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Assignment

OF

International Financial Management

On

Analysis of Capital structure,Dividend

Performance and Financial reportingOF

Tata Motors

Submitted to: Submitted by:

Prof. G.S Batra Rohit kumar

MBA 2 yr. D

Roll no: 6365

School of management studies

Punjabi university

PATIALA

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Tata Motors

Tata Motors Limited (formerly TELCO) is an Indian multinational automotive manufacturing

company headquartered in Mumbai, Maharashtra, India and a subsidiary of the Tata Group. Its

products include passenger cars, trucks, vans, coaches, buses and military vehicles. It is the

world's eighteenth-largest motor vehicle manufacturing company, fourth-largest truck

manufacturer and second-largest bus manufacturer by volume.

Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow,

Sanand, Dharwad and Pune, India, and in Argentina, South Africa, Thailand and the United

Kingdom. It has research and development centres in Pune, Jamshedpur, Lucknow and Dharwad,

India, and in South Korea, Spain, and the United Kingdom. It has a bus manufacturing joint

venture with Marcopolo S.A., Tata Marcopolo, and a construction equipment manufacturing

joint venture with Hitachi, Telcon Construction Solutions.

Founded in 1945 as a manufacturer of locomotives, the company manufactured its first

commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969.

Tata Motors entered the passenger vehicle market in 1991 with the launch of the Tata Sierra and

in 1998 launched the first fully indigenous Indian passenger car, the Indica. Tata Motors

acquired the South Korean truck manufacturer Daewoo Commercial Vehicles Company in 2004and the British premium car makerJaguar Land Roverin 2008.

Tata Motors is listed on the Bombay Stock Exchange, where it is a constituent of the BSE

SENSEX index, the National Stock Exchange of India and the New York Stock Exchange. Tata

Motors is ranked 314th in the 2012 Fortune Global 500 ranking of the world's biggest

corporations.

http://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Mumbai,_Maharashtrahttp://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Automotive_industry#Top_vehicle_manufacturing_groups_.3Cby_volume.3Ehttp://en.wikipedia.org/wiki/Jamshedpurhttp://en.wikipedia.org/wiki/Pantnagarhttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Sanandhttp://en.wikipedia.org/wiki/Dharwadhttp://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Marcopolo_S.A.http://en.wikipedia.org/wiki/Tata_Marcopolohttp://en.wikipedia.org/wiki/Hitachihttp://en.wikipedia.org/wiki/Telcon_Construction_Solutionshttp://en.wikipedia.org/wiki/Locomotiveshttp://en.wikipedia.org/wiki/Daimler-Benzhttp://en.wikipedia.org/wiki/Jaguar_Land_Roverhttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/BSE_SENSEXhttp://en.wikipedia.org/wiki/BSE_SENSEXhttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Fortune_Global_500http://en.wikipedia.org/wiki/Fortune_Global_500http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/BSE_SENSEXhttp://en.wikipedia.org/wiki/BSE_SENSEXhttp://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://en.wikipedia.org/wiki/Jaguar_Land_Roverhttp://en.wikipedia.org/wiki/Daimler-Benzhttp://en.wikipedia.org/wiki/Locomotiveshttp://en.wikipedia.org/wiki/Telcon_Construction_Solutionshttp://en.wikipedia.org/wiki/Hitachihttp://en.wikipedia.org/wiki/Tata_Marcopolohttp://en.wikipedia.org/wiki/Marcopolo_S.A.http://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Dharwadhttp://en.wikipedia.org/wiki/Sanandhttp://en.wikipedia.org/wiki/Lucknowhttp://en.wikipedia.org/wiki/Pantnagarhttp://en.wikipedia.org/wiki/Jamshedpurhttp://en.wikipedia.org/wiki/Automotive_industry#Top_vehicle_manufacturing_groups_.3Cby_volume.3Ehttp://en.wikipedia.org/wiki/Tata_Grouphttp://en.wikipedia.org/wiki/Mumbai,_Maharashtrahttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Multinational_corporation

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Meaning of capital structure :-

A mix of a company's long-term debt, specific short-term debt, common equity and preferred

equity. The capital structure is how a firm finances its overall operations and growth by using

different sources of funds.Debt comes in the form of bond issues or long-term notes payable, while equity is classified as

common stock, preferred stock or retained earnings. Short-term debt such as working capital

requirements is also considered to be part of the capital structure.

In finance, capital structure refers to the way a corporation finances its assets through

some combination of equity, debt, or hybrid securities. A firm's capital structure is then the

composition or 'structure' of its liabilities. For example, a firm that sells $20 billion in equity and

$80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of

debt to total financing, 80% in this example, is referred to as the firm's leverage.

Capital Structure (Tata Motors)

Period Instrument Authorized

Capital

Issued Capital - P A I D U P -

From To (Rs. cr) (Rs. cr) Shares (nos) Face Value Capital

2011 2012 Equity Share 900 634.71 3173546570 2 634.71

2010 2011 Equity Share 900 634.61 634613990 10 634.61

2009 2010 Equity Share 900 570.56 570557544 10 570.56

2008 2009 Equity Share 900 514.01 514008314 10 514.01

2007 2008 Equity Share 450 385.5 385503954 10 385.5

2006 2007 Equity Share 450 385.37 385373885 10 385.37

2005 2006 Equity Share 410 382.83 382834131 10 382.83

2004 2005 Equity Share 400 361.75 361751751 10 361.75

2003 2004 Equity Share 400 352.96 352958130 10 352.96

2002 2003 Equity Share 350 319.89 319784387 10 319.78

2001 2002 Equity Share 350 319.89 319782395 10 319.78

2000 2001 Equity Share 350 255.92 255856343 10 255.86

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Debt equity Ratio Of Tata Motors

Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

Debt Equity Ratio 0.57 0.80 1.12 1.06 0.80

Long Term Debt Equity Ratio 0.41 0.52 0.80 0.49 0.50

Dividend Performance

For the year ending March 2012, Tata Motors has declared an equity dividend of 200.00%amounting to Rs 4 per share. At the current share price of Rs 288.40 this results in a dividend

yield of 1.39%.

The company has a good dividend track report and has consistently declared dividends for the

last 5 years.

* As per the Profit & Loss account

Dividend Declared

AnnouncementDate

EffectiveDate

DividendType

Dividend(%)

Remarks

29-05-12 18-07-12 Final 200.00Recommended a dividend of Rs. 4/- per Ordinary sha(200%) and Rs. 4.10 per 'A' Ordinary share (205%), boface value of Rs. 2/- each (post split) for FY 2011-12.

26-05-11 19-07-11 Final 200.00 -

27-05-10 10-08-10 Final 150.00 -

29-05-09 03-08-09 Final 60.00 -

16-05-08 16-06-08 Final 150.00 -

18-05-07 01-06-07 Final 150.00 AGM

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Debt Equity ratio

DEBT EQUTY RATIO

TATA

MAR'06 0.53

MAR'07 0.59

MAR'08 0.80

MAR'09 1.06

MAR'10 1.11

Analysis: - this ratio judges the long term financial position and soundness of the

financial policies of the firm. In general lower the debts equity ratio higher the

degree of the protection enjoyed by the lenders.

But we can see in the graph that debt equity ratio of tata motors is increasing year

by year , which means that there is less protection to the lenders for their debts as

company is introducing more of equity in its capital structure.

0

0.2

0.4

0.6

0.8

1

1.2

Jan/06 Jan/07 Jan/08 Jan/09 Jan/10

ratio

ratio

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Meaning of dividends :-

Dividends are payments made by a corporation to its shareholder members. It is the portion of

corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that

money can be put to two uses: it can either be re-invested in the business (called retained

earnings), or it can be distributed to shareholders. There are two ways to distribute cash toshareholders: share repurchases or dividends. Many corporations retain a portion of their

earnings and pay the remainder as a dividend.

A dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend

in proportion to their shareholding. For the joint stock company, paying dividends is not

an expense; rather, it is the division of after tax profits among shareholders. Retained earnings

(profits that have not been distributed as dividends) are shown in the shareholder equity section

in the company's balance sheet - the same as its issued share capital.Public companies usually

pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called

a special dividend to distinguish it from the fixed schedule dividends.

Cooperatives, on the other hand, allocate dividends according to members' activity, so theirdividends are often considered to be a pre-tax expense.

Dividends are usually paid in the form of cash, store credits (common among retail consumers'

cooperatives) and shares in the company (either newly created shares or existing shares bought in

the market.) Further, many public companies offer dividend reinvestment plans, which

automatically use the cash dividend to purchase additional shares for the shareholder.

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Notes to Accounts

(1)The Company has given a letter of comfort to HDFC Bank against the short term and

long term loans aggregating Rs.235 crores given by HDFC Bank to Tata Marcopolo

Motors Ltd (TMML). The letter of comfort is restricted to 51% of loan amount i.e. Rs. 120crores. Also the Company has given an undertaking to HDFC Bank that it will not dilute

its stake below 51% during the tenor of the loan.

(2) The Company has given a letter of comfort to Citibank NA towards the short term and long

term loans aggregating THB 1,055 million (Rs.174.19 crores as on March 31, 2012) given by

Citibank NA to Tata Motor (Thailand) Ltd (TMTL). The Company has also given letter o

comfort to ICICI Bank towards working capital facility aggregating THB 300 million (Rs.

49.53 crores as on March 31,2012) given by ICICI Bank to TMTL. Further the Company has

given an undertaking to Citibank NA as well as to ICICI Bank for non- disposal of its

shareholding in TMTL below 51% during the tenor of the loan.

(3) The Company has given a letter of comfort to GE Commercial Distribution Finance Europe

Ltd for revolving syndicated loan facility to Jaguar Cars Ltd and Land Rover for outstanding

balance of GBP 50.20 million (Rs. 409.31 crores as on March 31, 2012). Also the Company

has given an undertaking to GE Commercial Distribution Finance Europe Ltd to retain ultimate

100% ownership of Jaguar Cars Ltd and Land Rover at all times during the tenor of the loan.

(4) The Company has given a letter of comfort to Citibank NA against working capital loans

extended by the bank to Tata Hispano Motors Carrocera, S.A. (Hispano) aggregating Euro 25

million (Rs. 169.86 crores as on March 31, 2012). The Company has also given a letter o

comfort to Banco de Valencia against bill discounting facility extended by the bank to

Hispano aggregating Euro 2 million (Rs. 13.59 crores as on March 31, 2012).The Company has

also given an undertaking to Citibank NA and Banco de Valencia for non-disposal of its

shareholding in Hispano during the tenor of the loan.

(5) The Company has given letter of comfort to certain banks and other lenders against credit

facilities extended to Fiat India Automobiles Ltd for Rs 1,600 crores and Euro 130 million (Rs.

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883.29 crores as on March 31, 2012). The letter of comfort is restricted to 50% of the value o

credit facilities extended i.e. Rs. 1,241.65 crores.

(6) The Company has given a letter of comfort to HDFC Bank amounting to Rs. 1 crore

against working capital facility to Tata Motors Insurance Broking and Advisory Services

Limited (TMIBASL). Also the Company has given an undertaking to HDFC Bank that it will

not dilute its stake below 51% during the tenor of the loan.

(7) Trilix Srl., Turin (Italy) is a limited liability company.

(8) In terms of the Scheme of Amalgamation sanctioned by order dated July 29, 2011 o

Hon''ble High Court of Bombay, HV Transmission Ltd has been amalgamated with TML

Drivelines Ltd (formerly known as HV Axles

Ltd) with effect from April 1, 2011.

9. Contingent liabilities, commitments (to the extent not provided for) :

Description of claims and assertions where a potential loss is possible, but not probable is

reported under note (1) and (2) below :

As at As at

March 31, March 31,

1 Claims against the Company not

acknowledged as debts - 2012 2011

(i) Sales tax - Gross 413.12 1,003.68

- Net of tax 279.08 670.28

(ii) Excise duty - Gross 656.93 492.55

- Net of tax 443.79 328.94

(iii) Others - Gross 157.02 156.92

- Net of tax 106.07 104.80

(iv) Income Tax in respect of matters :

(a) Decided in the Company''s favour by

Appellate Authorities and for which the

Department is in further appeal 2.38 2.38

(b) Pending in appeal / other matters 95.20 105.19

2 The claims / liabilities in respect of excise duty, sales tax and

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other matters where the issues were decided in favour of the Company

for which the Department is in

further appeal 69.77 31.28

3 Other money for which the Company is contingently liable -

(i) In respect of bills discounted and

export sales on deferred credit 139.21 170.60

(ii) The Company has given guarantees

for liability in respect of

receivables assigned by way of

securitisation 107.80 634.34

(iii) Cash margins / collateral

[Note 20, page 152] 90.29 428.82

(iv) In respect of subordinated

receivables 9.51 37.16

(v) Others 6.64 13.68

4 Estimated amount of contracts remaining to be executed on capital

account and not provided for 1,536.25 1,857.43

5 Purchase commitments 12,527.63 14,699.18

10. Other Notes

(i) The revised Schedule VI has become effective from April 1, 2011 for the preparation o

financial statements. This has significantly impacted the disclosure and presentation made in

the financial statements. Previous year figures have been regrouped/ reclassified wherever

necessary to correspond with the current year classification /disclosure.

(ii) During the year ended March 31, 2012, TML Holding Pte Ltd. (Singapore) (TMLHS), a

wholly owned subsidiary of the Company, boughtback 91,666,700 equity shares for a

consideration of USD 2.2 per share (Rs.108.79 per share), based on an independent valuation o

TMLHS. The

consideration of Rs. 997.24 crores has been credited to Investment account.

(iii) Capital work-in-progress as at March 31, 2012 includes building under construction at

Singur in West Bengal of Rs.309.88 crores for the purposes of manufacturing automobiles. In

October 2008, the Company moved the Nano project from Singur in West Bengal to Sanand in

Gujarat.The newly elected Government of West Bengal enacted a legislation on June 14, 2011,

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which was notified on June 20, 2011, to cancel the land lease relating to the project at Singur.

The Company has challenged the legal validity of the legislation including the process o

compensation in the Courts of Law, the outcome of which is pending as of the date of approval

of these financials by the Board of Directors. Based on management''s assessment no provision

is considered necessary to the carrying cost of buildings at Singur.