FM Assignment Final Project Comp

8/3/2019 FM Assignment Final Project Comp

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FINANCE PROJECT

ON

FINANCIALRATIO ANALYSIS

OF

MAHINDRA & MAHINDRA AND TATA MOTORS

SUBMITTED TO Prof. SWAPNA GOPALAN

SUBMITTED BY :-----

RAVI PRASAD

07BS3349

NISHANT

SRIVASTVA 07BS

NITIN JAIN 07BS

PALLAVI SHARMA

07BS

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TABLE OF CONTENTS

1.0.0 Financial Ratios an Overview

1.1.0 Financial ratio

1.2.0 Importance of Financial Ratios

1.3.0 Use of Financial Ratios

2.0.0 Ratios in our Project

3.0.0 Company Overview3.1.0. Mahindra Motors

3.1.1. An Overview

3.1.2. Mahindras Automotive Sector

3.1.3. Models Of Mahindra & Mahindra Cars

3.1.4. Consolidated Balance sheet and Profit and Loss account

3.2.0. Tata Motors

3.2.1. An Overview

3.2.2. Research and Development

3.2.3. Models Of Tata Motors

3.2.4. Economic Responsibility

3.2.5. Consolidated Balance Sheet and Profit And Loss Account

4.0.0. Financial Analysis

4.1.0. Liquidity Ratio4.1.1. Turnover Ratio

4.1.2. Coverage Ratio

4.1.3. Leverage Ratio

4.1.4. Du-Pont Analysis

5.0.0 Conclusion

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6.0.0 References

ACKNOWLEDGEMENT

It has been a great pleasure for us to work on the project that was given to us. The topic

that was given to us was financial ratio analysis of two companies.

Our sincere thanks to Prof. Aparna Hawaldar ,our lecturer in Financial Management for

giving us an opportunity to do this project whereby we were given an exposure toComparative

ratio analysis which helped us to identify and quantify the company's strengths and weaknessesand compare the financial position, and understand the risks the companies may be taking. It also

helped us to increase the span of our knowledge and developed our thinking on more practical

lines. We thank her for her guidance and support throughout the time when we were working on

our project.

We express our sincere thanks to the Dean, Dr. Lata Chakraborthy for giving us an

opportunity to go forward with this project and providing us the guidelines on which to work.

We also thank our Director, Prof T R Venkatesh without whose constant support we

would not have been able to make it.

We would also like to thank every member of our team who has worked hard through

every stage of this project right from collection and analysis of data to compilation of the final

project.

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ABSTRACT

The aim of our project is to do the financial ratio analysis of the two companies.

For our project we have taken the automobile industry in which we have done the comparative

analysis of Mahindra &Mahindra and Tata motors through ratios. The data to be analyzed has

been obtained from the annual reports of the two companies.

We have done analysis through ratios because ratios are highly important profit tools in financial

analysis that help implement plans that improve profitability, liquidity, financial structure,

reordering, leverage, and interest coverage. Although ratios report mostly on past performances,

they can be predictive too, and provide lead indications of potential problem area.

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1.0.0. FINANCIAL RATIOS

An overview :

Any successful business owner is constantly evaluating the performance of his or her company,

comparing it with the company's historical figures, with its industry competitors, and even withsuccessful businesses from other industries. To complete a thorough examination of company's

effectiveness, however, we need to look at more than just easily attainable numbers like sales,profits, and total assets. It must be able to read between the lines of the financial statements and

make the seemingly inconsequential numbers accessible and comprehensible.

This massive data overload could seem staggering. Luckily, there are many well-tested ratios out

there that make the task a bit less daunting. Comparative ratio analysis helps to identify andquantify the company's strengths and weaknesses, evaluate its financial position, and understand

the risks that one may be taking.

As with any other form of analysis, comparative ratio techniques aren't definitive and theirresults shouldn't be viewed as gospel. Many off-the-balance-sheet factors can play a role in thesuccess or failure of a company. But, when used in concert with various other business

evaluation processes, comparative ratios are invaluable.

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1.1.0 Financial Ratios

Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios

can be calculated from information provided by the financial statements. Financial ratios can beused to analyze trends and to compare the firm's financials to those of other firms. In some cases,

ratio analysis can predict future bankruptcy.

Financial ratios can be classified according to the information they provide. The following types

of ratios frequently are used:

Liquidity ratios

Asset turnover ratios

Financial leverage ratios

Profitability ratios Dividend policy ratios

Liquidity Ratios

Liquidity ratios provide information about a firm's ability to meet its short-term financial

obligations. They are of particular interest to those extending short-term credit to the firm. Twofrequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick

ratio.

The current ratio is the ratio of current assets to current liabilities:

Current Ratio =Current Assets

Current Liabilities

Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders mayprefer a lower current ratio so that more of the firm's assets are working to grow the business.

Typical values for the current ratio vary by firm and industry. For example, firms in cyclical

industries may maintain a higher current ratio in order to remain solvent during downturns.

One drawback of the current ratio is that inventory may include many items that are difficult toliquidate quickly and that have uncertain liquidation values. The quick ratio is an alternative

measure of liquidity that does not include inventory in the current assets. The quick ratio is

defined as follows:

Quick Ratio =Current Assets - Inventory

Current Liabilities

The current assets used in the quick ratio are cash, accounts receivable, and notes receivable.

These assets essentially are current assets less inventory. The quick ratio often is referred to as

the acid test.

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Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current assets

except the most liquid: cash and cash equivalents. The cash ratio is defined as follows:

Cash Ratio =Cash + Marketable Securities

Current Liabilities

The cash ratio is an indication of the firm's ability to pay off its current liabilities if for some

reason immediate payment were demanded.

Asset Turnover Ratios

Asset turnover ratios indicate of how efficiently the firm utilizes its assets. They sometimes are

referred to as efficiency ratios, asset utilization ratios, or asset management ratios. Two

commonly used asset turnover ratios are receivables turnoverand inventory turnover.

Receivables turnover is an indication of how quickly the firm collects its accounts receivablesand is defined as follows:

Receivables Turnover =Annual Credit Sales

Accounts Receivable

The receivables turnover often is reported in terms of the number of days that credit sales remain

in accounts receivable before they are collected. This number is known as the collection period.It is the accounts receivable balance divided by the average daily credit sales, calculated as

follows:

Average Collection Period = Accounts ReceivableAnnual Credit Sales / 365

The collection period also can be written as:

Average Collection Period =365

Receivables Turnover

Another major asset turnover ratio is inventory turnover. It is the cost of goods sold in a time

period divided by the average inventory level during that period:

Inventory Turnover =Cost of Goods Sold

Average Inventory

The inventory turnover often is reported as the inventory period, which is the number of daysworth of inventory on hand, calculated by dividing the inventory by the average daily cost of

goods sold:

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Inventory Period =Average Inventory

Annual Cost of Goods Sold / 365

The inventory period also can be written as:

Inventory Period =365

Inventory Turnover

Other asset turnover ratios include fixed asset turnover and total asset turnover.

Financial Leverage Ratios

Financial leverage ratios provide an indication of the long-term solvency of the firm. Unlike

liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratiosmeasure the extent to which the firm is using long term debt.

The debt ratio is defined as total debt divided by total assets:

Debt Ratio =Total Debt

Total Assets

The debt-to-equity ratio is total debt divided by total equity:

Debt-to-Equity Ratio =Total Debt

Total Equity

Debt ratios depend on the classification of long-term leases and on the classification of some items as

long-term debt or equity.

The times interest earned ratio indicates how well the firm's earnings can cover the interestpayments on its debt. This ratio also is known as the interest coverage and is calculated as

follows:

Interest Coverage =EBIT

Interest Charges

where EBIT = Earnings Before Interest and Taxes

Profitability Ratios

Profitability ratios offer several different measures of the success of the firm at generating

profits.

Thegross profit margin is a measure of the gross profit earned on sales. The gross profit marginconsiders the firm's cost of goods sold, but does not include other costs. It is defined as follows:

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Gross Profit Margin =Sales - Cost of Goods Sold

Sales

Return on assets is a measure of how effectively the firm's assets are being used to generate

profits. It is defined as:

Return on Assets =Net Income

Total Assets

Return on equity is the bottom line measure for the shareholders, measuring the profits earned for

each dollar invested in the firm's stock. Return on equity is defined as follows:

Return on Equity =Net Income

Shareholder Equity

Dividend Policy Ratios

Dividend policy ratios provide insight into the dividend policy of the firm and the prospects forfuture growth. Two commonly used ratios are the dividend yield and payout ratio.

The dividend yield is defined as follows:

Dividend Yield =Dividends Per Share

Share Price

A high dividend yield does not necessarily translate into a high future rate of return. It is

important to consider the prospects for continuing and increasing the dividend in the future. The

dividendpayout ratio is helpful in this regard, and is defined as follows:

Payout Ratio =Dividends Per Share

Earnings Per Share

Use and Limitations of Financial Ratios

Attention should be given to the following issues when using financial ratios:

A reference point is needed. To to be meaningful, most ratios must be compared tohistorical values of the same firm, the firm's forecasts, or ratios of similar firms.

Most ratios by themselves are not highly meaningful. They should be viewed asindicators, with several of them combined to paint a picture of the firm's situation.

Year-end values may not be representative. Certain account balances that are used to

calculate ratios may increase or decrease at the end of the accounting period because ofseasonal factors. Such changes may distort the value of the ratio. Average values should

be used when they are available.

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Ratios are subject to the limitations of accounting methods. Different accounting choices

may result in significantly different ratio values.

1.2.0 Importance of Financial Ratios

The users of accounts that we have listed will want to know the sorts of things we can see in the

table below: this is not necessarily everything they will ever need to know, but it is a startingpoint for us to think about the different needs and questions of different users.

Investors to help them determine whether they should buy shares in the business, hold

on to the shares they already own or sell the shares they already own. Theyalso want to assess the ability of the business to pay dividends.

Lenders to determine whether their loans and interest will be paid when due

Managers might need segmental and total information to see how they fit into the

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overall picture

Employees information about the stability and profitability of their employers to assessthe ability of the business to provide remuneration, retirement benefits and

employment opportunities

Suppliers and other

trade creditors

Businesses supplying goods and materials to other businesses will read their

accounts to see that they don't have problems: after all, any supplier wantsto know if his customers are going to pay their bills!

Customers the continuance of a business, especially when they have a long terminvolvement with, or are dependent on, the business

Governments and

their agencies

the allocation of resources and, therefore, the activities of business. To

regulate the activities of business, determine taxation policies and as the

basis for national income and similar statistics

Local community Financial statements may assist the public by providing information aboutthe trends and recent developments in the prosperity of the business and the

range of its activities as they affect their area

Financial analysts they need to know, for example, the accounting concepts employed for

inventories, depreciation, bad debts and so on

Environmental

groups

many organisations now publish reports specifically aimed at informing us

about how they are working to keep their environment clean.

Researchers researchers' demands cover a very wide range of lines of enquiry rangingfrom detailed statistical analysis of the income statement and balance sheet

data extending over many years to the qualitative analysis of the wording of

the statements

Use of Financial Ratios

Interest Group Ratios to watch

Investors Return on Capital Employes

Lendors Gearing ratios

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Managers Profitability

Employees Return on Capital Employed

Suppliers and other trade Creditors Liquidity

Customers Profitability

Governments and their agencies Profitability

Local Community This could be a long qand interesting listL

Financial Analysis Possibly all ratios

Environmental Groups Expenditure on anti-pollution measures

Researchers Depends on the narure of their study

2.0.0 Ratios in our project

We have selected the Automobile Industry under which we selected the Motor industry and the

two major players are Mahindra &Mahindra and Tata Motors. In our project we have analyzedthe following ratios for both the company that is for Mahindra & Mahindra and Tata motors for

two consecutive years i.e. 2006-07 and 2005-06.

From the annual Report of both the years for both the companies were analyzed for

i) Liquidity Ratioii) Profitability Ratio

iii) Activity turnover Ratio/ Turnover Ratioiv) Leverage Ratiov) Coverage Ratio

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Along with the above ratio we have also done the Duo-Pont analysis.

Duo-Pont Technique

It divides a particular ratio into components and studies the effect of each and every component

on the ratio. Comparative analysis give an ideas where a firm stands across the industry and

studies its financial trends over a period of time. The final steps in analysis are the interpretationof the data and measures assembled as a basis for decision and action. This is the most important

and difficult of the steps and requires application of a great deal of judgment, skill and effort.

3.0.0. Company Overview

3.1.0 Mahindra Motors

MAHINDRA MOTORS

3.1.1. An Overview

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Mahindra & Mahindra Limited (M&M) is a major automaker in India. It is the flagship

strategic business unit of the Mahindra Group. The company was set up in 1945 as Mahindra &

Mohammed.

The company first traded steel with suppliers in England and the United States. Real business

activity of M&M began by assembling complete knock down (CKD) Jeeps in 1949. M&M soon

branched out into manufacturing agricultural tractors and light commercial vehicles (LCVs). It

later expanded its operations to secure a significant presence in many more important sectors.The company has now transformed itself into a group of business units that caters to the Indian

and overseas markets with a presence in vehicles, farm equipment, information technology, tradeand finance related services, as well as infrastructure development.

By 2005, M&M had become the largest producer of Sports Utility Vehicle (SUVs) in India. The

company has recently started a separate sector, the Mahindra Systems and Automotive

Technologies (MSAT), to focus on developing components and offering engineering services.

Mahindra & Mahindra has grown steadily in size and stature and evolved into a Group that

occupies a premier position in almost all key sectors of the economy. The Group's history is

studded with milestones. Each one taking the group forward. In fact, today, its total turnover is

about 6 billion dollars.

3.1.2. Mahindras Automotive Sector

The Mahindra Groups Automotive Sector is in the business of manufacturing and marketing

utility vehicles and light commercial vehicles, including three-wheelers. It is the market leader in

utility vehicles in India since inception, and currently accounts for about half of Indias market

for utility vehicles. In 2002, it launched the indigenously engineered world-class sports utility

vehicle-Scorpio, which bridges the gap between style and adventure, luxury and ruggedness, and

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http://en.wikipedia.org/wiki/Automakerhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Strategic_business_unithttp://en.wikipedia.org/wiki/Mahindra_Grouphttp://en.wikipedia.org/wiki/Complete_knock_downhttp://en.wikipedia.org/wiki/Jeephttp://en.wikipedia.org/wiki/Tractorhttp://en.wikipedia.org/wiki/SUVhttp://en.wikipedia.org/wiki/Automakerhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Strategic_business_unithttp://en.wikipedia.org/wiki/Mahindra_Grouphttp://en.wikipedia.org/wiki/Complete_knock_downhttp://en.wikipedia.org/wiki/Jeephttp://en.wikipedia.org/wiki/Tractorhttp://en.wikipedia.org/wiki/SUV


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performance and economy. The Group exports its products to several countries in Europe,

Africa, South America, South Asia and the Middle East.

The Automotive Sector continues to be a leader in the utility vehicle segment with a diverseportfolio that includes mass transport as well as new generation vehicles like Scorpio and Bolero.

The International Operations of the Automotive Sector focuses on the international business.

Mahindra Renault announced the launch of Logan, Indias first wide body car The Logan

redefines its segment in terms of spaciousness as well as performance, technology

Mahindra International, a joint venture between Mahindra & Mahindra Limited and InternationalTruck and Engine Corporation, will manufacture trucks and buses for India and export markets.

It will also provide component sourcing and engineering services to International Truck and

Engine Corporation.

The Mahindra Group has a very strong international presence. It entered the world market in

1969, with the export of 1200 utility vehicles together with spare parts to Yugoslavia. Ceylon,

Singapore, Philippines and Indonesia welcomed Mahindra products to their countries a yearlater, and thereafter, the Group started making inroads into other parts of the world. With every

major product improvement and every new model, exports picked up in Africa, Asia, Europe andLatin America.Over the years, the Group has developed a large product portfolio catering to a diverse customer

base spanning rural and semi-urban customers, defence requirements and luxurious urban utility

vehicles.

3.1.3. Models Of Mahindra & Mahindra Cars

Mahindra Bolero (SUV)

Bolero SLX

Bolero SLE

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Bolero DIZ

Bolero DI

Bolero PLUS

Mahindra Scorpio (SUV)

Scorpio Petrolo Turbo 2.6

o Turbo 2.6 DX

o Turbo 2.6 GLX

o Turbo 2.6 SLX

Scorpio Diesel

o Turbo 2.6

o Turbo 2.6 DX

o Turbo 2.6 GLX

o Turbo 2.6 SLX

Scorpio Turbo Diesel CRDe

o Turbo 2.6o Turbo 2.6 DX

o Turbo 2.6 GLX

o Turbo 2.6 SLX

Mahindra CL-Range (SUV)

Mahindra MM Range (SUV)

Mahindra MM 500/550 DP

Mahindra MM 500/550 XDB

Mahindra MM 540 DP

Mahindra MM ISZ- Petrol Soft top

Mahindra Hard Top Range (SUV)

Mahindra Economy

Mahindra Marshal DI Mahindra 775 XDB

Mahindra 3 Door Hard Top

Mahindra 5 Door Hard Top

Marshal 2000 Deluxe

Marshal Deluxe Royale

Mahindra CNG-3 Door (SUV)

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http://auto.indiamart.com/cars/mahindra-bolero/index.html#dizhttp://auto.indiamart.com/cars/mahindra-bolero/index.html#dihttp://auto.indiamart.com/cars/mahindra-bolero/index.html#plushttp://auto.indiamart.com/cars/mahindra-scorpio/http://auto.indiamart.com/cars/mahindra-scorpio/index.html#link-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-3http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-4http://auto.indiamart.com/cars/mahindra-scorpio/index.html#link-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-3http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-4http://auto.indiamart.com/cars/mahindra-scorpio/index.html#link-3http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-3http://auto.indiamart.com/cars/mm-range/http://auto.indiamart.com/cars/mm-range/index.html#mm-1http://auto.indiamart.com/cars/mm-range/index.html#mm-2http://auto.indiamart.com/cars/mm-range/index.html#mm-3http://auto.indiamart.com/cars/mm-range/index.html#mm-4http://auto.indiamart.com/cars/hard-top-range/http://auto.indiamart.com/cars/hard-top-range/index.html#mm-1http://auto.indiamart.com/cars/hard-top-range/index.html#mm-2http://auto.indiamart.com/cars/hard-top-range/index.html#mm-3http://auto.indiamart.com/cars/hard-top-range/index.html#mm-4http://auto.indiamart.com/cars/hard-top-range/index.html#mm-5http://auto.indiamart.com/cars/hard-top-range/index.html#mm-6http://auto.indiamart.com/cars/hard-top-range/index.html#mm-7http://auto.indiamart.com/cars/mahindra-cng/http://auto.indiamart.com/cars/mahindra-bolero/index.html#dizhttp://auto.indiamart.com/cars/mahindra-bolero/index.html#dihttp://auto.indiamart.com/cars/mahindra-bolero/index.html#plushttp://auto.indiamart.com/cars/mahindra-scorpio/http://auto.indiamart.com/cars/mahindra-scorpio/index.html#link-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-3http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-4http://auto.indiamart.com/cars/mahindra-scorpio/index.html#link-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-3http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-4http://auto.indiamart.com/cars/mahindra-scorpio/index.html#link-3http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-1http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-2http://auto.indiamart.com/cars/mahindra-scorpio/index.html#turbo-3http://auto.indiamart.com/cars/mm-range/http://auto.indiamart.com/cars/mm-range/index.html#mm-1http://auto.indiamart.com/cars/mm-range/index.html#mm-2http://auto.indiamart.com/cars/mm-range/index.html#mm-3http://auto.indiamart.com/cars/mm-range/index.html#mm-4http://auto.indiamart.com/cars/hard-top-range/http://auto.indiamart.com/cars/hard-top-range/index.html#mm-1http://auto.indiamart.com/cars/hard-top-range/index.html#mm-2http://auto.indiamart.com/cars/hard-top-range/index.html#mm-3http://auto.indiamart.com/cars/hard-top-range/index.html#mm-4http://auto.indiamart.com/cars/hard-top-range/index.html#mm-5http://auto.indiamart.com/cars/hard-top-range/index.html#mm-6http://auto.indiamart.com/cars/hard-top-range/index.html#mm-7http://auto.indiamart.com/cars/mahindra-cng/


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Mahindra Voyager (SUV)

Mahindra Renault Logan (Mid size car)

3.1.4. Mahindra & Mahindra Consolidated Account

FOR THE YEAR 2006-2007

BALANCE SHEET

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PROFIT AND LOSS ACCOUNT

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BALANCE SHEET

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3.2.0. TATA MOTORS

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3.2.1. COMPANY OVERVIEW

Tata Motors Limited is India's largest automobile company, with revenues of Rs. 32,426 crore

(USD 7.2 billion) in 2006-07. It is the leader by far in commercial vehicles in each segment, and

the second largest in the passenger vehicles market with winning products in the compact,

midsize car and utility vehicle segments. The company is the world's fifth largest medium and

heavy commercial vehicle manufacturer, and the world's second largest medium and heavy bus

manufacturer. Established in 1945, Tata Motors' presence indeed cuts across the length and

breadth of India. The company's manufacturing base is spread across India - Jamshedpur

(Jharkhand) in the east, Pune (Maharashtra) in the west, and in the north in Lucknow (Uttar

Pradesh) and Pantnagar (Uttarakhand). A new plant is being set up in Singur (close to Kolkata in

West Bengal) to manufacture the company's small car.

In 2004, it acquired the Daewoo Commercial Vehicles Company, 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 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a

reputed Spanish bus and coach manufacturer, with an option to acquire the remaining stake as

well. It was Tata Motors, which developed 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. Within two years of launch, Tata Indica

Tata Motors have some distinct advantages in comparison to other MNC competitors. There is

definite cost advantage as labor cost is 8-9 per cent of sales as against 30-35 per cent of sales in

developed economies. Tata motors have extensive backward and forward linkages and it is

strongly interwoven with machine tools and metals sectors. India is an excellent source for IT

based engineering solution for products & process Integration. There are strong supporting

industries i.e. auto component industry has world class capabilities. There is huge demand in

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domestic markets due to infrastructure developments and Tata Motors is able to leverage its

knowledge of Indian market. There are favorable Government policies and regulations to boost

the auto industry i.e. Incentive for R&D.

Tata Motors - Commercial Vehicles

More than half a century of impressive presence and Tata Motors continues to provide India with

top of the line commercial vehicles. Tata Motors is India's largest and among the worlds top five

medium and heavy commercial manufacturers.

They have over 130 models providing a wide variety of commercial transport solutions. A

vehicle for every application - you name it they have it! From 2 ton LCVs to 40 ton tractor

trailers and buses that can seat 16 people to as many as 67. From Tippers to Special Purpose

Vehicles, to 6x4 and 4x4 off road vehicles and Defense vehicles.

Passenger Car Business Unit

The company's passenger car range comprises the compact car Indica, the midsize Indigo andIndigo Marina in both petrol and diesel versions. The Tata Sumo, the Tata Safari and its variants

Are the companys multi utility vehicle offerings. In addition to the growth opportunities in the

domestic market, the company is pursuing growth through acquisitions. In 2004, it acquired the

Daewoo Commercial Vehicle Company, Korea's second-largest truck maker, now named Tata

Daewoo Commercial Vehicles Company. In 2005, Tata Motors acquired a 21-per cent stake in o

Carrocera, a reputed Spanish bus and coach manufacturer, with an option to acquire the

remaining stake as well.

3.2.2. Research and Development

Tata Motors invests approximately up to 2 per cent of its annual turnover on research and

development, with an emphasis on new product / aggregates development and technology up

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gradation. Its Engineering Research Centre in Pune employs over 1,400 scientists and engineers

and has India's only certified crash-test facility and hemi-anechoic chamber for testing

of noise and vibration. The company also draws on the resources of leading international design

and styling houses like the Institute of Development in Automotive Engineering, SPA, Italy, and

Stile Bertoni, Italy. The company has also been implementing several environmentally sensitive

technologies in manufacturing processes and uses some of the world's most advanced equipment

for emission checking and control.

3.2.3. Models Of Tata Motors

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Safari Dicor (SUV)

Safari DICOR VX Safari DICOR EX Safari DICOR LX Safari DICOR 2.2 VTT

Tata Indigo (MID SIZE)

Petrol Variantso Indigo GLEo Indigo GLSo Indigo GLX

Diesel Variantso Indigo LXo Indigo LS

Tata Indigo LS Dicor Tata Indigo LX Dicor

Tata Indigo SX (MID SIZE)

Petrol

Diesel

Tata Indica (MID SIZE)

Tata Indica V2o DLXo DLGo DLSo DLE

Tata Indica V2 Xetao GLXo GLGo GLSo GLE

Tata Indica V2 Turboo DLGo DLX

Tata Indigo Marina (SUV)

Indigo Marina -Dieselo Indigo Marina LSo Indigo Marina LX

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http://auto.indiamart.com/cars/tata-safari-dicor/http://auto.indiamart.com/cars/tata-safari-dicor/index.html#vxhttp://auto.indiamart.com/cars/tata-safari-dicor/index.html#exhttp://auto.indiamart.com/cars/tata-safari-dicor/index.html#lxhttp://auto.indiamart.com/cars/tata-safari-dicor/index.html#vtthttp://auto.indiamart.com/cars/tata-indigo/http://auto.indiamart.com/cars/tata-indigo/index.html#petrolhttp://auto.indiamart.com/cars/tata-indigo/index.html#glehttp://auto.indiamart.com/cars/tata-indigo/index.html#glshttp://auto.indiamart.com/cars/tata-indigo/index.html#glxhttp://auto.indiamart.com/cars/tata-indigo/index.html#dieselhttp://auto.indiamart.com/cars/tata-indigo/index.html#lxhttp://auto.indiamart.com/cars/tata-indigo/index.html#lshttp://auto.indiamart.com/cars/tata-indigo/index.html#ls%20dicorhttp://auto.indiamart.com/cars/tata-indigo-sx/http://auto.indiamart.com/cars/tata-indigo-sx/index.html#petrolhttp://auto.indiamart.com/cars/tata-indigo-sx/index.html#petrolhttp://auto.indiamart.com/cars/tata-indigo-sx/index.html#dieselhttp://auto.indiamart.com/cars/tata-indigo-sx/index.html#dieselhttp://auto.indiamart.com/cars/indica/http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#turbohttp://auto.indiamart.com/cars/indica/index.html#turbohttp://auto.indiamart.com/cars/indica/index.html#turbohttp://auto.indiamart.com/cars/tata-indigo-marina/http://auto.indiamart.com/cars/tata-indigo-marina/index.html#dieselhttp://auto.indiamart.com/cars/tata-indigo-marina/index.html#dieselhttp://auto.indiamart.com/cars/tata-indigo-marina/index.html#lshttp://auto.indiamart.com/cars/tata-indigo-marina/index.html#lxhttp://auto.indiamart.com/cars/tata-safari-dicor/http://auto.indiamart.com/cars/tata-safari-dicor/index.html#vxhttp://auto.indiamart.com/cars/tata-safari-dicor/index.html#exhttp://auto.indiamart.com/cars/tata-safari-dicor/index.html#lxhttp://auto.indiamart.com/cars/tata-safari-dicor/index.html#vtthttp://auto.indiamart.com/cars/tata-indigo/http://auto.indiamart.com/cars/tata-indigo/index.html#petrolhttp://auto.indiamart.com/cars/tata-indigo/index.html#glehttp://auto.indiamart.com/cars/tata-indigo/index.html#glshttp://auto.indiamart.com/cars/tata-indigo/index.html#glxhttp://auto.indiamart.com/cars/tata-indigo/index.html#dieselhttp://auto.indiamart.com/cars/tata-indigo/index.html#lxhttp://auto.indiamart.com/cars/tata-indigo/index.html#lshttp://auto.indiamart.com/cars/tata-indigo/index.html#ls%20dicorhttp://auto.indiamart.com/cars/tata-indigo-sx/http://auto.indiamart.com/cars/tata-indigo-sx/index.html#petrolhttp://auto.indiamart.com/cars/tata-indigo-sx/index.html#dieselhttp://auto.indiamart.com/cars/indica/http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#v2http://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#xetahttp://auto.indiamart.com/cars/indica/index.html#turbohttp://auto.indiamart.com/cars/indica/index.html#turbohttp://auto.indiamart.com/cars/indica/index.html#turbohttp://auto.indiamart.com/cars/tata-indigo-marina/http://auto.indiamart.com/cars/tata-indigo-marina/index.html#dieselhttp://auto.indiamart.com/cars/tata-indigo-marina/index.html#lshttp://auto.indiamart.com/cars/tata-indigo-marina/index.html#lx


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Indigo Marina -Petrolo Indigo Marina GLEo Indigo Marina GLSo Indigo Marina GLX

Indigo Marina Dicor

Tata Magic (SMALL SIZE)

Tata Sumo (SUV)

Sumo Victa Sumo SE+ Sumo SE 4*4 Sumo 4*4 Sumo Spacio ST Sumo Spacio

3.2.4.Economic Responsibility

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Tata Motors has led the Indian automobile industry's anti-pollution efforts through a series of

initiatives in effluent and emission control. The company introduced emission control engines in

its vehicles in India before the norm was made statutory. All its products meet required emission

standards in the relevant geographies. Modern effluent treatment facilities, soil and water

conservation programmes and tree plantation drives at its plant locations contribute to the

protection of the environment and the creation of green belts.

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3.2.5 TATA MOTORS CONSOLIDATED ACCOUNTS


BALANCE SHEET

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BALANCE SHEET

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4.0.0 Financial Ratio Analysis of Mahindra&Mahindra and Tata Motors

4.1.0 LIQUIDITY RATIO

Current Ratio =

Quick Ratio =

2005-06 2006-07M&M TATA M&M TATA

Current assets 104.66 9661.31 107.79 10141.82

Inventories 32.98 2012.24 23.54 2500.95

Current Liabilities 33.64 7115.36 33.54 7357.77

Current Ratio 3.11 1.36 3.214 1.378

Quick Ratio 2.13 1.075 2.512 1.04

Analysis:

Looking to the current ratio of both the companies it is very clear that M&M has a

remarkable growth in the financial year 2006-07 over 2005-06 and their assets areincreasing greater than their liabilities, whereas looking at the current ratios of Tata

motors it can be easily interpreted that they have not grown much or in other words theirassets are increasing in par to their liabilities.

Quick ratios tell us the ability of a company to convert its inventory in to finished goodsand push it in to the market. From the quick ratios given above it can be interpreted that

M&M have a steady increase in the capacity of converting its inventory into finished

goods, whereas Tata motors have a decline in their capacity to convert its inventory intofinished goods.

4.1.1. Turnover Ratios

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Total Asset Turnover Ratio =

Average Total Asset=

2005-06 2006-07

M&M TATA M&M TATA

Net Sales 9273.09 24293.99 11231.99 31884.69

Avg. Total Asset 5433.61 8134.27 6870.895 10381.085

Tot. Asset Turn Over Ratio 1.7 times 2.99times 1.63 times 3.071 times

Analysis:

Total assets turnover ratio tells us the ability of the assets to generate sales or in other

words the company is having enough sales to cover the value of its total assets.

Looking at the total assets turnover of M&M it can be said that there is a decrease of net

sales in compare to total assets of the company means the assets of M&M in 2006-07 is

not as much productive as it was in 2005-06.

For Tata motors it can be said that the assets of the company are now more productive

than in the year 2005-06.

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4.1.2 Coverage Ratio

Interest Coverage Ratio =

2005-06 2006-07

M&M TATA M&M TATA

EBIT 1169.46 2347.86 1453.92 2972.62

Interest Expense 26.96 226.35 19.8 313.07

Interest coverage ratio 43.37times 18.37times 73.43times 9.49times

Analysis:

Interest coverage ratio tells that whether the revenues of the company are capable of

covering interest.

Looking at the interest coverage ratio of M&M it can be concluded that the company has

increased its capability of paying interest tremendously in the financial year 2006-07.

For Tata motors the interest paying capability of the company has decreased.

Investors now feel more secure to invest in M&M than Tata motors.

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4.1.3. Leverage Ratios

Debt Equity Ratio =

Debt-total asset ratio =

2005-06 2006-07

M&M TATA M&M TATADebt 883.36 2936.84 1635.98 4009.14

Net worth 2908.86 5537.07 3552.90 6869.75

Total Asset 5919.70 9096.45 7822.09

Debt /Equity ratio 0.03 0.53 0.46 0.58

Debt total asset ratio 0.15 0.32 0.21 0.34

Analysis:

Debt to equity ratio tells us about the financial mix of the company in terms of debt toequity. It also tells us about the risk taking ability of the company and the level of

Leverage Company is accommodating.

M&M has increased its equity component manifold in the financial year 2006-07. And

hence decreased its financial leverage, whereas Tata motors also have increased its debt

components in compare to equity in the year 2006-07.

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4.1.4. Du-Pont Analysis

Return on Equity =

2005-06 2006-07

M&M TATA M&M TATA

Total Asset 5919.70 9096.45 7822.09 11665.72Net profit 857.10 1528.88 1068.39 1913.46

Sales 9273.09 24293.20 11231.99 31884.61

Equity 233.40 382.87 238.03 385.41

ROE 3.66% 3.93% 4.50% 4.96%

Analysis:

Du point analysis return ratios in terms of profit margin and turnover ratios

Looking to the du point analysis of M&M it can be said that company has increased its

profitability and hence the tendency of the company to return to its equity holders has

also increased.

For Tata motors the net profit is also increased and hence the capability of the company

to pay to its equity holder increased.

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5.0.0 Conclusion

The Financial Ratio analysis and the comparative analysis between both the company shows that

both the companies are profit making company. Looking at the individual performances of the

company with respect o the industry both the companies has earned profit and are therefore

reliable for the investors.

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6.0.0 References

www.tatamotors.com

www.mahindra&mahindra.comwww.google.com

www.yahoo.com

www.wikipedia.com
http://www.tatamotors.com/http://www.google.com/http://www.yahoo.com/http://www.wikipedia.com/http://www.tatamotors.com/http://www.google.com/http://www.yahoo.com/http://www.wikipedia.com/

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