10 Years of TATA Motors Ltd - Financial Statement - Fundamental Insights

 

Tata Motors Limited is a leading global automobile manufacturer and India's second largest company in Automotive segment next to Maruti Suzuki. It is the part of Tata Group, an Indian multi-national conglomerate which provides its products and services on Buses, Cars, Defense Vehicles, Sports utility vehicles, Trucks and other related automotive in it's segment.

It is noteworthy that Tata Motors bought the famous and iconic brands Jaguar and Land Rover in the year 2008, from the Ford Company. Tata Motors is the leading player in the Commercial vehicle segment with a market share of around 45 Percent as per the FY2022. It is also said to be a Market leader in the EV segment with a market share of around 87 Percent in the year FY22 in India.

The company's last dividend was declared in the year 2016 for the Financial year 2015-16 with an amount of Rs. 0.20 per Share. Tata Motors Ltd is trading in the Indian Stock Exchanges(BSE, NSE) with a Market cap of Rs. 1.87 Lakh crore(22nd May 2023). Over the last one year, the stock price was up by 25 Percent and 85 percent in three years.

Tata Tiago, Tigor and Nexon are the recent models in the Electric Segment. Tata motors have discontinued more than 15 models Since 1988, including Tata Telcoline, Tata Sierra, Tata Sumo, Tata Indigo, Tata Nano and Tata Hexa. Tata Nexon is the company's first crossover SUV and it's electric version were came in the year 2019. 

The company's revenue and earnings have been highly volatile over the past few years. However, here are some fundamental insights based on it's track records.

• It's encouraging that the company has been profitable for the last two quarters - December 2022 and March 2023. It is noteworthy that the company has suffered losses for more than 10 quarters Since 2019. This means Tata Motors Ltd has posted net losses for Four consecutive Financial years(FY 2019-2022). 
• The highest net loss of the company came in the Financial year 2018-19 was Rs. (-28,724 Crores). Although the revenue of the company crossed Rs. 3 Lakh crore in the said year, it has incurred only loss in the bottom line.
• Tata Motor's cost of raw material has averaged between 60 to 65 Percent per annum, as per the Profit and Loss Statement. As such, the employee cost has averaged between 10 to 12 Percent.
• Other income in the P&L Statement varies from year to year. The company's Sales growth has been 3 Percent over the last 5 years and 6 Percent in the last Ten years.
• Compounded Profit growth has been Negative over the past 5 and 10 year periods. Although the company's share price has grown by 85 percent over the past 3 years, it has risen 11 over a five-year period and only 6 percent over a Ten-year period.
• The Return on Equity(ROE) has grown by 5 Percent over the past 10 years and it seems Negative in the recent past. However, it was growing by 6 Percent in the last one year which feels good for the investors.

 

• Short term and Long term borrowings have increased significantly. While the Short term borrowing was Rs. 9,696 Crore and the Long term borrowing was Rs.45,259 Crore in FY 2014, the short term borrowing was Rs. 36,965 Crore and Long term borrowing was Rs.88,696 Crore at the end of Financial year 2023.
• As per the FY 2022-23 report, the trade payable were stood at Rs. 72,056 Crore and the trade receivable were at Rs. 15,738 Crore. The cost of Working capital(CWIP) is Rs. 5,220 Crore and Inventories were stood at Rs.40,755 Crore in the said fiscal year.
• Reserves in the Balance Sheet is said to be Rs.44,556 at the end of FY 2022-23. However the Return on Capital Employed(ROCE) declined to 6 Percent in 2023 from the 23 Percent which was seen in the FY 2014.
• The acquisition of Jaguar and Land Rover(JLR) by Tata Motors Ltd in the year 2008 was a major talking point in the Global Automotive Industry. Initially, Tata Motors has agreed to pay USD 2.3 Billion in cash to acquire 100 percent of JLR's Business. However Tata Motors did not acquire any of JLR's debt obligations. So, the acquisition by Tata Motors was completely debt free.
• The Global economic slow down in the Automotive Industry, Brexit event, Pollution control and needy for the EV market have greatly affected the earnings of JLR Division. This impact was also reflected in the Tata Motors - Consolidated report. 
• Tata Motors were immensely failed in the project of Tata Nano and also consistently loss it's investments. This was hurt costly, while the company was also struggling to pay off its debt on the acquisition of JLR. Then, what we have seen in it's Financial statement in the subsequent years.

 

•  Tata Motor's Debt to Equity ratio has increased significantly over the past 5 to 10 years. The company's debt is well covered by its Operating Cash Flow. However, the interest payments on its debt are not well covered by it's EBIT(Earnings Before Interest and Tax).
• The company have the Short term assets worth Rs.1.52 Lakh Crore and the Short term liabilities were said to be Rs. 1.55 Lakh Crore. For the Long term, it's assets worth Rs.1.85 Lakh Crore and the liabilities worth Rs.1.28 Lakh Crore.
• Tata Motor's Stock price is currently trading at PE(Price to Earnings) of 76 Times which seems very high as compared with its peers. It is noteworthy that the Industry PE seems at 66 Times for the Automobile segment.  

In the recent past, the company have planned to target of achieving Net Zero Automotive debt by the end of FY2024. It is on track for the domestic business but it is stretched for the JLR Division. Most of the analysts are expecting that the company may reduce it's debt faster by rising output and Cash flow in it's consolidated business. 

As per the recent quarter, JLR business were looks good and there is a margin expansion in the company's business. It is said to be that the net debt of the India business was the lowest in 15 years.

With the changes and Challenges happening in the automotive industry globally, Tata Motors can expect to revive the growth of its business. Until then, the long term investors will have to wait for another few more years. 

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