Wealth maximization of tata motors

Financial management
Wealth maximization of Tata motors for 5 years
Trend analysis and Capital structure

1. Wealth Maximization of Tata Motors Submitted By: Komal Agarwal MBA II

2. Introduction Wealth maximization is a modern approach to financial management . It is defined as the present value of the expected future returns to the owners of the firm. Shareholders wealth maximization is the attempt by business managers to maximize the wealth of the firm they run , which results in rising stock prices that increases the net worth of shareholders. 2

3. TATA MOTORS PROFILE Tata Motors Limited (TML), a USD 42 billion organization, is India’s largest automobile company by revenues. The company is a leading global manufacturer of cars, utility vehicles, buses, trucks and defense vehicles and is working towards developing Smart Mobility Solutions for Smart Cities. It is also developing a smart range of EVs, to accelerate the adoption of Electric Vehicles (EV) in the country , supporting the government’s mission on electric vehicles. Incorporated in India, in the year 1945, Tata Motors is a part of the USD 100 billion Tata group and has operations across India, UK, South Korea, Thailand, South Africa, and Indonesia. 3 Source: https://www.tatamotors.com/wp-content/uploads/gms2018/tata-motors-profile-english.pdf

4. Scope of the study This study mainly attempts to analyze the financial performance of the company . The present study develops a financial analysis for owner’s equity and its development. The study forecast to evaluate how to increase the company profit . 4

5. Objectives of the study To determine the value of trend for past 5 years. To compare the income statement and Balance sheet of Tata Motors for the past 5 years. To study the financial position of the business using comparative statement and trend Analysis. Tools used 1. Trend Analysis 2. Capital Structure 5

6. Trend Analysis Trend analysis involves the collection of information from multiple time periods and plotting the information on a horizontal line for further review. The intent of this analysis is to spot actionable patterns in the presented information. 6

7. 7 Table 1: Trend Percentage Years Share Capital Net Profit (Rs. in cr.) Trend Percentage (Rs. in cr.) Trend Percentage 2015-16 679.18 100.00 427.65 100.00 2016-17 679.22 100.01 -2014.56 -471.08 2017-18 679.22 100.01 19.74 4.62 2018-19 679.22 100.01 2602 608.44 2019-20 719.54 105.94 -4616.42 -1079.49

8. Capital Structure Planning the capital structure is an important area of financial decision making . The finance manager has to select long-term sources of funds in such a way that the capital structure is optimum. The raising of more debt may help to improve the return to shareholders. But it will increase the risk and the fixed interest charges . And, raising of funds through equity capital will bring in more permanent funds . The risk to the firm is also less, but the shareholders expect higher returns . Therefore, the finance manager has to strike a balance between various long-term sources with a view to minimize the overall cost of capital . 8

9. 9 Table 2: Capital Structure Years EPS Market value of equity shares Market value of debts Value of the firm Earning available to equity share holder Rs. ( in cr.) (Rs. in cr.) (Rs. in cr.) (Rs. in cr.) (Rs. in cr.) 2015-16 -0.18 390.09 14,776.51 15,166.60 204.74 2016-17 -7.15 480.76 13,914.74 14,395.50 -2082.06 2017-18 -3.05 359.82 13,155.91 13,515.73 19.74 2018-19 5.94 233.83 13,686.09 13,919.92 2602 2019-20 -21.06 164.55 10,599.96 10,764.51 -4616.42

10. Findings The value of share capital is increased by 5.94%. And the value of net profit have been decreased by 979.49%. Even in the year value of the firm decreased by 29.02%. Sales of Tata Motors was falling subsequently each year . 10

11. Reason Lockdown was one of the reason for weak performance . Loss and debt on company is increasing. 80% Profit depends upon the sale of Jaguar and land rover and sale of these car was decreased. Export was decreased. Profit margin of 2017-18 was 3% which is too low and in 2016-17 it is 2.7%. 11

12. They have to reduce the expenses by dropping investment. Increase the profit margin not only depend upon tata consultancy service. Decrease the cost of the business. ( Cost Saving ). Concreate on the demand on passenger vehicles.( New NEXON & Tiago ) Move towards Electric Vehicle .( Jaguar and Land rover) With Chairman N Chandrasekaran said the company is eyeing “near-zero” debt in next three years. Today value of shares of tata motors is Rs 306.90. April 3, 2021 13 Conclusion

13. April 3, 2021 Annual Review 14