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.
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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.
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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.
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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
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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.
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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
-1200.00
-1000.00
-800.00
-600.00
-400.00
-200.00
0.00
200.00
400.00
600.00
800.00
2015-16 2016-17 2017-18 2018-19 2019-20
Chart 1
Tabel 1: Trend Percentage Share Capital Trend Percentage
Tabel 1: Trend Percentage Net Profit Trend Percentage

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.
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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
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
2015-16 2016-17 2017-18 2018-19 2019-20
Value of the firm (Rs. in cr.)

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.
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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%.
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13. • 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.
May 1, 2021
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Conclusion

14. May 1, 2021
Annual Review
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