Assignment

OF
International Financial Management On Analysis of Capital structure,Dividend Performance and Financial reporting OF Tata Motors
Submitted to: Prof. G.S Batra Submitted by: Rohit kumar MBA 2 yr. D Roll no: 6365

School of management studies Punjabi university PATIALA

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 2004 and the British premium car maker Jaguar Land Rover in 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.

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
(Rs. cr)

Issued Capital
(Rs. cr)

-PAIDUP-

From 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

To 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share

Shares (nos) Face Value 3173546570 634613990 570557544 514008314 385503954 385373885 382834131 361751751 352958130 319784387 319782395 255856343 2 10 10 10 10 10 10 10 10 10 10 10

Capital 634.71 634.61 570.56 514.01 385.5 385.37 382.83 361.75 352.96 319.78 319.78 255.86

900 900 900 900 450 450 410 400 400 350 350 350

634.71 634.61 570.56 514.01 385.5 385.37 382.83 361.75 352.96 319.89 319.89 255.92

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
Announcement Date Effective Date Dividend Type Dividend (%) Remarks

29-05-12

18-07-12

Final

200.00

Recommended a dividend of Rs. 4/- per Ordinary share (200%) and Rs. 4.10 per 'A' Ordinary share (205%), both of face value of Rs. 2/- each (post split) for FY 2011-12. AGM

26-05-11 27-05-10 29-05-09 16-05-08 18-05-07

19-07-11 10-08-10 03-08-09 16-06-08 01-06-07

Final Final Final Final Final

200.00 150.00 60.00 150.00 150.00

Debt Equity ratio

DEBT EQUTY RATIO

TATA MAR'06 MAR'07 MAR'08 MAR'09 MAR'10 0.53 0.59 0.80 1.06 1.11

ratio
1.2 1 0.8 0.6 0.4 0.2 0 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10

ratio

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.

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 to shareholders: 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 their dividends 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.

Notes to Accounts
(1) (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. 120 crores. 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 of 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 of 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.

883.29 crores as on March 31, 2012). The letter of comfort is restricted to 50% of the value of 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 of 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 March 31, 1 Claims against the Company not acknowledged as debts (i) Sales tax - Gross - Net of tax (ii) Excise duty - Gross - Net of tax (iii) Others - Gross - Net of tax 2012 413.12 279.08 656.93 443.79 157.02 106.07 As at March 31, 2011 1,003.68 670.28 492.55 328.94 156.92 104.80

(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 (b) Pending in appeal / other matters

2.38 95.20

2.38 105.19

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

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 (ii) The Company has given guarantees for liability in respect of receivables assigned by way of securitisation (iii) Cash margins / collateral [Note 20, page 152] (iv) In respect of subordinated receivables (v) Others 170.60

107.80 90.29 9.51 6.64

634.34 428.82 37.16 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 of 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 of 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,

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 of 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.