Weight
ed
Proportio Cost(% Cost(%
Source Amount n(%) ) )

Equity 361.79 14.50 30.22 4.38

Debt 2495.42 87.34 8.73 7.62
2857.21 101.84 12.00
Year 2004
Weight
ed
Proportio Cost(% Cost(%
Source Amount n(%) ) )

Equity 353 28.02 29.05 8.14

Debt 1259.77 78.11 16.07 12.55
1612.77 106.13 20.69
 Financial Performance
The year 2007-08 was a historic year for the Company marked with two significant events
viz., the unveiling of Tata Nano -the world's least expensive car and the signing of the
definitive agreement with Ford Motor Company for purchase of Jaguar and Land Rover,
which has since been completed on June 2, 2008.

During the year, the Company recorded its highest ever sale of 5, 85,649 vehicles and grew
its turnover to Rs. 33,094 crores to remain as India's largest automobile company by
revenue.

The Company's margins were under pressure during the year due to rising interest rates,
constraints in availability of vehicle financing from outside sources and unprecedented
increase in prices of raw materials.

The EBIDTA (earnings before interest, taxes, depreciation, and amortization ) margin at 10.8%
was lower than last year as increase in input costs could only be partially absorbed by the
market.
Note: Amortization = non-cash expense of writing off intangible assets over their useful lives.

The Profit Before-Tax at Rs.2, 576 crores was 0.1 % higher than last year, The Profit after
Tax at Rs.2, 029 crores, was 6.1 % higher than last year.

With significant increase in the Company's capital expenditure program’s and the growing
business requirement, the overall borrowings of the Company stood at Rs.6, 280.52 crores
at a Debt: Equity ratio of 0.80:1.

The Indian economy remained in high growth phase but witnessed moderation in GDP
growth to 90/ in FY 07-08 as compared to over 9% growth achieved in the previous two
years. The commercial vehicle industry which grew by over 33% in FY 06-07 was impacted
by moderation in economic growth as wet as substantial reduction in vehicle financing and
posted a 8.1% growth this fiscal. The passenger vehicle industry also witnessed a slowdown
but managed to grow by 11.1 % by increasing discounts on mature products, launching new
models and due to reduction in excise duty announced by the government in Budget during
February'08. Vehicle exports also grew, albeit at a slightly lower rate of 11.9% as compared
to 14.8% witnessed in the previous year.

Amidst moderation in economic growth, a high interest rate regime and tightening of the
liquidity position, the domestic passenger vehicle industry was able to grow by 11.3% to an
all time high of over 1.5 million vehicles, albeit at a lower growth rate than 21% of the last
fiscal. The Industry's growth rate in fact fell to single digit in the last four months of the
fiscal. Growth was primarily driven by new launches and discounts on existing volume
models. Along with two wheelers, entry level cars (price point below Rs 3 lacs) declined by
2%.The luxury segment however doubled in size to over 5,000 vehicles and were

immune to the slowing market conditions. Of over 90 models in the industry the top 10
constitute 65% of the industry sales.
After six years of consecutive growth, the Company's passenger vehicle sales decreased
marginally by 4.5% to 2, 18,055 vehicles (including 3,297 Fiat branded vehicles) and the
Company had a 14.2% share in the passenger vehicle market between TATA and Fiat
branded vehicles.

Fiscal 2007-08, the first year of 11th Five Year Plan saw a marginal fall in GDP growth rate of
9%. In view of the slow down in economy, increase in inflation, poor credit availability,
hardening of interest rates, rise in prices of input materials, proposed increase in fuel prices
and volatility in foreign exchange rates, the commercial and passenger vehicle industry has
a challenging year ahead, with pressure on volumes and margins.

Financial Performance as a measure of Operational Performance

In a challenging environment, the Company has been able to marginally grow its revenues
and profits. Whilst the Company's profit after tax improved to Rs.2,028.92 crores from
Rs.1,913.46crores in the previous year, the margins were under pressure mainly due to the
rising input costs and lower volume growth.

Turnover, net of excise duties increased by 4.6% to another record high of Rs. 28,730.82
crores from Rs.27, 470.03 crores in FY 2006-07.The total number of vehicles sold during the
year increased by 0.9% to 585,649 units from 580,280 units in FY 2006-07.The domestic
volumes increased by 0.8% to 530,990 units from 526,806 units in FY 2006-07, while
export volumes increased by 2.22% to 54,659 units in FY 2007-08 from 53,474 units in FY
2006-07.

Net Raw Material consumption inclusive of processing charges increased by 6.2%to Rs.21,
082.10 crores in FY 2007-08, from Rs.19,849.04 crores in FY 2006-07. Material Cost as a %
of net turnover has increased to 73.4% from 72.3% for the last year. This was largely a
result of increase in prices of steel, aluminum, nickel, copper and natural rubber. However,
the Company managed to lower the impact through its on going cost reduction program with
initiatives like global sourcing, vendor rationalization and value engineering.

Employee Cost increased by 12.9% during the year to Rs. 1,544.57 crores from Rs.
1,368.09 crores registered in the previous year mainly inline with trends in industry and
economy. The manpower increased marginally to 23,230 from 22,349 with increases also in
flexible manpower.

Manufacturing and Other Expenses increased by 2.4% to Rs. 3,011.83 crores in FY 2007-08
from Rs.2,940.53 crores in FY 2006-07.These were 10.5% of net turnover for the year as
compared to 10.7% for the previous year.

Profit before depreciation, interest and tax increased by 0.5% to Rs.3,575.50 crores from
Rs.3,557.56 crores in FY 2006-07.The margin decreased to 12.4% from 13% in FY 2006-07.

Depreciation (including product development expenditure) for 2007-08 increased by 6.8% to

Rs. 716.66 crores from Rs.671.31 crores in FY 2006-07 on account of increase in fixed
assets. It represents 2.5% of net turnover as compared to 2.4% for FY 2006-07.

Net interest cost decreased to Rs. 282.37 crores in FY 2007-08 from Rs.313.07 crores in FY
2006-07. Despite increase in interest rates and increase in capital expenditure, the
reduction was mainly on account of significant reduction in the Company's vehicle financing
portfolio (on account of securitization), better working capital management, interest
earnings and larger capitalization of interest in line with the increase in capital expenditure.
Profit before Tax (PBT) of the Company increased by 0.13% to Rs. 2,576.47 crores from Rs.
2,573.18 crores in FY 2006-07.

Profit after Tax (PAT) increased by 6.03% to Rs. 2,028.92 crores from Rs.1, 913.46 crores
in FY 2006-07. This was mainly on account of a lower tax provision owing to the increase in
spends on Research and Development and income from capital gains, which is subject to a
lower tax rate. Basic Earning Per Share (EPS) increased by 5.79% to Rs.52.64 as compared
to Rs.49.76 last year.

Investments increased to Rs.4, 910.27 crores in FY 2007-08 from Rs.2, 477.00 crores in FY
2006-07.