vehicles

PROJECT REPORT ON

COMPARE THE STANDING TATA MOTORS vis-á-vis THE INDUSTRY

& CUSTOMER SATISFACTION SURVEY

TATA Motors Ltd. SUBMITTED TO:-

SUBMITTED

BY:-

LOVELY PROFESSIONAL UNIVERSITY ARUN GULERIA [email protected]

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LOVELY INSTITUTE OF MANAGEMENT (LIM)

DECLARATION I ARUN KUMAR GULERIA here by declare that the project report entitled “COMPARE THE STANDING TATA MOTORS vis-á-vis THE INDUSTRY & CUSTOMER SATISFACTION SURVEY” under guidance of

Miss. Sukhwinder

Arora submitted for the requirement of a degree programme of LOVELY PROFESSIONAL UNIVERSITY is my original work.

Any literature, data or works done by others and cited within this dissertation has been given due acknowledgement and listed in the reference section.

Signature

:

Date

:

Place

:

Jalandhar

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ACKNOWLEDGEMENT In order to make my project I acknowledge a special thanks to all those people without whose supports it would not be possible for me to complete for me to complete my report. First of all I really thankful to my Lovely Professional University because of them I could achieve the target. I express my sincere thanks to my project guide Miss. Sukhwinder Arora who had guide to me throughout my project. I would also thankful to the Satluj Motors (TATA MOTORS Dealership) for giving me this opportunity to work on project in Mandi (H.P). I convey my heart full thanks to the Mr. Bhopal Singh Jamwal (Admin. Manager) and the staff members of Satluj Motors, with their help and corporation. Also I would like to express my inner feeling for all the people for co-operating and helping me throughout the project. Last but not the least I am thankful to my parents and friends who have provided me with their constant support throughout this project.

Arun Kumar Guleria

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PREFACE The professional training is the internal part of a M.B.A program. It helps the student understand practical aspects of Business Management in a better way as a part of my M.B.A. program at Lovely Professional University, Jalandhar. I was supposed to work the organization. ‘Finance Management is the systematic and objective identification, collection, analysis, dissemination, and use of information for the purpose of improving decision making related to identification and solution of problems and opportunity” Perception is the process, by which an individual selects, organizes and interprets information inputs to create a meaningful picture of the world around as” To be a Master of Business Administration student is a matter of pride because we are in a field, which help us to develop from a normal human being into a disciplined, and dedicated professional. One has to be a good learner to sharper knowledge in the particular field to achieve and attain the desired goals and heights. I analysis the financial position of TATA Motors and conducted a financial analysis of two of its competitors – Mahindra & Mahindra and Maruti Udyog. To compare the standing TATA Motors vis-á-vis the industry. I used Balance Sheet, Profit & Loss Account, Cash Flow and Fund Flow Statement, and Ratio Analysis. And I also conducted Customer Satisfaction Survey of TATA Motors in the Mandi District of Himachal Pradesh. I used research questionnaires as the research and data collection tools. The responses were collected from 100 respondents from various areas of Mandi. I had learned lot during my project on compare the standing TATA Motors vis-á-vis the industry & customer satisfaction survey of TATA Motors; I hope this will be helpful to find out financial standing of TATA Motors in automobile industry and satisfaction of consumer in Mandi city.

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INDEX

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S.No.

PARTICULAR

Declaration Acknowledgement Preface Executive Summary Introduction Literature Review: 6.1 Tata Motors July Sales At 48,054 Nos. 6.2 First Quarter Stand-Alone Net Revenue Rs.6405 Crores, Pat Grows 58% To Rs.514 Crores 6.3 Delivers First Tata Nano In The Country In Mumbai 6.4 June 2009 Domestic Sales At 43,244 Nos 6.5 First Jaguar Land Rover Showroom Opens In India 6.6 Tata Motors To Introduce Air Car 6.7 Consolidated Revenue In 2008-09 Rs. 70938.85 Crores, Loss After Tax Rs. 2505.25 Crores 6.8 Effect Of Inflation On Car Market Profile Of Tata Group: 7. 7.1 TATA Group Companies Profile Of Tata Motors Limited: 8. 8.1 Industry Overview 8.2 History Of Tata Motors 8.3 Important Developments 8.4 Global Operations 8.5 Future Challenges 8.6 Milestones 8.7 Awards Products Of Tata Motors: 9. 9.1 Passenger cars and utility vehicles 9.2 Concept vehicles 9.3 Commercial vehicles Marketing Strategies: 10. 10.1 Launch Of Tata Nano 10.2 Modification In Tata Sumo 10.3 New Version Of Indigo ,Indigo Dicor 10.4 Tapping Of Rural Markets SWOT Analysis - Tata Motors Limited 11. Financial Analysis: 12. 12.1 Financial Overview 12.2 Capital Structure 12.3 Weighted Average Cost Of Capital ARUN GULERIA 12.4 Balance Analysis [email protected] 12.5 Financial Analysis Of Tata100 Motors Global Automobile Industry 13.

1. 2. 3. 4. 5. 6.

Page No. (i) (ii) (iii) 7 10 14 15

16 17 18 19 20 21 24 27 32 35 37 39 39 48 51 52 57 58 58 59 60 62 62 69 71 72 73 76 77 78 79 81 84 87

EXECUTIVE SUMMARY The project on COMPARE THE STANDING TATA MOTORS vis-á-vis THE

INDUSTRY & CUSTOMER SATISFACTION SURVEY based on financial performance and on customer survey. The main objectives of the project are:  Financial performance in automobile industry  Market performance  Market position.  Economic and the industry environment  Cost saving initiatives  Awareness regarding the facilities provided by Tata Motors.  Overall opinion about Tata Motors.  Satisfaction amongst the customers of Tata Motors For this project Financial Statements was analysis and customer research was carried out at various area of Mandi District of Himachal Pradesh. I learnt analysis financial statement in to find different aspects for compare the standing vis-á-vis industry and customer’s perception about TATA Motors.

THE REPORTS IS DIVIDED INTO VARIOUS SECTIONS: 1. Company Overview: This part describes the company profile. This part recognizes the achievements and rewards the company has achieved, it also gives little insights into what company offers to the Corporate and the Consumers. This section also describes the kind of technology used.

2. Company Profile:

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This section gives the information about the company. It includes the company history which depicts the company from the period of foundation. This section also products of the company producing by the company.

3. Analysis of Financial: Financial statements of the company over last few years are analysis in this section and financial performance is output.

4. Competitors of company: The company’s competitors are finding and study the business during the financial years.

5. Comparison of company’s financial statements with competitors: Comparison of company’s Balance Sheet, Profit & Loss Account and Fund and Cash Flow Statement with their competitor to find the standing of company in automobile industry.

FINDINGS: A detailed analysis of the company shows that the company has had a strong fundamental as well as a strong market performance over the years. Given the economic and the industry environment (improving outlook for the CV industry) TATA Motors would be a key beneficiary. While a pick-up in its CV volumes is evident, operating leverage and cost saving initiatives will improve margins. On an average more than 73% people feel that the prices are affordable whereas 12% do not agree, 74% believe that attractive discounts are offered whereas 26% are not satisfied with the discounts offered. 20% said that the test drives are not offered and 15% said that post sales follow ups are not done regularly whereas 85% said that they were done regularly but people feel that it is the people’s car as it is satisfactory on all other parameters: knowledgeable sales persons , employees spent enough time before and during sales, display of merchandise is attractive, ARUN GULERIA [email protected]

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availability of product, variety of merchandize, vehicle in good condition, prices are affordable, attractive discounts are offered, décor of the waiting area is pleasing, responds to complaints quickly, service at TATA Motors service station is excellent, careful with personal information and is value for money . The overall opinion about TATA Motors is very good.

At the end it is submitted to “Lovely Professional University”

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INTRODUCTION

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India is an emerging country with huge potential. The domestic economy is now growing at around 9-10% per annum and India’s importance in global terms is being reinforced by rapidly rising exports and domestic consumption. At a time when numbers of a slowdown and overheating in the Indian economy have started gaining momentum, the Indian rupee sprang a surprise by pushing the GDP figure past the trillion-dollar (42,00,000 crore) mark. The automotive industry is at the center of India’s new global dynamic. The domestic market expanding rapidly as incomes rise and consumer credit becomes more widely available. Manufacturer’s product lines are being continually expanded, as is the local automotive manufacturing base. Expectation are high that India can develop as a global hub for vehicle manufacturers and as an outsourcing center that offers the global automotive industry solution high up the automotive value chain.

• India eyes 25 million automotive jobs. •

India's GDP is set to double over the next decade

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In percentage terms, the automotive industry's contribution should also double.

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In dollar terms, the sector's contribution is set to quadruple to some $145bn The automobile industry in India accounts for a business volume of $45 billion and has

the potential to grow much faster both through Indian as well as international manufacturers who have established huge facilities in the country With the world’s second largest and fastest-growing population, there is no denying India’s potential in both economic and population terms and the effect it will have on the auto industry in the years to come. The country is already off to a good start, with a well-developed components industry and a production level of 1 million four-wheeled vehicles a year, plus a further 5 million two- and three-wheelers.

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The implications, market drivers and scope of a future massive Indian vehicle market are covered in the India Strategic Market Profile, a brand-new forecast of Indian automotive and related activity to 2020. Based on Max Pemberton's unique relational long-term forecasting model, it forecasts car and CV sales, demographics, materials usage, auto industry employment, and explains their inter- year of healthy growth in auto industry.

INDUSTRY GROWTH:

Future of the Automobile in the Economy:

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US based consultancy, keystone predicts that India will become world’s third largest automobile market by 2030. Overall size expected to exceed 20 million with compounded annual growth rate of over 12%.

INDIA THEN & NOW 1983

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Number of brands

2

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Number of models

2

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Number of brands

30

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Number of models

70

2008

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LITERATURE REVIEW

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Released on: 3rd August, 2009

Tata Motors July sales at 48,054 nos., growth of 18% M&HCV sales record year-on-year growth after almost a year - Ashish Garg

increase compared to 15,064 nos. (14,652 Tata + 412 Fiat) in July last year. Sales of Tata cars, at 14,537 nos., grew by 21% over July 2008. Dispatches of the Tata Nano began during the month, and the sales were 2,475 nos. The Indica range sales were 8,563 nos., a growth of 14% over July last year. The Indigo range recorded sales of 3,499 nos., lower by 22% over July last year. The UV/SUV range of Sumo/Safari accounted for sales of 2,638 nos., flat compared to July last year.

Tata Motors total sales (including exports) of Tata commercial and passenger vehicles in July 2009 were 48,054 vehicles, a growth of 18% over 40,729 vehicles sold in July 2008. The company’s domestic sales of Tata commercial and passenger vehicles for July 2009 were 45,599 nos., a 23% growth over 37,033 nos. sold in July last year. Cumulative sales (including exports) for the company for the fiscal at 171,168 nos., was lower by 1%, compared to 172,462 nos. sold last year.

The company began the sale and deliveries of the Jaguar and Land Rover range through the brands’ flagship store in Mumbai. The response has been quite encouraging in the first month with the initial India stock and pipeline imports booked to a large extent.

Commercial Vehicles The company’s sales of commercial vehicles in July 2009 in the domestic market were 28,408 nos., a 27% growth compared to 22,381 vehicles sold in July last year. LCV sales were 17,750 nos., a growth of 44% over July last year. M&HCV sales stood at 10,658 nos. turning positive after almost a year with a growth of 6% over July last year and the highest since September 2008 Cumulative sales of commercial vehicles in the domestic market for the fiscal were 100,464 nos., a growth of 7% over last year. Cumulative LCV sales were 63,180 nos., a growth of 32% over last year, while M&HCV sales stood at 37,284 nos. was lower by 19% over last year.

Cumulative sales and distribution offtake of passenger vehicles in the domestic market for the fiscal were 70,572 nos. (63,028 Tata + 7,544 Fiat), against 67,559 nos. (65,746 Tata + 1,813 Fiat) last year, a growth of 4%. Nano sales were 2,475 nos. Cumulative sales of the Indica range at 37,412 nos., reported a growth of 13%. Cumulative sales of the Indigo family were 12,422 nos., lower by 29%. Cumulative sales of the Sumo/Safari range were 10,690 nos., lower by 29%. Exports The Company’s sales from exports at 2,455 vehicles in July 2009 were lower by 34% compared to 3,696 vehicles in July last year. The cumulative sales from exports for the fiscal at 7,676 nos. were lower by 40% over 12,855 nos. in the same period last year.

Passenger Vehicles The passenger vehicle business reported a total sale and distribution offtake of 19,881 nos. (17,191 Tata + 2,690 Fiat) in the domestic market in July 2009, a 32% ARUN GULERIA [email protected]

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Released on: 27th July, 2009

Tata Motors First Quarter Stand-alone net revenue Rs.6405 Crores, PAT grows 58% to Rs.514 crores - R. S. Sardha

Improvement in liquidity, increased reach across the country and introduction of new products and variants improved the company’s sales, except in the case of the heavy truck segment. The heavy truck segment is recovering, albeit slowly, in response to infrastructure development, Government stimulus packages for the automobile industry and Jawaharlal Nehru National Urban Renewal Mission (JNNURM) initiatives.

Tata Motors today reported revenues (net of excise) of Rs.6404.63 crores on a standalone basis for the quarter ended June 30, 2009, of the financial year 2009-10, a decline of 7.6% compared to Rs.6928.44 crores in the corresponding quarter previous year. The company’s continued focus on cost efficiencies, coupled with reduction of raw material prices, inventory reduction and improvement in sales realisation, yielded considerable benefits resulting in the operating margin to 11.4% (from 7.1% in the previous year), with operating profits at Rs.728.00 crores, an increase of 47.9% as compared to the corresponding period of the previous year.

The company’s domestic sales volume at 122,120 vehicles recorded a marginal decrease of 1.4% over the corresponding quarter of the previous year, whilst the exports at 5220 vehicles continued to be severely impacted (negative 43%) in the wake of continuing tumultuous global environment resulting in total sales volume at 127,340 vehicles, a decline of 4.3% as compared to the corresponding quarter of the previous year. The company gained market share in commercial vehicles to 67.4% during the quarter compared with 61% in the corresponding quarter of previous year on the back of a marginal 1.1% growth in domestic sales to 72,216 units. Tata passenger vehicles declined by 10% in the domestic market to 45,846 units but have been growing sequentially every month of the quarter breaking into positive growth in June. The market share for Tata passenger vehicles has sequentially improved from April to June 2009 with the June exit market share at 12.5%, and for the period being at 11.3%. Along with Fiat, the company has a joint market share of 12.3%

Profit before Tax for the quarter grew by 58.8% to Rs.548.04 crores (Q1 2008-09: Rs.345.09 crores) and Profit after Tax was Rs.513.76 crores (Q1 2008-09: Rs.326.11 crores), an increase of 57.5%. The interest cost (net) at Rs.253.45 crores for the quarter increased by 125.6% due to increased debt taken by the company during the previous year to support its product programmes, investments and working capital requirements and depreciation at Rs.229.12 crores was higher by 26.7% reflecting the increased investments in new products and supporting capabilities. For the quarter ended June 30, 2009, there was an exceptional notional foreign exchange valuation loss of Rs.5.54 crores (previous year loss of Rs.161.59 crores). ARUN GULERIA [email protected]

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in

the

industry. In passenger vehicles, the company has completed the process of allotment of Tata Nanos, following the car’s launch in March 2009. Deliveries to the allottees have since begun. The company also opened the first Jaguar Land Rover showroom in India at Mumbai. Along with the Fiat Linea, Fiat 500 and the Palio, the company has commenced the distribution of the Fiat Grande Punto in June 2009.

The company continues to upgrade its resources to leverage emerging opportunities. In commercial vehicles, the company unveiled its new range of world standard trucks in May 2009, comprising multi-axle trucks, tractor-trailers, tippers, mixers and special purpose vehicles which are being gradually launched in India and also in select international markets over a period of time. An all-new Starbus range of buses has also been introduced. A new mileage enhancing automatic stop-start technology, developed in-house, has been introduced in the Ace mini truck. Tata Motors has received a majority of the orders for buses released by different State Governments under the JNNURM.

The audited stand-alone financial results for the quarter ended June 30, 2009, are enclosed. The consolidated financial results for the 1st quarter of Financial Year would be voluntarily disclosed separately in due course.

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Released on: 17th July, 2009

TATA MOTORS DELIVERS FIRST TATA NANO IN THE COUNTRY IN MUMBAI - Rojar R. Karm

Tata Motors is pleased to announce that

emission-friendly

Mr. Ashok Raghunath Vichare of Mumbai has become the first customer in India of the Tata Nano. Mr. Vichare received his choice, the Tata Nano LX (Lunar Silver), at the hands of the Chairman of Tata Sons and Tata Motors, Mr. Ratan N. Tata, at the company’s dealership, Concorde Motors, today.

Along with Mr. Vichare, two other customers, Mr. Ashish Balakrishnan (Tata Nano LX – Sunshine Yellow) and Kores India Limited (Tata Nano LX – Lunar Silver), also received their cars today.

car.”

As planned, Tata Motors has commenced deliveries of the Tata Nano this month to different towns and cities of the country. Dispatches to dealerships have begun from the Pantnagar plant, where the car is being produced, in accordance with schedules informed to customers.

Speaking on the occasion, Mr. Tata said, “I hope the Tata Nano will bring motoring pleasure to those who will be buying their first car as also those who currently own cars but want a modern, contemporary, ARUN GULERIA [email protected]

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Released on: 1st July, 2009

TATA Motors’s June 2009 DOMESTIC SALES at 43,244 nos. -

G. Lata Sure

total sale and distribution offtake of 19,513 nos. (17,039 Tata + 2,474 Fiat) in the domestic market in June 2009, an 11% increase compared to 17,567 nos. (17,017 Tata + 550 Fiat) in June 2008, and an increase of 17.8% over 16,563 nos. (15,388 Tata + 1,175 Fiat) of May 2009. The Indica range grew for the fifth consecutive month at sales of 10,210 nos. -- a growth of 19% over June 2008. The Indigo family recorded sales of 3,522 nos., a 26% decline over June 2008, but a growth of 24.4% over 2,832 nos. of May 2009. The Sumo/Safari range accounted for sales of 3,307 nos., a decline of 11% compared to June 2008, but a growth of 29.7% over 2,550 nos. of May 2009.

Tata

Motors’ total sales (including exports) of Tata commercial and passenger vehicles were 45,399 vehicles, a decline of 4% over 47,245 vehicles sold in June last year. The company’s domestic sales of Tata commercial and passenger vehicles for the month of June 2009 were 43,244 nos., a 1% decline over 43,814 nos. sold in June last year. Cumulative sales (including exports) for the company for the quarter at 123,113 nos., declined by 7%, compared to 131,733 nos. sold last year. Commercial Vehicles The Company’s sales of commercial vehicles in June 2009 in the domestic market were 26,205 nos., a 2% decline compared to 26,797 vehicles sold in June last year. LCV sales were 16,256 nos., a growth of 17% over June 2008, while M&HCV sales stood at 9,949 nos., a decline of 23% over June 2008 but an increase of 15% over May 2009.

The company launched the Jaguar and Land Rover range in the last week of June in Mumbai. Cumulative sales and distribution offtake of passenger vehicles in the domestic market for the quarter were 50,691 nos. (45,837 Tata + 4,854 Fiat), against 52,495 nos. (51,094 Tata + 1,401 Fiat) in the same period last year. Cumulative sales of the Indica range at 28,849 nos., reported a growth of 12%. Cumulative sales of the Indigo family were 8,923 nos., a 32% decline over the same period last year. Cumulative sales of the Sumo/Safari range were 8,065 nos., a decline of 35%.

Cumulative sales of commercial vehicles in the domestic market for the first quarter of the fiscal were 72,056 nos., a growth of 1% over last year. Cumulative M&HCV sales stood at 26,626 nos., a decline of 26% over last year, while LCV sales for the quarter were 45,430 nos., a growth of 27% over last year.

Exports The Company’s sales from exports at 2,155 vehicles in June 2009 declined by 37% compared to 3,431 vehicles in June 2008.

Passenger Vehicles The passenger vehicle business reported a ARUN GULERIA [email protected]

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The cumulative sales from exports for the

fiscal at 5,220 nos. declined by 43% over 9,159 nos. in the same period last year.

Released on: 28th June, 2009

FIRST JAGUAR LAND ROVER SHOWROOM OPENS IN INDIA

Jaguar Land Rover's official entry to the fast-growing Indian car market was marked today by the opening of a flagship showroom facility at Ceejay House in Mumbai by Mr. Ratan N. Tata, Chairman of Tata Sons and Tata Motors. Jaguar and Land Rover's award-winning vehicles are well known around the world. Jaguar has become one of the world's leading producers of beautiful fast cars. Land Rover produces the world’s most versatile all-terrain vehicles, combining refined luxury with a true breadth of capability. The exciting new range of premium luxury vehicles available for the Indian market will include the Jaguar XF, XFR and XKR and Land Rover Discovery 3, Range Rover Sport and Range Rover. Further details, including specifications, are available on the new Jaguar India website (www.jaguar.in) and Land Rover India website (www.landrover.in). Jaguar Land Rover has confirmed Tata Motors as its exclusive importer and the world-class Ceejay House facility in Worli, Mumbai, will offer a wide range of both Jaguar and Land Rover vehicles, with a dedicated showroom section for each brand. It aims to establish a benchmark experience in luxury car sales in India, with plans to develop the dealer network throughout 2009 and 2010. Mr. Ratan N. Tata, Chairman of Tata Sons and Tata Motors, said: "We are extremely pleased and proud to introduce the Jaguar Land Rover brands in the Indian market and give the discerning Indian customer direct access to these prestigious brands, accompanied by a parts and service network. We hope that they will delight customers in India just as they have done in markets the world over." Mr. David Smith, CEO of Jaguar Land Rover, said: "Jaguar Land Rover is delighted to have officially opened our first showroom in India. It is an exciting time to be entering the Indian market, a country with increasing affluence and an economy which is still growing. We believe ARUN GULERIA [email protected]

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that the Indian market holds significant growth potential in the long term, and we hope to tap the demand for premium vehicles from discerning customers."

Released on: July 7, 2009

TATA MOTORS TO INTRODUCE AIR CAR – Ben MaGreow

The MiniCAT which is a simple, light urban car, with a tubular chassis that is glued not welded and a body of fiberglass powered by compressed air. Microcontrollers are used in every device in the car, so one tiny radio transmitter sends instructions to the lights, indicators etc. There are no keys - just an access card which can be read by the car from your pocket.

Tata

Motors is taking giant strides and making history for itself. First the Landrover-Jaguar deal, then the world's cheapest car and now it is also set to introduce the car that runs on air, compressed air to be specific. With fuel prices touching nearly $150 per barrel, it is about time we heard some breakthrough! India's largest automaker Tata Motors is set to start producing the world's first commercial air-powered vehicle. The Air Car, developed by ex-Formula One engineer Guy Nègre for Luxembourg-based MDI, uses compressed air, as opposed to the gasand-oxygen explosions of internalcombustion models, to push its engine's pistons. Some 6000 zero-emissions Air Cars are scheduled to hit Indian streets by August of 2009.

According to the designers, it costs less than 50 rupees per 100Km (about a tenth that of a petrol car). Its mileage is about double that of the most advanced electric car (200 to 300 km or 10 hours of driving), a factor which makes a perfect choice in cities where the 80% of motorists drive at less than 60Km. The car has a top speed of 105 kmph. Refilling the car will, once the market develops, take place at adapted petrol stations to administer compressed air. In two or three minutes, and at a cost of approximately 100 rupees, the car will be ready to go another 200-300 kilometers.

The Air Car, called the MiniCAT could cost around Rs. 3,50,000 ($ 8177) in India and would have a range of around 300 km between refuels.

As a viable alternative, the car carries a small compressor which can be connected to the mains (220V or 380V) and refill the tank in 3-4 hours. Due to the absence of combustion and, consequently, of residues, changing the oil (1 litre of vegetable oil) is necessary only every 50,000Km.] The temperature of the clean air expelled by the

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exhaust pipe is between 0-15 degrees below zero, which makes it suitable for use by the

internal air conditioning system with no need for gases or loss of power.

Released on: 26th June, 2009

Consolidated Revenue in 2008-09 Rs. 70938.85 crores, Loss after Tax Rs. 2505.25 crores

Tata Motors today reported consolidated

Jaguar Land Rover: Jaguar Land Rover made a profit in 2007 and continued to do so in the first half of 2008. However, the global meltdown, especially after July 2008 with vehicle financing and demands drying up, impacted the auto industry worldwide, including Jaguar Land Rover. In 2008 therefore, Land Rover sales fell considerably. However, Jaguar was able to maintain the sales level primarily on the back of a very strong consumer response to the newly launched XF sedan.

gross revenue of Rs.74151.21 crores in 2008-09. The consolidated financial performance of the company is not comparable to 2007-08 on account of the acquisition of Jaguar Land Rover in June 2008. In 2007-08, the consolidated gross revenue was Rs.40340.79 crores. The consolidated revenues (net of excise) in 2008-09 amounted to Rs.70938.85 Crores (2007-08: Rs. 35660.07 crores). On a consolidated basis, the company reported a Loss after Tax in 2008-09 of Rs. 2505.25 crores; in 2007-08, the company had reported a Profit after Tax of Rs. 2167.70 crores.

The company has actively responded to this changed situation by taking a number of urgent and long term measures. These include cutting costs drastically and working on a plan of substantial cost reduction, aligning production with demand and tight control over cash flows. In addition, the company has introduced successfully new variants on both Jaguar and Land Rover brands, and is to unveil the all new XJ sedan shortly.

Tata Motors has reported a Basic Earnings Per Share (EPS) loss of Rs.(56.88) (200708: Profit of Rs. 56.24) for its consolidated operations. Tata Motors has already reported on May 29, 2009, that its own stand-alone revenues (net of excise) for 2008-09 amounted to Rs.25660.79 crores, and Profit after Tax for the year was Rs.1001.26 crores. Business

TDCV: While market illiquidity and high interest rates in South Korea impacted the company’s domestic performance, it

Highlights:

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strongly grew exports. The company is focusing on aggressive growth in both home and international markets harnessing stimulus packages announced by different governments, as also product development initiatives. Telcon: The company has launched several new products, but was impacted by the credit squeeze in the third quarter of the year. It expects demand revival supported by infrastructure spend in the country. HVAL & HVTL: Though impacted by lower volumes on the back of decline in medium and heavy trucks, the two companies significantly reduced variable costs to counter the slowdown. Their plans include strengthening in-house design and validation capabilities and expanding customer base in India and broad. TMFL: In line with Tata Motors’ sales in 2008-09, there was a decline in disbursals. It is focused on incremental captive vehicle financing of Tata Motors through increased securitisation and borrowings on its own books with higher ability to leverage.

provider of leading Engineering and PLM products in all major geographies winning several projects, and has expanded presence in aerospace design and aero structures. While the year ahead is challenging, it has developed appropriate business structures and processes to strengthen relationship with strategic clients.

Tata Technologies: The company has consolidated position among the top three solutions and software

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Released on: 29th May, 2009

Tata Motors Net Revenue in 2008-09 lower at Rs.25660.79 crores, and Net Profit lower at Rs.1001.26 crores, due to market upheaval Ace and the Tata Magic, have continued to improve penetration.

Tata Motors today reported gross revenue (stand-alone) of Rs.28599.27 crores (200708: Rs.33093.93 crores) in 2008-09, a year marked by severe demand contraction in the automobile industry.

Stimulus packages from the Government in the last quarter of the year have to an extent helped regenerate overall sales, as in the automobile industry, but growth is yet to revive to earlier levels.

Revenues (net of excise) for the year were Rs. 25660.79 crores compared to Rs.28739.41 crores in 2007-08, a decline of 10.7%. The Profit before Tax was Rs.1013.76 crores compared to Rs.2576.47 crores in 2007-08, a decline of 60.7%. The Profit after Tax for the year was Rs.1001.26 crores compared to Rs.2028.92 crores, a decline of 50.7%.

The fall in volumes combined with peak input prices and high interest rates brought margins under pressure. The company accelerated cost reduction measures and proactively managed working capital to contain the impact as best as it could. The total 2008-09 sales volume (including exports) is 506,421 units, compared to 585,649 units in the previous year. The company retained its domestic leadership position in commercial vehicles, and continued to be amongst the top three in passenger vehicles. Domestic commercial vehicles sales amounted to 265,373 units (2007-08: 312,935 units). The company increased market share in commercial vehicles to 63.8% (2007-08: 62.2%), aided by its wide product offering. Domestic

The demand contraction was triggered by high interest rates and unavailability of finance throughout the year; particularly in the October-December quarter post the global financial market upheavals. The impact on heavy commercial vehicles was more severe, abetted by reduction in freight movement in different segments and customer concerns on economic conditions. Small commercial vehicles, like the Tata ARUN GULERIA [email protected]

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passenger vehicles sales amounted to 207,512 units (2007-08: 218,055 units).The launch of the second generation Tata Indica Vista and the continuing good run of the Tata Indigo CS has helped recover market share in passenger vehicles in the second half which stands at 13.1% for the year (2007-08: 14%) and a March exit share of 14.5%. Tata Motors’ exports were 33,536 numbers (2007-08: 54,659 numbers), impacted by the worldwide downturn in the industry.

2008, and the launch of the Tata Nano on March 23, 2009. Over 2.03 lakh fully paid bookings were received for the Tata Nano, the deliveries of which will begin from July 2009. The Pantnagar plant began producing the Tata Nano during the year, while the Sanand plant is rapidly progressing towards completion. DIVIDEND The Board of Directors has recommended a dividend of Rs.6/- per Ordinary share and Rs.6.50 per ‘A’ Ordinary share of Rs.10/each for the financial year 2008-09 (200708: Rs.15/- for Ordinary share). The dividend is subject to approval of shareholders; tax on the dividend will be borne by the Company.

The launch of the Tata Indica Vista was augmented by the distribution of the Fiat 500 and Linea, both of which have been received well. In commercial vehicles too, new products, introduced during the year or the previous year, offering benefits like higher fuel efficiency, grew at a faster rate and helped enhance market share. The landmark events of the year were the acquisition of Jaguar Land Rover on June 2,

The Audited Financial Results for the financial year ended March 31, 2009, are enclosed.

__________________________________________________________ EFFECT OF INFLATION ON CAR MARKET - Hindustan Times

in a scenario where the stock market is on a slow rise. Due to inflation it has also been noticed that the sales of car are being motivated by the discount offers that the automobile companies are offering to the buyers. Some car manufactures have gone to the extent of giving exchange offers to the consumers and some have introduced a competitive finance rates. The effect of inflation has taken the rise in the price rate of the cars by 3-4%, which in turn suffices the need to meet the rise in price of the raw materials to build a car.

The growth in the car market has shown declining results as a result of the inflation. The effect on inflation has affected every sector which is related to car manufacturing and production. The increase in the price of fuel and the steel has led to a slower growth rate of the car industry in India. The production of Indian cars has been brought to a noticeable halt for inflation. It has also been noticed that leading car manufacturer in India like the Tata Motors, Maruti, Hyndai and Honda are trying hard to boost their production and sales of the cars ARUN GULERIA [email protected]

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The effect of inflation has affected not only the production and sales of Indian cars but also has significantly affected the car dealer, officials and car financers. Research and observations have led to the conclusion that in the year 2008, the car market and the car industry is expected to witness 8-9% fall. The effect of inflation on the car manufacturers have in turn affected the dealers in a way where they are being pressurized to push the sales graph higher and keep a high profit margin. The financers in the cycle are pressurized by both car manufacturers and dealers to pay the consumers a cent percent financial assistance by reducing on the loan interest rate. Overall it has been noticed that the automobile market in India and specially the car market in India have experienced a downtrend with the inflation affecting almost every industry to which the car market is essentially related.

ARUN GULERIA [email protected]

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THEORETICAL RELEVANCE OF TATA MOTORS’S LONG TERM FINANCIAL BEHAVIOR - Financial Institute

“As per the Trade off theory, the marginal cost and benefit of debt in determining the best financial structure of a company is considered, at most considerate liability percentage, a companies market value is brought up and the companies whose liability percentage diverge from the best possible can increase their price by bringing their liability percentage towards the target”. (European Journal of Economics) “The pecking order theory is based on the idea of asymmetric information between managers and investors. A company increases its debits by issuing new equities to finance new projects because if not done the same way then and new investors are brought into consideration then the new Investors will make most of the profit which is ”the net present value (NPV)” of that particular project which will cause lose to the present share holders. To avoid this most of the firms tend to finance their new projects using a security that is not undervalued in the market, which can be internal funds or some other less dangerous debt securities. Therefore, this is what affects the choice between internal and external financing. (European Journal of Economics).

“The M&M theory is a theory of capital structure which explains that a company’s market price is definite by its earning power and by the basic risk of its resources, the three most important ways of funding, they are issuing shares, borrowing and retaining profits “As opposed to dispersing them to shareholders in dividends” (Modigliani-Miller Theorem M&M) This theory also says that if there are no taxes, bankruptcy costs, and asymmetric information, in an efficient market then a company’s value becomes solid for finance by its sources. It makes no difference how the company’s funds are increased either by issuing stock or by selling debt and neither matters the dividend policy of the company”. (Modigliani-Miller Theorem - M&M) Therefore, According to the above composed data the Tata motors raised funds from NYSE in 2004, and then from Bombay stock Exchange, Private Equity Funds, Sale of Stakes, Inter-Group Sales and Bridge loans, so, this is in accordance to “the pecking order theory which says that a company increases its debits by issuing new equities to finance new projects because if not done the same way then and new investors are brought into consideration then the new Investors will

make most of the profit which is ”the net present value (NPV)” of that particular project which will cause lose to the present share holders. To keep away from this situation most of the firms tend to finance their new projects using a security that is not undervalued in the market, which can be internal funds or some other less dangerous debt securities. Therefore, this is what affects the choice between internal and external financing”. Hence, the pecking order theory explains the need of the firms to rely on the internal sources of the company for finances and also explains why the companies prefer debt to equity if external financing is required.

COMPANY PROFILE

TATA GROUP Tata is a rapidly growing business group based in India with significant international operations. Revenues in 2007-08 are estimated at $62.5 billion (around Rs251,543 crore), of which 61 per cent is from business outside India. The Group employs around 350,000 people worldwide. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. The business operations of the Tata Group currently encompass seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. The Group’s 27 publicly listed enterprises have a combined market capitalization of some $60 billion, among the highest among Indian business houses, and a shareholder base of 3.2 million. The major companies in the Group include Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels and Tata Communications. The Group’s major companies are beginning to be counted globally. Tata Steel became the sixth largest steel maker in the world after it acquired Corus. Tata Motors is among the top five commercial vehicle manufacturers in the world and has recently acquired Jaguar and Land Rover. TCS is a leading global software company, with delivery centres in the US, UK, Hungary, Brazil, Uruguay and China, besides India. Tata Tea is the second largest branded tea company in the world, through its UK-based subsidiary Tetley. Tata Chemicals is the world’s second largest manufacturer of soda ash. Tata Communications is one of the world’s largest wholesale voice carriers. In tandem with the increasing international footprint of its companies, the Group is also gaining international recognition. Brand Finance, a UK-based consultancy firm, recently valued the Tata brand at $11.4 billion and ranked it 57th amongst the Top 100 brands in the world.

Businessweek ranked the Group sixth amongst the World’s Most Innovative Companies. And the Reputation Institute, USA, recently rated it as the World’s Sixth Most Reputed Firm. Founded by Jamsetji Tata in 1868, the Tata Group’s early years were inspired by the spirit of nationalism. The Group pioneered several industries of national importance in India: steel, power, hospitality and airlines. In more recent times, the Tata Group’s pioneering spirit has been showcased by companies like Tata Consultancy Services, India’s first software company, which pioneered the international delivery model, and Tata Motors, which made India’s first indigenously developed car, the Indica, in 1998 and recently unveiled the world’s lowest-cost car, the Tata Nano, for commercial launch by end of 2008. The Tata Group has always believed in returning wealth to the society it serves. Twothirds of the equity of Tata Sons, the Tata Group.s promoter company, is held by philanthropic trusts which have created national institutions in science and technology, medical research, social studies and the performing arts. The trusts also provide aid and assistance to NGOs in the areas of education, healthcare and livelihoods. Tata companies also extend social welfare activities to communities around their industrial units. The combined developmentrelated expenditure of the Trusts and the companies amounts to around 4 per cent of the Group’s net profits. Going forward, the Group is focusing on new technologies and innovation to drive its business in India and internationally. The Nano car is one example, as is the Eka supercomputer (developed by another Tata company), which in 2008 is ranked the world’s fourth fastest. The Group aims to build a series of world class, world scale businesses in select sectors. Anchored in India and wedded to its traditional values and strong ethics, the Group is building a multinational business which will achieve growth through excellence and innovation, while balancing the interests of its shareholders, its employees and wider society.

CORE VALUES OF TATA At the Tata Group our purpose is to improve the quality of life of the communities we serve. We do this through leadership in sectors of national economic significance, to which the Group brings a unique set of capabilities. This requires us to grow aggressively in focused areas of business. Our heritage of returning to society what we earn evokes trust among consumers, employees, shareholders and the community. This heritage is being continuously enriched by the formalization of the high standards of behavior expected from employees and companies. The Tata name is a unique asset representing leadership with trust. Leveraging this asset to enhance Group synergy and becoming globally competitive is the route to sustained growth and long-term success.

 FIVE CORE VALUES The Tata Group has always sought to be a value-driven organization. These values continue to direct the Group’s growth and businesses. The five core Tata values underpinning the way we do business are:

Integrity:

We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny.

Understanding:

We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for

the

benefit of the communities we serve.

Excellence: We must constantly strive to achieve the highest possible standards in our day-today work and in the quality of the goods and services we provide.

Unity:

We must work cohesively with our colleagues across the Group and with our customers and partners around the world, building strong relationships

based on

Responsibility:

tolerance, understanding and mutual cooperation.

We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring

that over.

what comes from the people goes back to the people many times

TATA Group Companies Family pride The TATA family of enterprises comprises 98 companies in seven business sectors. This section lists all these companies under the sectors in which they operate, besides the two promoter companies of the Group.

The Seven Business Sectors are: Engineering (AUTOMOTIVE): •

Tata Auto comp systems: Subsidiaries/Associates/Joint Ventures: International Automotive, Knorr Bremse Systems for commercial Vehicles, Tata Auto Comp GY Batteries, TACO Engineering, TACO Faurecia Design Centre, TACO Hendrickson Suspension Systems, TACO Interiors and Plastics Division, Taco Kunstofftechnik, TACO MobiApps Telemaics, TACO Supply Chain Management, TACO Tooling, TACO Visteon Engineering Center, Tata Ficosa Automotive Systems, Tata Johnson Controls Automotive, Tata Toyo Radiator, Tata Yazaki Auto Comp, TC Springs, Technical Stampings Automotive.

•

Tata Motors: Subsidiaries /Associates/ Joint Ventures: Concorde Motors, HV Axels, HV Transmissions, Nita Company, TAL Manufacturing Solutions, Tata Cummins, Tata Daewoo Commercial Vehicles Company, Tata Engineering Services, Tata Precision Industries, Tata Technologies, Telco construction Equipment.

•

Engineering Services Tata Projects, TCE Consulting Engineers, Voltas

•

Engineering Products TAL Manufacturing Solutions, Telco Construction Equipment Company, TRF

METALS: •

TATA STEEL Subsidiaries /Associates/ Joint Ventures: Hooghly Met Coke and Power Company, Jamshedpur Injection Powder (Jamipol), Jamshedpur Utility and Service Company Limited (JUSCO), Lanka Special Steel, Mjunction Serves, NatSteel, Sila Eastern Company, Tata Blue Scope Steel, Tata Metallic, Tata Pigments, Tata Refractories, Tata Ryerson, Tata Sponge Iron, Tata steel (Thailand), Tata Steel KZN, Tayo Rolls, The Dhamra Port Company, The Indian Steel and Wire Products, The Tinplate Company of India, Tm International Logistics, TRF.

ENERGY: •

POWER • Tata BP Solar India • Tata Power Subsidiaries /Associates/ Joint Ventures: Tata Ceramics, Tata Power Trading, North Delhi Power Limited

•

OIL AND GAS • Tata Petrodyne

CHEMICALS: • • •

Rallis India Tata Pigments Tata Pigments

•

PHARMA • Advinus Therapeutics

SERIVES: •

HOTELS AND REALTY • Indian Hotels (Taj Group) Subsidiaries /Associates/ Joint Ventures: Taj Air, Roots Corporation (Ginger Hotels)

•

THDC • Tata Realty and Infrastructure

•

FINANCIAL SERVICES • Tata AIG General Insurance, Tata AIG Life Insurance, Tata Asset Management, Tata Capital, Tata Financial Services, Tata Investment Corporation

•

OTHER SERVICES • Tata Quality Management Services, Tata Services, Tata Strategic Management Group

CONSUMER PRODUCTS: • • • • • •

Infiniti Retail Tata Tea Subsidiaries /Associates/ Joint Ventures: Tata Coffee, Tata Tetley, Tata Tea Inc Tata Ceramics Tata McGraw Hill Publishing Company Titan Industries Trent

INFORMATION SYSTEMS AND COMMUNICATIONS: • •

• • • •

Nelito Systems Tata Consultancy Services Subsidiaries /Associates/ Joint Ventures: APONLINE, Airline Financial Support Services, Aviation Software Development Consultancy, CMC, CMC Americas Inc, Conscripti, HOTV, Tata America International Corporation, WTI Advance Technology. Tata Elxsi SerWizSol Tata Interactive Systems Tata Technologies

COMMUNICATIONS • • • •

Tata Sky Tata Teleservices Subsidiaries /Associates/ Joint Ventures: Tata Teleservices (Maharashtra) Tata Communication Tata Net

INDUSTRIAL AUTOMATION • Nelco Subsidiaries /Associates/ Joint Ventures: Tatanet

TATA MOTORS LIMITED The largest passenger automobile and commercial vehicle manufacturing company of India Tata Motors Limited, was formerly called TELCO (TATA Engineering and Locomotive Company), has its headquarters in Bombay, now Mumbai, India. Established in 1945, listed on the New York Stock Exchange in 2004 has created Rs. 320 billion wealth and was one of the top 10 wealth creators in India, With manufacturing facilities in the towns of Jamshedpur, Lucknow, and Pune. This company was founded by Jamshetji Tata and is run by Ratan Tata under the flagship company known as Tata and sons group. He commands 22000 employees working in three plants as well as other regional and zonal offices across the length and breadth of India. Tata motor’s passenger cars still need to reach acceptable international requirements. The company commands an imposing 65% share of the domestic commercial vehicle market and is trying to modernize this segment. The financial business of Tata motors was separated into a subsidiary company in sep. 2006, where it recorded a strong financial performance during the last 5 year period. From year 2003-2007, the profits of the company went up at a CAGR of 36.4%, to attain Rs. 331, 525 million in 2007 from Rs. 95, 731 Million in 2003. By floating two rights issues at the end of Sep 2008 Tata Motors Ltd expected to raise Rs 4, 150 crores. They are offering one ordinary share valued at Rs. 340 every six shares expecting to net Rs. 2.90 Crores, the so called “A” share would have different voting and dividend rights, for every such 6 shares held at a face value of 305 would raise Rs. 1.960 Crores, these proceed would be utilized for an early repayment of the short term funding of 2.3 Billion $ (Rs. 10,189 Crores) Borrowed for Acquisition of jaguar and Land Rover from their principle “The Ford Motor Company’s”. It is also in talks with private equity funds to offload 25% of stake in each of the following 6 unlisted group units, they are Tata Daewoo commercial vehicle company, HV transmissions, Tata motors finance, Tata technologies and TELCO construction equipment, the sales of the stakes would possible conclude by June 2009, helping it to raise further funds for this acquisition, earlier in July it sold 24% stake in an Auto component unit to a group firm and booked a profit of Rs. 110 crores, it also sold 10 million shares or 1.36% of Tata steel for RS. 486 crores to Tata Sons, the holding company of whole Tata group firms.

"The Company aims to monetize a part of its funds through a phased divestment of certain investments preferably as inter-group sales wherever possible at current market prices in the coming six to eight months," the money that will be released from these investments will become a part of the capital to be lifted for repayment of the bridging loan taken for the JaguarLand Rover acquisition. Taken in March 2008" (Tata Motors Profile) It took a 15 month bridge loan of 3 billion in March from a consortium of banks to finance the JLR accusation and its expansion plans Since the rights issue was announced on 28th may its share value has fallen more than 30% and fell by 1.82% to Rs. 429.85 on BSE, even though the bench mark index gained 3.8% to end at 15, 049.86 points.

The Analysts say that, this is a strategic move taken by Tata Motors because it is allowing the company to make a lot of profit even when the market is in the financial pressure allows Tata sons to raise its wager in group companies. If the company will follow the above mentioned trends then possibly it can raise its finances in a low liquidity and high interest rate set-up.

INDUSTRY OUTLOOK The Indian Automobile Industry enjoys the advantage of low cost base, high skilled labour, strong ancillary network coupled with Government’s support by way of concessional excise duty of 16% for small cars, ban on overloading and also significant investments proposed for removing infrastructure bottlenecks. The CV industry is directly related to the economic growth and development. The growth in demand for CVs is directly related to the IIP index and any upsurge in economic activities will call for more cargo movement in the economy. The domestic CV market grew at a CAGR of 26.7% during the last 6 years. In FY07, the CV segment registered a growth of 32.2% due to Supreme Court’s ban on over loading trucks. However, we believe that this is a one-time demand and the CV segment may not witness such kind of growth repeatedly. There is a regulation that restricts the movement of vehicles above certain age (15 years in National Capital Region and 8 years in Mumbai). Though the rule is not being followed strictly at present, in future if this rule is implemented strictly it will result in huge replacement demand. With the Indian economy expected to grow at 8.5% to 9% in coming years, we expect the demand for CVs to be fairly decent except for the fact that the industry is currently experiencing a correction due to sharp spurt in demand in the previous years. The CV industry witnessed a change in demand dynamics in last few years. The demand for LCVs in the 35.2 tonnes is witnessing a surge while demand for semi-trailers in 26.4 to 35.2 tonnes segment is suffering. This structural shift in demand dynamics is due to the evolution of Hub & Spoke model of distribution, which is now adopted by transportation players because of improved road infrastructure and also the ban on trucks in many cities by the authorities to tackle the traffic congestion issues. According to the Hub & Spoke model, HCVs plying over the highways to transport goods to different states and districts, while MCVs are used in distributing goods to different cities and the last leg of distribution in intra city is done by using