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2010

Sumit Tkakur PGPM/0911/019

2009-2011

International

Academy

of

Management

&

Entrepreneurship

TATA Motors

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TATA MOTORS Introduction

Tata Motors Limited (NSE: TATAMOTORS, BSE: 500570, NYSE: TTM), is a multinational corporation headquartered in Mumbai, India. Part of the Tata Group, it was formerly known as TELCO (TATA Engineering and Locomotive Company). Tata Motors has a consolidated revenue of USD 16 billion after the acquisition of British automotive brands Jaguar and Land Rover in 2008.

It is India's largest company in the automobile and commercial vehicle sector with upwards of 70% cumulative Market share in the Domestic Commercial vehicle segment, and a midsized player on the world market with 0.81% market share in 2007 according to OICA data. The OICA ranked it as the 19th largest automaker,[1] based on figures for 2007.[2] and the second largest manufacturer of commercial vehicles in the world. The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer. In India, Tata ranks as the leader in every commercial vehicle segment, and is in the top 3 makers of passenger cars. Tata Motors is also the designer and manufacturer of the iconic Tata Nano, which at INR 100,000 or approximately USD 2300, is the cheapest car in the world. Established in 1945, when the company began manufacturing locomotives, the company manufactured its first commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969.[3] Tata Motors is a dual-listed company traded on both the Bombay Stock Exchange, as well as on the New York Stock Exchange. Tata Motors in 2005, was ranked among the top 10 corporations in India with an annual revenue exceeding INR 320 billion.

In 2004, Tata Motors bought Daewoo's truck manufacturing unit, now known as Tata Daewoo Commercial Vehicle, in South Korea. It also acquired Hispano Carrocera SA, now a fully-owned subsidiary. In March 2008, it acquired the Jaguar Land Rover (JLR) business from the Ford Motor Company, which also includes the Daimler and Lanchester brands.[4][5][6] and the purchase was completed on 2 June 2008.[7]

Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow, Ahmedabad and Pune in India, as well as in Argentina, South Africa and Thailand.

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HISTORY OF TATA MOTER

Tata Motors is a part of the Tata Group manages its share-holding through Tata Sons. The company was established in 1935 as a locomotive manufacturing unit and later expanded its operations to commercial vehicle sector in 1954 after forming a joint venture with Daimler-Benz AG of Germany. Despite the success of its commercial vehicles, Tata realized his company had to diversify and he began to look at other products. Based on consumer demand, he decided that building a small car would be the most practical new venture. So in 1998 it launched Tata Indica, India's first fully indigenous passenger car. Designed to be inexpensive and simple to build and maintain, the Indica became an instant hit in the Indian market. It was also exported to Europe namely the UK and Italy. Since then it has never looked back. In 2004 it acquired Tata Daewoo Commercial Vehicle and in late 2005 it acquired 21% Aragonese Hispano Carrocera giving it controlling rights of the company. It has formed a Joint Venture with Marcopolo of Brazil and introduced low-floor buses in the Indian Market. Recently it had acquired British Jaguar Land Rover (JLR) business, which also includes Daimler and Lanchester brand names.

EXPANSION OF TATA MOTERS

After years of dominating the commercial vehicle market in India, Tata Motors entered the passenger vehicle market in 1991 by launching the Tata Sierra, a multi utility vehicle. After the launch of three more vehicles, Tata Estate (1992, a stationwagon design based on the earlier 'TataMobile' (1989), a light commercial vehicle), Tata Sumo (LCV, 1994) and Tata Safari (1998, India's first sports utility vehicle). Tata launched the Indica in 1998, the first fully indigenous passenger car of India. Though the car was initially panned by auto-analysts, the car's excellent fuel economy, powerful engine and aggressive marketing strategy made it one of the best selling cars in the history of the Indian automobile industry. A newer version of the car, named Indica V2, was a major improvement over the previous version and quickly became a mass-favourite. A badge engineered version of the car was sold in the United Kingdom as the Rover CityRover, which was a failure and was declared the worst car ever driven on BBC Top Gear show[8]. Tata Motors also successfully exported large quantities of the car to South Africa.The success of Indica in many ways marked the rise of Tata Motors.

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TECHNOLOGY DEVELOPMENT

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International strategy based on the competitive advantage

New product (eg. Tata Nano, the cheapest car in the World).

Acquisitions (eg. Land Rover and Jaguar brands from Ford Motors).

Partnership with established companies (eg. Alliance with Fiat since 2006) to enhance the product portfolio and knowledge exchange.

Facilities for learning from other companies.

Developing programmes for intensive management development.

Consolidate position in India by exploiting opportunities:

New mobility of young Indians.

Government’s substantial road-building program

GDP growth

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Tata's global operations

Tata Motors has been aggressively acquiring foreign brands to increase its global presence. Tata Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in 2008. Tata Motors has also acquired from Ford the rights of Rover. 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 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer,[10] giving it controlling rights of the company. Hispano’s presence is being expanded in other markets.

On Tata's journey to make an international foot print, it continued its expansion through the introduction of new products into the market range of buses (Starbus & Globus) as well as trucks (Novus). These models were jointly developed with its subsidiaries Tata Daewoo and Hispano Carrocera. In May, 2009 Tata unveiled the Tata World Truck range jointly developed with Tata Daewoo [27] They will debut in South

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Korea, South Africa, the SAARC countries and the Middle-East by the end of 2009 [27] In 2006, it formed a joint venture with the Brazil-based Marcopolo, a global leader in bodybuilding for buses and coaches to manufacture fully-built buses and coaches for India and select international markets.[28] Tata Motors has expanded its production and assembly operations to several other countries including South Korea, Thailand, South Africa and Argentina and is planning to set up plants in Turkey, Indonesia and Eastern Europe.[25] Tata also franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal.[29] Tata has dealorships in 26 countries across 4 continents.[30] Though Tata is present in many counties it has only managed to create a large consumer base in the Indian Subcontinent namely India, Bangladesh, Bhutan, Sri Lanka and Nepal and has a growing consumer base in Italy, Spain and South Africa

BOARD OF DIRECTORS

The Board of Directors alongwith its Committees provides leadership and guidance to the Company’s management and directs, supervises and controls the performance of the Company. The composition of the Board of Directors is governed by the Companies Act, 1956 (the Act), the listing agreement with the Indian Stock Exchanges where the shares of the Company are listed and the Articles of Association of the Company.

The Board of Directors has an optimum combination of Executive and Non-Executive Directors and presently comprises of twelve Directors (exclusive of one alternate director), out of which ten are Non-Executive Directors. The Company has a Non-Executive Chairman and the four Independent Directors, comprise more than one third of the total strength of the Board. The Board also includes a Managing Director and an Executive Director.The Managing Director is responsible for the conduct of the business as also the day-to-day affairs of the Company.

The Executive Director is in-charge of the Finance and Corporate Affairs’ functions of the Company. The role of the Chairman and the Managing Director (CEO) are distinct and separate.

None of the Directors on the Company’s Board is a Member of more than ten Committees and Chairman of more than five Committees(Committees being, Audit Committee and Investors’ Grievance Committee) across all the companies in which he is a Director. All the Directors have made necessary disclosures regarding Committee positions held by them in other companies. Also, none of the Directors on the Board hold the office of Director in more than 15 companies.

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The required information as enumerated in Annexure IA to Clause

49 of the Listing Agreement is made available to the Board of Directors for discussions and consideration at Board Meetings. The Board also reviews the declaration made by the Managing Director and the Executive Director regarding compliance with all applicable laws on a quarterly basis, as also the Board Minutes of all its subsidiary companies.

During the year under review, eight Board Meetings were held on April 4, 2005, May 17, 2005, June 6, 2005, July 29, 2005, October 6, 2005, October 25, 2005, February 9, 2006 and March 31, 2006. The maximum time-gap between any 2 consecutive meetings did not exceed 4 months. The composition of the Board, attendance at Board Meetings (BM) held during the Financial Year under review and at the last Annual General Meeting (AGM), number of directorships, memberships/chairmanships in public companies (including the Company) and their shareholding

In addition to the above Committees, the Board has constituted the following Committees:-

Finance Committee of Directors to look into matters pertaining to finance and banking transactions, including the Company’s fund raising and treasury operations, investments, all related risk management and policy matters, granting Powers of Attorney, property matters and other day-to-day financial related operations

Present and future challenges

The popular myththat Tata Motors have some distinct advantages in comparison to other multi-national competitors especially a cost advantage as labor costs are not true as Tata Motors has 8-9 percent of sales as compared similar percent for most multinational companies. Also employee productivity in Tata Motors is less than 1/3rd (in $million sales / employee) than Toyota. Another advantage in the increasing demand in its own backyard, India due to infrastructure developments and rising GDP. India remains one of the few developing auto markets where domestic brands have managed to keep a large presence, Tata and fellow compatriots account for more than 60% of the passenger vehicle sales and 95% of commercial vehicle sales. There are also favorable Government polices and regulations in place in order to help boost the auto industry. However, Tata has not been able to capitalize on its global presence. Tata relies heavily on its sales in India and has not yet managed to create a foothold in international markets even though it has a number of well reputed subsidiaries. However, Tata Nano may boost its international presence, at least in developing economies.

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Though it has an advantage in India, thanks to low costs and government policies it soon faces stiff competition from it multinational competitors all eyeing for a share in the ever growing Indian auto sector. Earlier, a policy required majority-owned subsidiaries of foreign car firms to invest at least US$50 million in equity if they wished to set up manufacturing projects in India and mere car assembling operations were not welcomed.An Indian cabinet panel has since announced a new automobile policy that sets fresh investment guidelines for foreign firms wishing to manufacture vehicles in the country. Investments in making auto parts by a foreign vehicle maker will also be considered a part of the minimum foreign investment made by it in an auto-making subsidiary in India. The move is aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts. The policies adopted by Government will increase competition in domestic market, motivate many foreign commercial vehicle manufactures to set up shops in India, whom will make India as a production hub and export to nearest market. Thus Tata Motors will have to face tough competition in near future, which might affect its growth negatively.

Currently, the presence of Suzuki through its subsidiary, Maruti Suzuki in the Indian market may also be alarming. Maruti has aggressively launched family cars to undermine the Tata models. Tata has continued to be strong in the MUV and SUV sector due to lack of competition and correct pricing. However, Tata now faces stiff competition from fellow compatriot Mahindra Group as well as multinational brand like Toyota and Chevrolet. In addition, the growing presence of fellow Indian competitors, Mahindra and Force Motors not only in the Indian but also in the Global market may effect Tata's sales. Mahindra and Force have formed joint ventures with Renault and MAN respectively. Mahindra has also formed a 51:49 JV called Mahindra Navistar with ITEC, USA (parent Navistar International), to manufacture commercial vehicles and to bolster its position in the CV business[31] Ashok Leyland, which is the second largest commercial manufacturer in India has remained Tata's biggest competitor in the Indian heavy commercial vehicle market and with its aquistion of Czech Republic-based Avia[32] it may manage to increase its presence in neighbouring markets such as Sri Lanka, Nepal where Tata

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Tata Motors Limited

Shareholders’ Satisfaction Survey: On the recommendations of the Investors’ Grievance Committee, a

survey on Shareholders’ Satisfaction was conducted in November 2005. 3,322 shareholders (1.38% of shareholder base) responded by sending in their duly filled in questionnaires which, when analysed reflected that on an overall basis, 64% of the shareholders were delighted (extremely satisfied) with the services provided by the Company and around 89% of the shareholders expressed a view that the services rendered by the Company were very good/excellent. Interaction with Company/Registrar’s personnel vis-à-vis Services for holdings in physical form - Change of address/mandates 63 86 6 - Registration of nomination 60 83 7 - Issue of fresh cheques in lieu of lost warrants 54 74 14 - Transmission/issue of duplicate share certificates 57 78 12 - Transfer/dematerialisation of shares 59 81 9 - Payment of dividend through ECS 72 88 7 Arrangements made at General Meetings 33 51 38 Timely receipt of dividend 67 88 5 The Company has taken steps to further improve the satisfaction levels based on the above analysis/feedback. The status on the total number of complaints received during the FY 2005-06, is as follows:- Description Received Replied Pending Letters received from Statutory Bodies Securities and Exchange Board of India 11 11 0 Ministry of Company Affairs 0 0 0 Stock Exchanges 9 9 0 Depositories 6 6 0 Legal Matters Court / Consumer Forum Matters 0 0 0 Dividends Non- receipt of dividend/interest warrants (pending reconciliation at the time of receipt of letters) 206 206 0 Fraudulent encashment of dividend/Interest warrants 3 0 3 Letters in the nature of reminders/ complaints 0 0 0

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Total Correspondence 235 232 3 There were no pending share transfers pertaining to the Financial Year ended March 31, 2006. The correspondence identified as investor complaints are letters received through Statutory/ Regulatory bodies and those related to Court/ Consumer forum matters (where the Company/Registrar is involved and is accused of deficiency in service), fraudulent encashment and non-receipt of dividend amounts where reconciliation of the payment is in progress/completed after the end of the quarter.

GENERAL BODY MEETINGS

Location and time of General Meetings Date Year Type Venue Time July 11, 2005 2004-2005 Annual General Meeting 3.30 p.m. April 26, 2005 2005-2006 Court Convened Meeting 4:00 p.m. July 8, 2004 2003-2004 Annual General Meeting 3:30 p.m. April 8, 2004 2004-2005 Extra Ordinary General Meeting 3:30 p.m. July 21, 2003 2002-2003 Annual General Meeting 3:30 p.m.

All resolutions moved at the last Annual General Meeting were passed by a show of hands by the requisite majority of members attending the meeting. The following are the Special Resolutions passed at the previous three Annual General Meetings and Extraordinary General Meetings held in the past 3 years: AGM/EGM Whether Special Summary held on Resolution Passed July 11, 2005 No N.A. April 26, 2005 Yes* Court convened meeting for approving the Scheme of Re-organisation and (EGM) Amalgamation of Tata Finance Limited with the Company.

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July 8, 2004 Yes Alteration of Article on Authorised Capital in the Articles of Association of the Company. April 8, 2004 Yes Raising of finance by way of equity/debt upto Rs.2250 crores and creation of a (EGM) charge on the Company’s assets in connection with the above. July 21, 2003 Yes - Offer, Issue and Allot securities, not exceeding Rs.500 crores or its equivalent of incremental funds of the Company. - Delisting of the Company’s Ordinary Shares from all or any of the Stock Exchanges excluding The Bombay Stock Exchange Limited (BSE) and The National Stock Exchange of India Limited (NSE). - Payment of commission to Non Whole-time Directors upto a sum not exceeding 1% of the Net Profits of the Company for a period of 5 years. - Change of the name of the Company from ‘Tata Engineering and Locomotive Company Limited’ to ‘Tata Motors Limited’. * This was passed by a dual majority comprising of more than three-fourth in value and majority in number of shareholders

DISCLOSURES

During the year under review, besides the transactions mentioned elsewhere in the Annual Report, there were no other related party transactions by the Company with its promoter, directors, management and subsidiaries that had a potential conflict with the interests of the Company at large.

The Audit Committee is briefed of the related party transactions

undertaken by the Company in the ordinary course of business (summary), material individual transactions which were not in the normal course of business and material individual transactions with related parties or others, which were not at arm’s length basis together with management’s justification for the same.

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The senior management has made disclosures to the Board relating to all material financial and commercial transactions stating that they did not have personal interest, that could result in a conflict with the interest of the Company, at large.

The Company has complied with various rules and regulations prescribed by Stock Exchanges, Securities and Exchange Board of India or any other statutory authority relating to the capital markets during the last three years. No penalties or strictures have been imposed by them on the Company.

The Company follows Accounting Standards issued by the Institute of Chartered Accountants of India and in the preparation of financial statements, the Company has not adopted a treatment different from that prescribed in any Accounting Standard. Birla Matushri Sabhagar 19, Sir Vithaldas Thackersey Marg

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PROFIT AND LOSS ACCOUNT

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BALANCE SHEET