Analysis of Tata Motors Financial Statements

Name- Erya Modi

Roll no.- 69
UID- 211441
Course- Business Accounts & Finance
Course Code- ACOM0402

Introduction to Tata Motors

Tata Motors Limited (TML), a $42 billion organisation, is India’s largest automobile
company and is a leading global manufacturer of cars, utility vehicles, buses, trucks and
defence vehicles. Incorporated in India in the year 1945, Tata Motors is a part of the over
$100 billion Tata Group founded by Jamsetji Tata in 1868. Recognised for its world-class
quality, originality, engineering and design excellence, the Company is on the path of shaping
the future of mobility in India. Sustainability and the spirit of ‘giving back to society’ is their
guiding philosophy and good corporate citizenship is strongly embedded in their DNA. With
a large global footprint, the Company has consolidated its position as the Tata Motors Group
through mergers and acquisitions. It has a network of 76 subsidiaries in India and
internationally, which provide a host of engineering and automotive solutions. Some of the
world’s most iconic brands, including Jaguar Land Rover in the UK and Tata Daewoo in
South Korea form part of the automotive operations of the Group.
 A. Determine the capital structure of the company from its annual reports.

Capital structure- Capital structure describes the mix of a firm's long-term capital, which is a
combination of debt and equity. Capital structure is a type of funding that supports a
company's growth and related assets. Sometimes it's referred to as capitalization structure or
simply capitalization.

Formula:

Capital Structure = Debt(Non-current liabilities + Current liabilities) + Equity

Capital Structure (March 2022) = Rs. 16962.91cr. + Rs. 26992.81cr. + Rs. 19937.76cr.

Total Capital = Rs. 63893.48cr.

Ratios Applied to Capital Structure (March 2022)

1. Debt ratio= Total debt/Total Assets

= Rs. 43955.72/Rs. 63899.9
= 0.68788
2. Debt to equity ratio= Debt/Equity
= Rs. 43955.72/ Rs. 19937.76
= 2.20464

Equity

The equity portion of the debt-equity relationship is simple to define. In a capital structure,
equity consists of a company's common and preferred stock plus retained earnings. This is
considered invested capital and it appears in the shareholders' equity section of the balance
sheet. Invested capital plus debt comprise the capital structure.

Debt

Debt is less straightforward. Investment literature often equates a company's debt with its
liabilities. However, there is an important distinction between operational liabilities and debt
liabilities. Operational liabilities are what a company has to pay to keep the business running,
such as salaries. Debt liabilities form the debt component of capital structure although
investment research analysts do not agree on what constitutes a debt liability.

Capital structure and costs related to capital-

The capital structure and costs related to capital includes the following items as shown in
(figure 1.1)

I. Share Capital- It includes equity and preference share capital. The total share capital
of the company is Rs. 765.88cr.
II. Reserves and Surplus- It includes Retained Earnings are the cumulative profits that
remain after a company pays dividends to its shareholders. These funds may be
reinvested back into the business by, for example, purchasing new equipment or
paying down debt. The total Reserves and Surplus of the company is Rs.19,171.88cr.
III. Secured Long term loans- This includes Debentures, other long-term loans and
advances which are more than a year. The company’s long term loans consist of Rs.
16,962.91cr.

Capital Structure of Tata Motors

BALANCE SHEET OF MAR 22 MAR 21 MAR 20 MAR 19 MAR 18

TATA MOTORS (in Rs. Cr.)

12 12 12 12 12
months months months months months

EQUITIES AND
LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 765.88 765.81 719.54 679.22 679.22

TOTAL SHARE CAPITAL 765.88 765.81 719.54 679.22 679.22

Reserves and Surplus 19,171.88 18,290.16 16,800.61 21,483.30 19,491.76

TOTAL RESERVES AND 19,171.88 18,290.16 16,800.61 21,483.30 19,491.76

SURPLUS

TOTAL SHAREHOLDERS 19,937.76 19,055.97 18,387.65 22,162.52 20,170.98

FUNDS
NON-CURRENT
LIABILITIES

Long Term Borrowings 14,102.74 16,326.77 14,776.51 13,914.74 13,155.91

Deferred Tax Liabilities [Net] 173.72 266.50 198.59 205.86 154.61

Other Long-Term Liabilities 1,212.34 1,786.93 1,646.56 404.11 502.37

Long Term Provisions 1,474.11 1,371.94 1,769.74 1,281.59 1,009.48

TOTAL NON-CURRENT 16,962.91 19,752.14 18,391.40 15,806.30 14,822.37

LIABILITIES

CURRENT LIABILITIES

Short Term Borrowings 9,129.91 5,421.95 6,121.36 3,617.72 3,099.87

Trade Payables 6,102.10 8,115.01 8,102.25 10,408.83 14,225.63

Other Current Liabilities 11,152.74 11,671.05 10,180.46 7,765.57 6,030.53

Short Term Provisions 608.06 1,043.54 1,406.75 1,148.69 862.92

TOTAL CURRENT 26,992.81 26,251.55 25,810.82 22,940.81 24,218.95

LIABILITIES

TOTAL CAPITAL AND 63,899.87 65,059.66 62,589.87 60,909.63 59,212.30

LIABILITIES

Fig(1.1)

B. List out the current Fixed capital and Working capital constituents from its
annual reports.

Fixed Capital- The assets which remain in the business for a period of more than one
year are known as Fixed Assets. For example, plant, machinery, building, land, furniture,
equipment, etc. These assets are not meant for sale. Fixed Capital is the money invested
by a company in its fixed assets, which are to be used over a long period of time. Hence,
it can be said that fixed capital is used for meeting the permanent or long-term needs of
the business.

Management of Fixed Capital- Raising fixed capital required by the firm at minimum cost
and using it effectively sums up the management of fixed capital. The decision taken by a
 firm to invest in fixed assets is known as Capital Budgeting Decision. A firm must take
capital budgeting decisions carefully as it affects the profitability, growth, and risk of
business in the long run. It consists of decisions related to the purchase of land, plant and
machinery, building, investing in advanced techniques of production, or launching a new
product line. A firm must always finance its fixed assets through long-term sources, like
shares, debentures, long-term loans, etc., and not through short-term sources.

Fixed assets- Gross Value – Depreciation

Depreciation can be defined as a continuing, permanent and gradual decrease in the book
value of fixed assets. This type of shrinkage is based on the cost of assets utilised in a firm
and not on its market value. By deducting depreciation from the gross values we get the real
value of the Asset. It is calculated by two methods-

i. Straight Line Method

ii. Written Down Method

List of Fixed Assets in Tata Motors-

i. Non- Current Investments: Rs 29,256.39 cr.

ii. Long term loans and Advances: Rs. 48.43cr.
iii. Tangible Assets: Rs. 12,065.89cr.
iv. Non-Tangible Assets: Rs. 2,009.87cr.
v. Capital Work in progress: Rs. 585.21cr.
vi. Other Non-current Assets: Rs. 3,432.44cr.

Working Capital- Working capital estimates are derived from the array of assets and
liabilities on a corporate balance sheet. By only looking at immediate debts and
offsetting them with the most liquid of assets, a company can better understand what sort
of liquidity it has in the near future.

Working capital is also a measure of a company’s operational efficiency and short-term

financial health. If a company has substantial positive Negative Working Capital, then it
could have the potential to invest in expansion and grow the company. If a company’s
current assets do not exceed its current liabilities, then it may have trouble growing or
paying back creditors. It might even go bankrupt.
Current Assets- The Current Assets account is a balance sheet line item listed under the
Assets section, which accounts for all company-owned assets that can be converted to
cash within one year. Assets whose value is recorded in the Current Assets account are
considered current assets.

Current assets include cash, cash equivalents, accounts receivable, stock inventory,
marketable securities, pre-paid liabilities, and other liquid assets. Current Assets may
also be called Current Accounts.

Company’s Current Assets are Rs. 1,469,775cr. Current assets rose 0% and stood at Rs
1,470 billion, while fixed assets fell 6% and stood at Rs 1,798 billion in FY22. Overall,
the total assets and liabilities for FY22 stood at Rs 3,267 billion as against Rs 3,386
billion during FY21, thereby witnessing a fall of 4%.

List of Current Assets in Tata Motors

i. Current Investments: Rs. 5,143.08cr.

ii. Inventories: Rs. 3,718.49cr.
iii. Trade Receivables: Rs. 2,111.78cr.
iv. Cash And Cash Equivalents: Rs. 2,605.43cr.
v. Short Term Loans and Advances: Rs.139.37cr.
vi. Other Current Assets: Rs. 1,901.46cr.

Current Liabilities- Current liabilities are a company’s short-term financial obligations

that are due within one year or within a normal operating cycle. An operating cycle, also
referred to as the cash conversion cycle, is the time it takes a company to purchase
inventory and convert it to cash from sales. An example of a current liability is money
owed to suppliers in the form of accounts payable.

Some examples of current liabilities that appear on the balance sheet include accounts
payable, payroll due, payroll taxes, accrued expenses, short-term notes payable, income
taxes, interest payable, accrued interest, utilities, rental fees, and other short-term debts.

List of Current Liabilities in Tata Motors

Short Term Borrowings: Rs. 9,129.91cr.

Trade Payables: Rs.6,102.10cr.

Other Current Liabilities: Rs. 11,152.74cr.

Short Term Provisions: Rs. 608.06cr.

Working Capital= Current Assets – Current Liabilities

Working Capital (March 2022) = Rs. 15,619.61cr. - Rs. 26,992.81cr.

Working Capital (March 2022) = -Rs. 11,373.207cr.

Negative Working Capital is when a business' current liabilities exceed its current income
and assets. A temporarily Negative Working Capital typically occurs when a business
makes a large purchase, such as investing in more stock, new products, or equipment.

Investments- Investments are assets held by an enterprise for earning income by way of
dividends, interest, and rentals, for capital appreciation, or for other benefits to the
investing enterprise. Assets held as stock-in-trade are not ‘investment’.

A current investment is an investment that is by its nature readily realisable and is

intended to be held for not more than one year from the date on which such investment is
made.

A long-term investment is an investment other than a current investment. An investment

property is an investment in land or buildings that are not intended to be occupied
substantially for use by, or in the operations of, the investing enterprise.

Fair value is the amount for which an asset could be exchanged between a
knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length
transaction. Under appropriate circumstances, market value or net realisable value
provides an evidence of fair value.

Market value is the amount obtainable from the sale of an investment in an open market,
net of expenses necessarily to be incurred on or before disposal.

Investment portfolio Management- A portfolio is a collection of financial investments

like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds
and exchange traded funds (ETFs). People generally believe that stocks, bonds, and cash
comprise the core of a portfolio.
Balance Sheet of Tata Motors (in Rs. Crore)

CURRENT LIABILITIES MAR 22 MAR 21 MAR 20 MAR 19 MAR 18

Short Term Borrowings 9,129.91 5,421.95 6,121.36 3,617.72 3,099.87

Trade Payables 6,102.10 8,115.01 8,102.25 10,408.83 14,225.63

Other Current Liabilities 11,152.74 11,671.05 10,180.46 7,765.57 6,030.53

Short Term Provisions 608.06 1,043.54 1,406.75 1,148.69 862.92

TOTAL CURRENT 26,992.81 26,251.55 25,810.82 22,940.81 24,218.95

LIABILITIES

TOTAL CAPITAL AND 63,899.87 65,059.66 62,589.87 60,909.63 59,212.30

LIABILITIES

ASSETS

NON-CURRENT ASSETS

Tangible Assets 12,065.89 19,922.06 19,540.25 18,316.61 18,192.52

Intangible Assets 2,009.87 6,501.04 5,667.73 3,970.22 3,411.23

Capital Work-In-Progress 585.21 1,400.82 1,755.51 2,146.96 1,371.45

Other Assets 0.00 0.00 0.00 0.00 0.00

FIXED ASSETS 15,543.00 29,429.56 29,702.78 28,573.42 26,800.35

Non-Current Investments 29,256.39 16,114.91 15,730.86 15,434.19 14,260.79

Deferred Tax Assets [Net] 0.00 0.00 0.00 0.00 0.00

Long Term Loans and 48.43 72.39 138.46 143.13 143.96

Advances

Other Non-Current Assets 3,432.44 3,588.21 3,449.01 3,529.59 3,035.54

TOTAL NON-CURRENT 48,280.26 49,205.07 49,021.11 47,680.33 44,240.64

ASSETS

CURRENT ASSETS
Current Investments 5,143.08 1,578.26 885.31 1,433.18 2,502.78

Inventories 3,718.49 4,551.71 3,831.92 4,662.00 5,670.13

Trade Receivables 2,111.78 2,087.51 1,978.06 3,250.64 3,479.81

Cash And Cash Equivalents 2,605.43 4,318.94 3,532.19 1,306.61 795.42

Short Term Loans and 139.37 184.49 232.14 200.08 140.27

Advances

Other Current Assets 1,901.46 3,133.68 3,109.14 2,376.79 2,383.25

TOTAL CURRENT 15,619.61 15,854.59 13,568.76 13,229.30 14,971.66

ASSETS

TOTAL ASSETS 63,899.87 65,059.66 62,589.87 60,909.63 59,212.30

Fig(1.2)

C. Analyse and interpret the financing structure of the company since its inception
based on annual reports and other information.
a) Tata Motors Income Statement 2021-22

No. of Moths Year Ending 12 Mar-21* 12 Mar-22* % Change

Net Sales Rs m 2,497,948 2,784,536 11.5%
Other income Rs m 57,574 44,242 -23.2%
Total Revenues Rs m 2,555,522 2,828,778 10.7%
Gross profit Rs m 154,122 227,199 47.4%
Depreciation Rs m 235,467 248,357 5.5%
Interest Rs m 80,972 93,119 15.0%
Profit before tax Rs m -104,743 -70,034 -33.1%
Tax Rs m 25,419 42,313 66.5%
Profit after tax Rs m -130,161 -112,347 -13.7%
Gross profit margin % 6.2 8.2
Effective tax rate % -24.3 -60.4
Net profit margin % -5.2 -4.0
Fig (1.3)
Analysis-

Operating income during the year rose 11.5% on a year-on-year (YoY) basis. The company's
operating profit increased by 47.4% YoY during the fiscal. Operating profit margins
witnessed a fall and down at 8.2% in FY22 as against 6.2% in FY21.

Depreciation charges increased by 5.5% and finance costs increased by 15.0% YoY,
respectively. Other income declined by 23.2% YoY also Net profit for the year declined
by 13.7% YoY and Net profit margins during the year grew from 5.2% in FY21 to 4.0%
in FY22.

Net Sales- Net sales refers to the total amount of sales made by a business within a
specific period after sales returns, discounts, and sales allowances are deducted. Net sales
may be referred to as “net revenue” or simply “sales” when listed on an income statement.
Net sales are depicted on a company's income statement. Most companies directly report
the net sales numbers, and the derivation is given in the notes to the financial statements.
However, some companies report gross and net sales both on the income statement itself.
The net sales of Tata Motors of FY 22 Rs. 27,84,536cr.

Net Sales = Gross Sales – Sales Returns – Allowances – Discounts.

Gross Profit- Gross profit is the profit a business makes after subtracting all the costs that
are related to manufacturing and selling its products or services. You can calculate gross
profit by deducting the cost of goods sold (COGS) from your total sales. The Gross Profit
of the company is Rs.2,27,199cr.

Gross Profit = Total Revenue - Cost of Goods Sold (COGS)

Earnings before interest and tax (EBIT)- EBIT (earnings before interest and taxes) is a
company's net income before income tax expense and interest expenses are deducted.
EBIT is used to analyse the performance of a company's core operations without the costs
of the capital structure and tax expenses impacting profit. EBIT stands for Earnings
Before Interest and Taxes and is one of the last subtotals in the income statement before
net income. EBIT is also sometimes referred to as operating income and is called this
because it's found by deducting all operating expenses (production and non-production
costs) from sales revenue. The EBIT of the company is in negative that is Rs. -21,158cr.
EBIT is negative, if net income is negative, which suggests that operating expenses or cost
of goods sold exceeded revenue.

Interest- Interest expense is a non-operating expense shown on the income statement. It

represents interest payable on any borrowings—bonds, loans, convertible debt or lines of
credit. It is essentially calculated as the interest rate times the outstanding principal
amount of the debt. Interest expense is usually at the bottom of an income statement, after
operating expenses. Sometimes interest expense is its own line item on an income
statement. Other times it's combined with interest income, or income a business makes
from sources like its savings bank account. The interest of Tata Motors according to its
Income statement is Rs. 93,119cr.

Tax(deduction)- A tax deductible expense is any expense that is considered “ordinary,

necessary, and reasonable” and that helps a business to generate income. It is usually
deducted from the company's income before taxation. Basically, income tax expense is the
company's calculation of how much it actually pays in taxes during a given accounting
period. It usually appears on the next to last line of the income statement, right before the
net income calculation. The tax deducted from the Company’s statement is Rs. 42,313cr.

Profits after tax (PAT)- Profit After Tax refers to the amount that remains after a
company has paid off all of its operating and non-operating expenses, other liabilities and
taxes. This profit is what is distributed by the entity to its shareholders as dividends or is
kept as retained earnings in reserves. Profit after Tax (PAT) is the amount of money which
is left after subtracting total business expenses from the company's total revenue. It is a
calculation that includes almost all financial transactions in your business. Where, Total
Income = Revenue/ sales + income from other sources. The PAT of the company is in
negative that is Rs. -112,347cr. Hence, it is considered as loss and therefore it is not
taxable. It makes the company unsustainable during a loss period.

Dividends (deduction)- Dividends are not considered an expense, because they are a
distribution of a firm's accumulated earnings. For this reason, dividends never appear on
an issuing entity's income statement as an expense. Instead, dividends are treated as a
distribution of the equity of a business. Dividends are deducted from Income statement
since cash or stock dividends distributed to shareholders are not recorded as an expense on
a company's income statement. Stock and cash dividends do not affect a company's net
income or profit. Instead, dividends impact the shareholders' equity section of the balance
sheet.

b) Tata Motors Cash Flow Statement 2021-22

No. of
12 12 %
Particulars months
Change
Year Ending Mar-21 Mar-22
Cash Flow from Operating
Rs m 290,005 142,828 -50.7%
Activities
Cash Flow from Investing -
Rs m -47,751 -
Activities 261,263
Cash Flow from Financing
Rs m 99,042 -33,802 -
Activities
Net Cash Flow Rs m 132,322 64,590 -51.2%
Fig(1.4)

Analysis-

Tata Motor's cash flow from operating activities during FY22 stood at Rs 143 billion on
a YoY basis. Cash flow from investing activities during FY22 stood at Rs -48 billion on a
YoY basis. Cash flow from financial activities during FY22 stood at Rs -34 billion on a
YoY basis. Overall, net cash flows for the company during FY22 stood at Rs 65 billion
from the Rs 132 billion net cash flows seen during FY21.

c) Tata Motors Share Price Performance

Over the last one year, TATA MOTORS share price has moved up from Rs 337.6 to Rs 382.8,
registering a gain of Rs 45.2 or around 13.4%.
Meanwhile, the S&P BSE AUTO Index is trading at Rs 24,533.7 (down 0.7%). Over the last
one year it has moved up from 23,386.0 to 24,533.7, a gain of 1,148 points (up 4.9%).
Overall, the S&P BSE SENSEX is down 1.4% over the year.
 d) Tata Motors interpretation of Financial Structure

BALANCE SHEET OF MAR 22 MAR 21 MAR 20 MAR 19 MAR 18

TATA MOTORS (in Rs. Cr.)

12 months 12 months 12 months 12 months 12 months

EQUITIES AND
LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 765.88 765.81 719.54 679.22 679.22

TOTAL SHARE CAPITAL 765.88 765.81 719.54 679.22 679.22

Reserves and Surplus 19,171.88 18,290.16 16,800.61 21,483.30 19,491.76

TOTAL RESERVES AND 19,171.88 18,290.16 16,800.61 21,483.30 19,491.76

SURPLUS

TOTAL SHAREHOLDERS 19,937.76 19,055.97 18,387.65 22,162.52 20,170.98

FUNDS

NON-CURRENT
LIABILITIES

Long Term Borrowings 14,102.74 16,326.77 14,776.51 13,914.74 13,155.91

Deferred Tax Liabilities [Net] 173.72 266.50 198.59 205.86 154.61

Other Long-Term Liabilities 1,212.34 1,786.93 1,646.56 404.11 502.37

Long Term Provisions 1,474.11 1,371.94 1,769.74 1,281.59 1,009.48

TOTAL NON-CURRENT 16,962.91 19,752.14 18,391.40 15,806.30 14,822.37

LIABILITIES

CURRENT LIABILITIES

Short Term Borrowings 9,129.91 5,421.95 6,121.36 3,617.72 3,099.87

Trade Payables 6,102.10 8,115.01 8,102.25 10,408.83 14,225.63

Other Current Liabilities 11,152.74 11,671.05 10,180.46 7,765.57 6,030.53

 Short Term Provisions 608.06 1,043.54 1,406.75 1,148.69 862.92

TOTAL CURRENT 26,992.81 26,251.55 25,810.82 22,940.81 24,218.95

LIABILITIES

TOTAL CAPITAL AND 63,899.87 65,059.66 62,589.87 60,909.63 59,212.30

LIABILITIES

Considering the data of past five years from 2018-2022 we are analysing the financial
structure of Tata Motors-

Equity Share Capital-

March 2022- Rs. 765.88cr.

March 2021- Rs. 765.81cr.

March 2020- Rs. 719.54cr.

March 2019- Rs. 679.22cr

March 2018- Rs. 679.22cr.

Analysis- In past 5 years equity share capital have increased. The equity share capital of
2018 and 2019 has been same that is Rs. 679.22cr. In 2020 there was increase in the
company’s share capital to Rs. 719.54cr. Whereas, the equity share capital of 2021 was
Rs. 765.81cr. and in 2022 it is increased to Rs.765.88cr.

Reserves and Surplus-

March 2022- Rs. 19,171.88cr.

March 2021- Rs. 18,290.16cr.

March 2020- Rs. 16,800.61cr.

March 2019- Rs. 21,483.30cr

March 2018- Rs. 19,491.76cr.

Analysis- In past 5 years there have been ups and downs in the data of Reserves and
Surplus. In 2018, the total retained earnings were Rs. 19,491.76cr. but were increased to
Rs. 21,483.30cr. and was gradually decreased to Rs. 16,800.61cr. in 2020. Whereas, it
again increased in 2021 and 2022. The more Reserves and Surplus the less dividend is
given to share holders of the Company or less Retained earnings can be a reason of less
profit. Company may have invested that amount in some other activity can also be a
reason.

Debt-

a) Non-Current Liabilities-

March 2022- Rs. 16,962.91cr.

March 2021- Rs. 19,752.14cr.

March 2020- Rs. 18,391.40cr.

March 2019- Rs. 15,806.30cr.

March 2018- Rs. 14,822.37cr.

Analysis- In past five years the non-current liabilities of the company have gradually
increased mainly due to increase in long term borrowings, deferred tax, other long-
term liabilities as well as increase in long term provisions. But in 2022 all of these
factors mentioned above have reduced gradually which leads to Rs. 16,962.91cr.

b) Current Liabilities-

March 2022- Rs. 16,962.91cr.

March 2021- Rs. 19,752.14cr.

 March 2020- Rs. 18,391.40cr.

March 2019- Rs. 15,806.30cr.

March 2018- Rs. 14,822.37cr.

Analysis- In past five years, Current liabilities have increased of Tata Motors. Reason
behind increase in Current liabilities increase in Short-term borrowings, Trade
payables, Other current liabilities and Short-term provisions. Till 2021 Current
liabilities were increasing but in 2022 it decreased to Rs. 16,962.91cr. due to decrease
in the factors mentioned above.

Shareholding Pattern - Tata Motors Ltd.

Holder's Name No of Shares % Share Holding

No. Of Shares 3320912308 100%

Promoters 1540885009 46.4%

Foreign Institutions 455231178 13.71%

Banks Mutual Funds 226702101 6.83%

Central Govt 4790554 0.14%

Others 236036671 7.11%

General Public 580072719 17.47%

Financial Institutions 277194076 8.35%

This is the current Share holding pattern of the Company. The Promoters of the Company
have 46.4% whereas general public have only 17.47%. Foreign institution have 13.71%
whereas Financial institutions have only 8.35%. Banks and Mutual Funds have 6.83% and
Central Government of India have only 0.14%.