TATA MOTORS ANNUAL REPORT ANALYSIS

By Akshay Kshirsagar

Annual Report Analysis

Annual Report Analysis of Tata MotorsTata Motors is an automobile manufacturer providing mobility solutions to over 175 countries. In the CV segment, which is the backbone of the domestic business, the Company has maintained its leadership position in the industry with a 45.1% market share in FY 2018-19.

OPINION OF MANAGEMENT

There is slowdown in auto-sector worldwide due to technology innovation. Electronic Vehicle (EVs )is the new future we will witness. Additionally geopolitical trade situation slow down in China and BREXIT have led more uncertainty in the auto sector.

Company believes that there is the strong need for innovation in India and is hopeful that Government and company will work together to achieve that goal.

Jaguar Land Rover is making significant investments to develop next-generation products. But JLR sales from china declined by 34% in FY 2018-19 due to slow down in auto-sector.

FINANCIAL PERFORMANCE ON A CONSOLIDATED BASIS

Annual Report analysis

TATA MOTORS BALANCE SHEET ANALYSIS

CONSOLIDATED ASSETS AND LIABILITIES Comparison

Current Assets Analysis 

Current Asset YOY at Rs 123,431 crore compared to Rs 135,972  in 2018. While Inventories contribute the major part of current assets Rs. 39,013 crore.

No major changes in Current Liabilities. 

TATA MOTORS PROFIT AND LOSS A/C ANALYSIS

Tata Motors Analysis

CONSOLIDATED INCOME STATEMENT

Company reported loss of Rs (34,299) crore compared to profit of Rs. 38,653 crore last year.

This was due three main reasons.

  1. Increase in Total Expenditure.
  2. Increase in loss of Exceptional items.
  3. Decrease in other comprehensive income.

Increase in Total Expenditure – Expenditure Increase was due to increase in cost of material. This increase can be for many factors such as surge in Dollar price, Inflation and many others

Increase in exceptional cost – In above income statement increase in exceptional cost is due to impairment of business of Jaguar Land Rover. Book value of the asset is more than recoverable amount hence this resulted in an impairment charge of `27,837.91 crores recognized within ‘Exceptional items’ as at March 31, 2019.

Impairment loss may occur due to many reasons, some of indications are .

  1. Market value declines.
  2. Negative changes in technology, markets, economy, or laws.
  3. Increases in market interest rates.
  4. Net assets of the company higher than market capitalization.

Decrease in comprehensive income –  This decline is due to fluctuation in currency, reimbursement of employees benefit and gain and losses in cash flow hedge.

TATA MOTORS CASH FLOW ANALYSIS

INCOME FROM OPERATING ACTIVITIES
Rs. 18,890 crores
INCOME FROM INVESTING ACTIVITIES
Rs. (19,711) crores
INCOME FROM FINANCING ACTIVITIES
Rs. 8,830.37 crores

Cash Flow from operating activities – Cash generated from working capital and operation is day to day business activities which is Rs 18,890 crores.

Cash Flow from investing activities – Cash generated from investing activities is when assets or investment are sold. While cash in negative indicated purchase of assets or investment as in this case.

Cash from financing activities – All borrowing and issuing debts, dividends and interest include financing activities. Cash in positive indicate borrowed capital that means cash inflow, while repayment indicate negative cashflow. Cash from financing is Rs. 8,830 crore.

Conclusion

Automobile industry in India will suffer for long due to lock down imposed by the Prime Minister amid covid 19. But the worse is yet come as Tata Motors 10% revenue is from China . Now many countries are blaming China for the spread of virus and this could lead to some restriction on trade with China.

The Pandemic which hit world economy to great depression is L shape according to economist. L shape is symbol from fall in GDP and stay lower for longer period. If the prediction is true automobile industry will be at great risk. As we will see decline in spending power of the people due to inflation and layoff. 

So one should be very selective on buying stocks of automobile industry. No doubt Tata Motors is the good bet, but if you want to have good return you must have patience. This sector may bounce back after 4 years when we will see innovation of electric cars and solar energy. But for now I believe you should avoid buying, it may bounce back for while but for short term it may suffer. Investors holding the stock at current price should continue to hold and avoid average buying.

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Above Analysis is based on Consolidated Statement. I am neither an investment adviser nor a stockbroker to provide recommendations and none of my answers is to be construed as buy/sell recommendations. All I am doing is, showing the facts of company, which cannot be seen through charts and news.