FRCC- Final Draft , ratio analysis

7/31/2019 FRCC- Final Draft , ratio analysis

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Ratio AnalysisPresented by:-VaishaliRochan VijayakumarBenny SolomonAshish Sharma

Uday Kiran


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History

Started in 1945 in

Mumbai, India. Original production

was on locomotives.

1954

First car rolled off ofthe assembly line.

Tatas are a family ofIndian industrialists

and philanthropists.

Tata Motors is Indias

owns the largestindependent companyin India.

Mercedes and Tata

teamed up to create atruck line.

- First majorbusiness deal withanother firm.


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Together bothcompanies started theircommercial vehicleoperations in 1960.

In 1986 the company

created and sold thefirst LCV

LCV = light commercialvehicle

Was the Tata 407

Tata Motors decided topursue joint ventures.

Cummins Engine Co.,Inc., was the firstcompany to jointlyventure with Tata in1993.

TATA began creatingnew product lines in

the late 1990s andearly 2000s.


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Corporate SocialResponsibility

A Company that cares about the future

TATA signed the United Nations GlobalCompact

TATA plays a significant role in community

development

TATA deals with Environmentally-friendlyproducts and technology


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Tata Motors today said its global sales

increased 21 per cent in July to 1,01,605 unitsover the same period last year.

Sales of luxury brands from Jaguar LandRover were at 26,921 units in July, up 41 per

cent from the same month last year. Sales of luxury sedans of Jaguar brand stood

last month at 4,064 units.

Growth and Expansion


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sales were at 22,857 units, Tata Motorssaid in a statement.

The company said total passengervehicles sales stood at 53,829 units inJuly, 2012, a jump of 45 per cent fromthe same month last year.

Commercial vehicle sales were up by 1per cent to 47,776 units from the samemonth last year


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Brand: Tata Ford GM

Sales: $7.6 billion $172 billion $181 billion

No of employees 33,900 246,000 266,000

Profit Margin 20% 17% 6.7%

Comparatively Speaking


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Current

RatioCurrent Ratio : It is the relationshipbetween the current assetsand current liabilities .

Current Ratio = CurrentAssets Current LiabilitiesIt is the most important and

widely used test of liquidity of a

business.


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Years 2012 2011 2010

Total Current Assets

56,935.30 40,881.17 42,445.64

in Rs.Cr.

Years 2012 2011 2010

Total Current Liabilities

73,268.07 55,125.62 41,720.83

Year 2012 2011 2010

Current ratio 0.77708202 0.741600185 1.01737286

0

2

4

6

8

10

12

Current ratios

Current Ratio = CurrentAssets Current

LiabilitiesThe higher the

current ratio thebetter the liquidity/

short term solvency.


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Acid Test

Ratio/Quick RatioIt is the ratio between Quick CurrentAssets and Current Liabilities. Ideally,quick ratio should be 1:1

Acid Test/Quick Ratio = Quick CurrentAssets Current Liabilities

Quick Current Assets : Cash/Bank Balances+ Receivables up to 6 months + Quicklyrealizable securities like Govt. Securities andBank Fixed Deposits .


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years 2012 2011 2010

Acid testratio

0.3613439 0.325352350.38193152

0

2

4

6

8

10

12

Acid test ratio

Year 2012 2011 2010

SundryDebtors 8,236.84 6,525.65 7,191.18

Year 2012 2011 2010

Cash andBank 18,238.13 11,409.60 8,743.32Year 2012 2011 2010

Total CurrentLiabilities 73,268.07 55,125.62 41,720.83

in Rs.Cr.

Acid Test/Quick Ratio =Quick Current Assets Current Liabilities

This is the mostrigorous andconservative testof a firm's


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Debt Equity

RatioIt is the relationship between borrowers

fund (Debt) and Owners Capital

(Equity).

Debt Equity Ratio = Long Term Debt Shareholders Equity

ORDebt Equity Ratio = Total Debt

Shareholders Equity


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2

4

6

8

10

12

debt equity ratio

years 2012 2011 2010

debt equity

ratio 0.843515510.900087474 4.27812655

Year 2012 2011 2010

Total Debt27,962.48 17,256.00 35,108.36

Year 2012 2011 2010

Total ShareholdersFunds 33,149.93 19171.47 8206.48

in Rs.

Cr.

Debt Equity Ratio =Total Debt

Shareholders

EquityA high debt equityratio has a seriousimplication from thefirms point of view.

High proportion of


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Inventory

Turnover Ratio

This ratio indicates the number of timesthe inventory is rotated during therelevant accounting period

Inventory turnover ratio = Cost ofgoods sold average inventory

Average Inventory = (Opening

Stock + Closing Stock) 2In days = 365days Inventory turnover ratio


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2

4

6

8

10

12

Inventory turnover ratio

Years 2012 2011 2010

Inventory turnover

ratio 9.0746971 8.43376904 7.64595019

Year 2012 2011 2010

COGS 1,46,495.24 1,07,035.24 85,109.48

Year 2012 2011 2010

averageinventory 16,143.27 12,691.27 11,131.32

in Rs.

Cr.

Inventory turnover =Cost of goods sold

ratio

average inventoryThis ratio indicates howfast inventory is sold. Ahigh ratio is good, as itshows liquidity and low

ratio shows that


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Debtor Turnover

RatioDebtors Turn Over ratio = Net CreditSales Average debtors

Net credit sales = (Gross creditsales) (Sales returns)

Average Debtors = (Opening

Debtors + Closing Debtors) 2(including bills

receivable)


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2

4

6

8

10

12

debtor turnover ratio

Years 2012 2011 2010

debtor turnover

ratio 22.4426218 17.8070180915.4378343

Year 2012 2011 2010

sales 1,65,654.49 1,22,127.92 92,519.25

Year 2012 2011 2010

averagedebtors 7,381.25 6,858.42 5,993.02

in Rs.

Cr.

Debtors Turn Over ratio= Net CreditSales Average

debtorsA high ratio showsshort time lagbetween credit salesand cash collection

and a Low ratio


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TOTAL ASSET TURNOVERRATIO

Total Assets Turnover Ratio = Cost of Goodssold

Avg. totalAssets

COGS= Sales-Gross profitParticulars 2012 2011 2010

Total fixedcharge ratio 3.98 3.21 3.04


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0

2

4

6

8

10

12 total asset turnover ratio

As the Total Assets turnover is high, it implies that the investmentmade on asset has yielded the firm with high returns when comparedto the previous year i.e., it has utilized the assets effectively. So it isfavorable to the investors to invest when this ratio is taken intoaccount.


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FIXED ASSET TURNOVERRATIOS

Fixed Assets Turnover Ratio =Cost of Goods sold/ Avg. FixedAssets

Particulars 2012 2011 2010

Fixed assetturnover ratio

2.34 2.08 1.72


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0

2

4

6

8

10

12

Fixed asset turnover ratio

The Ratio is high when compared to the previous year which implies that the firm isutilizing the fixed assets effectively to obtain best returns which is beneficial to the firmas well as to the investors.


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CREDITORS TURNOVERRATIO

CTR=Net credit purchases / Average creditors.

Net credit purchases = (Gross credit purchases) (Purchasereturn).Avg creditors = (Opening Crs + Closing Crs) / 2.

(including bills payable)

- A business organisation has to pay creditors if it buys goodson credit. Any new creditor will give us the goods on credit ifhe knows that we pay our creditors' bill within short period oftime. So, for knowing this time period, both parties calculatecreditor turnover ratio.


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DIVIDEND PAYOUT RATIO

Dividend payout ratio = Dividend per equity

share/Earnings pershareParticular 2012 2011 2010

Dividend

payout ratio

11.01 15.97 38.96


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0

2

4

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12

Dividend payout ratio

Dividend payout ratio measures the proportion of dividends paid to earning available to

shareholders. The dividend payout ratio is an important and widely used ratio. Thepayout ratio can be compared with the trend over the years or an inter firm and intra industrycomparison would throw light on its adequacy. Here in the graph it tells us that the companys

ratio is declining which discourages the investors to invest in the company as only lessdividend is being paid to them


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Net Profit Ratio

NPR= (Net Profit/ Net sales)*100

NP ratio is used to measure the overallprofitability and hence it is very useful to

proprietors. The ratio is very useful as if the netprofit is not sufficient, the firm shall not be ableto achieve a satisfactory return on itsinvestment.

PROFITABILITY RATIOS


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2012 2011 2010Net ProfitRatio

8.19410932

7.550108116 2.72039603

0

2

4

6

8

10

12 NPR


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Gross profit Ratio

GPR= (Gross Profit/ Sales)*100

Gross profit ratio may be indicated to whatextent the selling prices of goods per unit may

be reduced without incurring losses onoperations. It reflects efficiency with which afirm produces its products. As the gross profit isfound by deducting cost of goods sold from netsales, higher the gross profit better it is.


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2012 2011 2010

GPR 11.5657897 12.35809142 8.00889545

0

2

4

6

8

10

12GPR


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Operating profit Margin

Operating profit= Operating income/Net sales

Operating margin is a measurement of whatproportion of a company's revenue is left overafter paying for variable costs of productionsuch as wages, raw materials, etc. A healthyoperating margin is required for a company tobe able to pay for its fixed costs, such asinterest on debt.

If a company's margin is increasing, it is

earning more per dollar of sales. The higher the


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2012 2011 2010

OPM 13.3660549 14.3111829 10.6735517

0

2

4

6

8

10

12

OPM


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Interest Coverage ratio

ICR = EBIT / Interest expense

A ratio used to determine how easily acompany can pay interest on outstandingdebt.

The lower the ratio, the more the company isburdened by debt expense. When acompany's interest coverage ratio is 1.5 orlower, its ability to meet interest expenses

may be questionable.

Coverage Ratios


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2012 2011 2010

ICR7.42449249 7.3274514 4.00560171

0

2

4

6

8

10

12

ICR


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Fixed charge coverage ratios

Fixed charge coverage ratio = EBIT + Fixed

ChargeFixed

charge+ Interest

A ratio that indicates a firm's ability to satisfy fixedfinancing expenses, such as interest and leases.

For example, since leases are a fixed charge, thecalculation determining a company's ability leaseswould be (EBIT + Lease Expenses) / (Lease Expenses +Interest).


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2012 2011 2010

FCCR 7.42449249 7.32745144.00560171

0

2

4

6

8

10

12FCCR


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Debt service coverage ratio

DSCR = Net operating Income

Total Debt service

In corporate finance, it is the amount of cash flowavailable to meet annual interest and principalpayments on debt, including sinking fund payments.

A DSCR of less than 1 would mean a negative cashflow. A DSCR of less than 1, say .95, would mean thatthere is only enough net operating income to cover 95%of annual debt payments.


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2012 2011 2010

DSCR

7.437918736.81749655

2 3.5976425

0

2

4

6

8

10

12

DSCR


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Analysis of share prices

Live BSE QuotesAug 29, 2012

2:53:00 PM

Price

(Rs)

247.15

Open (Rs)

242.50

High (Rs)

248.00

Low

(Rs)

241.35%

Change

0.80

Volume

806,880

Value (Rs)

199,420,392

52-

Week

H/L

320.60

/137.65Valuation

EPS (Rs)*

6.63

P/E Ratio (x)

37.28

Market Cap (Rs m)

669,215.47

P/BV (x)

2.02


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Analysis

1) Tata Motor's luxury Jaguar Land Rover (JLR)models disappointed on the margins frontin the March quarter. Margins in the fiscalfourth quarter grew at 14.6 per cent againstexpectations of 18.2 per cent growth.

2) Margins were hit on account ofhigher staffcosts post fresh hiring. Higher ad-spendand incentives also led to the fall .Weak EBITmargins were driven by higher other expenses.

3) One-off tax credit of Rs. 1,826 crore inQ4 contributed to Tata's 139 per cent quarterlyprofit leap.


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4)Core domestic business performancewas lacklustre. Domestic car market grewjust 2.2 % in the last financial year. High

interest rates and slowing economic growthhave dampened demand in Asia's third-largest

economy.

5) frontloading of purchases ahead of theunveiling of the federal budget for the 2012/13that, as widely expected, raised excise duties

for vehicles.

6) Brokerages downgraded the stock orcut their target price post earnings.


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Market capitalization (or market cap) is

the total value of the tradable shares ofa publicly traded company.

In the case of TATA Motors market cap as onAugust 23, 2012 is

Market capitalization

Rs Cr $ Billion

Tata Motors 77,820 14.08


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Tata Motors being part of the Tataconglomerate has its philosophy deeply linkedto the core philosophy of the Tata group.It has fair, ethical and transparentgovernance practices along with highest

standards of professionalism, honesty,integrity and ethical behaviour. Thecompany gives maximum importance to the3

value creation and sustainability of all the

other stakeholders viz. customers, creditors,employees, vendors, community and theGovernment. Tata Motors have implementedthe Tata Business Excellence model whichis a part of Tatacode of conduct applicable to all subsidiar

Corporate Governance

Future outlook of the


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The overall Tata Motors Group sales crossed the1 million mark in 2010-11, higher by 24.2%

compared to the previous year.

Nano sales increased to 70,431 vehicles, agrowth of 129% from 30,763 vehicles in theprevious year. But the company stillconcentrated Nano to increase its sale as it was

when launched. The company also plans to launch a diesel

version of Nano in future.

The concept car of TATA is PIXEL. It has thefeature of Tablet activated key less entry, touch

screen information selection, voice activatedmedia functions, zero turn and space efficientparking.

The volume growth, market sales, vehicle saleskeeps increasing for Tata motor Ltd.

R&D expenditure and as a % net turn over

Future outlook of thecompany


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The automobile industry in India the tenth largest inthe world with an annual production of approximately2 million units is expected to become one of themajor global automotive industries in the

coming years. The global automobile industryproduction in 2010, registering a growth of about 22%and 38% respectively over the previous year.

The Tata motors ltd. recorded sale growth of 22.8%over the previous year in the Indian domestic market

representing a 24.3% market share in the Indianindustry. It exported 58,089 vehicles from India, agrowth of 70.3% over the previous year.

Tata Motors is has done of a very good job in the pastfive years of strengthening its position in the market.It appears to have an excellent opportunity for future.

The company must focus on combining its unique

Conclusion


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