Final Project Report
On
A STUDY ON CAPITAL STRUCTURE
OF TATA MOTORS LTD
Completed At
JIMS Rohini
By
Manas Srivastava
FRM2319
PGDM 22-24
Under Supervision of
Dr. Deepika Saxena
Presented in Partial Fulfillment of the Requirements of
Post Graduate Diploma in Management
3, Institutional Area, Rohini,
Sector-5, Delhi – 110085, India
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi-110085
CERTIFICATE
This is to certify that the final project report on “A Study on Capital
Structure of Tata Motors ltd. is a bonafide work of “Manas Srivastava,
Roll No: FRM2319”, pursuing PGDM Batch (2022- 24) of Jagan Institute
of Management Studies, 3, Institutional Area, Sec-5, Rohini, New Delhi
– 110085. The report was prepared under my supervision during
03/01/2025 – 07/03/2025.
Date: 30/03/25
Signature of the faculty Guide Professor
Dr. Deepika Saxena
JIMS Rohini Sector -5 New Delhi - 85
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi-110085
STUDENT’S DECLARATION
I declare that the Report on “A Study on Capital Structure of Tata Motors
ltd. is an original work done by me in accordance with the guidelines
prescribed by the Dean’s office for preparation of Final Project Report and
the work has not been submitted anywhere else for review.
I understand that if the content of the work is found to be plagiarized at any
time of its evaluation, my report can be rejected and disciplinary action may
be initiated against me.
Signature of the student Manas Srivastava
FRM2319
PGDM RM - Batch 23-25
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi-110085
Acknowledgement
I take the opportunity to express my gratitude to all of them who in some or
other way helped me to accomplish this challenging report. No amount of
written expression is sufficient to show my deepest sense of gratitude to
them.
I am very thankful to Dean (Dr) R.K Singh, JIMS Rohini and my Guide,
Professor Dr. Deepika Saxena for their everlasting support and guidance on
the grounds of which I have acquired a new field of knowledge. The course
structure created for this curriculum has benefited with the inclusion of recent
development in the organizational
and managerial aspects. I express my sincere thanks to all people who
participated and helped me in successfully conducting the Final Project
Report. I am thankful to all the members who gave valuable information in
the part of my Final Project Report.
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi-110085
Table of Contents
Page No.
Certificate (from the organization)
Author’s Declaration
Acknowledgement
List of Figures
Executive Summary
Chapter1: Introduction
(Overview of the Company)
Chapter 2: Research Methodology
Chapter 3: Conceptual Background
Chapter 4: Data Analysis and Findings
Chapter 5: Discussion and Conclusion
Chapter 6: Recommendations
Chapter 7: Learnings from Reports
References
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Executive Summary
During my summer internship, I had the opportunity to work on a project titled
“A Study Structure of Tata Motors ltd.”. The main objectives of the project were to study
the overview, evaluate financial performance using fundamental analysis, and prepare a financial model
for the company.
Part of the USD128 billion Tata group founded by Jamshed Ji Tata in 1868, Tata Motors is among
the world’s leading manufacturers of automobiles. The company believes in ‘Connecting
aspirations’, by offering innovative mobility solutions that are in line with customers' aspirations.
Tata Motors is India's largest automobile manufacturer.
In conclusion, this study provided a comprehensive understanding and examining how a
company finances its operations through debt and equity through the capital structure analysis.
The analysis can be valuable for potential investors, guiding their investment decisions.
However, investors should carefully assess all available information before making any
investment choices.
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Chapter 1. Introduction
1.1 Overview of the Industry
Introduction
The Indian automobile industry contributes almost 6.4% of India's GDP and 35% of
manufacturing GDP and is a leading employment provider. The The Indian automobile
industry has historically been a good indicator of how well the economy is doing, as the
automobile sector plays a key role in both macroeconomic expansion and technological
advancement. The two wheelers segment dominates the market in terms of volume, owing to
a growing middle class and a huge percentage of India’s population being young. Moreover,
the growing interest of companies in exploring the rural markets further aided the growth of
the sector. The rising logistics and passenger transportation industries are driving up demand
for commercial vehicles. Future market growth is anticipated to be fueled by new trends
including the electrification of vehicles, particularly three- wheelers and small passenger
automobiles.
India enjoys a strong position in the global heavy vehicles market as it is the largest tractor
producer, second-largest bus manufacturer, and third-largest heavy trucks manufacturer in
the world. India’s annual production of automobiles in FY22 was 22.93 million vehicles. The
industry rests on the following four pillars as shown in the picture below.
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Jagan Institute of Management Studies
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Market Size
The India passenger car market was valued at US$ 32.70 billion in 2021, and it is expected to
reach a value of US$ 54.84 billion by 2027, while registering a CAGR of over 9% between
2022-27. The electric vehicle (EV) market is estimated to reach Rs. 50,000 crore (US$ 7.09
billion) in India by 2025. A study by CEEW Centre for Energy Finance recognized a US$ 206
billion opportunity for electric vehicles in India by 2030. This will necessitate a US$ 180
billion investment in vehicle manufacturing and charging infrastructure.
According to NITI Aayog and the Rocky Mountain Institute (RMI), India's EV finance industry
is likely to reach Rs. 3.7 lakh crore (US$ 50 billion) by 2030. A report by the India Energy
Storage Alliance estimated that the EV market in India is likely to increase at a CAGR of 36%
until 2026. In addition, projection for the EV battery market is expected to expand at a CAGR of
30% during the same period. Indian automotive industry is targeting to increase export of
vehicles by five times during 2016-26. In FY22, total automobile exports from India stood at
5,617,246
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Investments
To keep up with the growing demand, several auto makers have started investing
heavily in various segments of the industry during the last few months. The industry
attracted Foreign Direct Investment equity inflow (FDI) worth US$ 33.53 billion
between April 2000-June 2022, accounting for 5.54% of the total equity FDI during the
period. Some of the recent/planned investments and developments in the automobile
sector in India are as follows:
1. In November 2022, Maruti Suzuki India announced plans to spend nearly Rs. 7,000
crore (US$ 865.12 million) on a number of projects this year, including the building of
its new facility in Haryana and the introduction of new models.
2. In April 2022, Tata Motors announced plans to invest Rs. 24,000 crore (US$ 3.08
billion) in its passenger vehicle business over the next five years.
3. In March 2022, MG Motors, owned by China's SAIC Motor Corp, announced plans to
raise US$ 350-500 million in private equity in India to fund its future needs, including
EV expansion.
4. A cumulative investment of Rs. 12.5 trillion (US$ 180 billion) in vehicle production and
charging infrastructure would be required until 2030 to meet India’s EV ambitions.
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Overview of the Company
Tata Motors Ltd was founded in 1945 as a manufacturer of locomotives, the company manufactured
its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which ended in 1969.
Tata Motors entered the passenger vehicle market in 1988 with the launch of the Tata Mobile
followed by the Tata Sierra in 1991, becoming the first Indian manufacturer to achieve the capability
of developing a competitive indigenous automobile. Tata Motors is listed on the (BSE) 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. The company is ranked 226th on the Fortune Global 500 list of
the world's biggest corporations as of 2016. On 17 January 2017, Natarajan Chandrasekaran was
appointed chairman of the company Tata Group. Capital Structure is a mix of company’s debts
includes debentures, long term loans, common equity and preferred equity. The most crucial
decision of any company is involved in the formulation of its appropriate capital structure. The break-
even point is a point where total costs and total sales are equal. This allows us to discover exactly how
much we must sell at the present level of costs to avoid making a loss. To accurately calculate your
break-even point, the fixed and variable costs on which your based calculation must be correct.
Vision and Mission of the Company
Our mission and vision is to become the most aspirational Indian auto brand by FY24, achieving this
through superior returns, sustainable mobility, exceeding customer expectations, and an engaged
workforce. Their mission centers on innovating mobility solutions with passion, aiming to enhance
the quality of life for all. They also focus on providing value to stakeholders and being a trusted global
network.
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi-110085
Chapter 2: Research Methodology
2.1 Objectives of the project
• To analyse the financial performance of Tata Motors Ltd.
• To find out the Financial break-level point of Tata Motors Ltd.
Type of research: Qualitative, Quantitative
Data type: Secondary Data
2.2 Sources of Data Collection:
Data for the study was collected from reliable and authentic sources, including the company's
financial reports, National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and industry
publications. The data included financial statements, revenue trends, market data, share prices
over the period of time, and market-related information.
2.3 Limitations of the study:
If promoters miscalculate in working out financial requirement of a company, then company may
land in a situation where it has a large surplus of capital.
This study is limited to a period of 5 years as it is a secondary data collected from previous
information.
"The project's success is dependent on external market conditions, which may impact its
scalability and long-term viability.”
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2.4 Tools Used in the Study:
The study used various financial tools like Excel.
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3, Institutional Area, Sector-5, Rohini, Delhi-110085
Chapter 3: Conceptual Background
Capital Structure:
Capital structure analysis refers to evaluating how a company finances its operations and growth
through a mix of debt and equity. It examines the proportion of debt, equity, and hybrid securities
in the company's total capital. A well-balanced capital structure optimizes financial performance,
minimizes risks, and enhances shareholder value. Key metrics include the debt-to-equity ratio,
cost of capital, and financial leverage. This analysis helps investors and management assess
financial stability, risk exposure, and the company's ability to generate returns sustainably.
Ratios:
Structural ratio is based on the proportions of debt and equity in the capital structure of the firm.
The capital structure ratio may be defined as those financial ratios which measure the long-term
stability and structure of the firm. These ratios indicate the mix of funds provided by owners and
lenders and assure the lenders of the long-term funds. When a company has issued a variety of
securities at different points of time to raise at difficult terms, it may need to consolidate such
securities to simply the financial plan as and when the market conditions are favorable.
Fixed assets turnover ratio
Working capital turnover ratio
Interest coverage ratio
sources
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• Fixes assets turnover ratio:
The fixed asset turnover ratio is in general, used by analysts to measure operating performance. It
is a ratio of net sales to fixed assets. This ratio specially measures a company’s ability to generate
net sales from fixed asset investments namely property, plant and equipment, net of depreciation. In
general, a higher fixed asset turnover ratio indicates that a company has more effectively utilized
investment in fixed assets to generate revenue.
Fixed Asset Turnover Ratio = Net sales / Net property, Plant and Equipment
• Working capital turnover ratio:
Capital Turnover Ratio indicates the efficiency of the organization with which the capital
employed is being utilized. A high capital turnover ratio indicates the capability of the
organization to achieve maximum sales with minimum amount of capital employed. Higher the
capital turnover ratio better will be the situation.
Capital Turnover Ratio = Sales / Capital Employed
• Interest coverage ratio:
The Interest coverage ratio is a measure of a company’s ability to meet its interest payments.
Interest coverage ratio is equal to earnings before interest and taxes (EBIT) for a time period, often
one year, divided by interest expenses for the same period.
Interest coverage ratio = EBIT / Interest
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Financial break-even point:
Financial break-even point is the level of earnings before interest and taxes that will result in zero
net income or zero earnings per share. It equals the company’s interest expense plus dividends paid
to preferred stock- holders and associated taxes.
Financial Break-even point= Fixed cost/ Contribution.
DU Pont Analysis
DuPont Analysis is a financial performance framework that breaks down Return on Equity (ROE) into
three components: Net Profit Margin, Asset Turnover, and Financial Leverage. It helps analyze
profitability, efficiency, and leverage to identify key drivers of a company's ROE.
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Chapter 4: Data Analysis and Findings
Data Analysis
Fixed asset turnover ratio
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Chapter 4: Data Analysis and Findings
Data Analysis
Fixed asset
turnover ratio
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Interpretation and Analysis
In the most recent year, 2023-24, the ratio increased to 3.6, indicating a significant improvement in
efficiency.
This suggests that Tata Motors has effectively leveraged its assets, possibly due to higher vehicle
demand, increased production efficiency, and better operational management.
The Fixed Asset Turnover Ratio (FATR) of Tata Motors Ltd. reflects its efficiency in utilizing fixed
assets to generate revenue. Over the past eight years, the ratio has fluctuated, peaking at *3.6* in
2023-24, indicating strong asset utilization and sales growth. The lowest ratio of *1.8* in 2020-21
was due to pandemic-related disruptions, which impacted sales despite a stable asset base.
Post-pandemic, Tata Motors showed recovery, with the ratio improving to *2.0* in 2021-22 and
steadily increasing. A higher FATR suggests better operational efficiency and revenue generation.
To sustain this, Tata Motors must continue optimizing asset utilization, managing production
effectively, and maintaining strong market demand to ensure long- term profitability and
growth.
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Working capital turnover ratio
Table 1.2
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Interpretation and analysis
• This ratio measures how efficiently a company uses its working capital to generate revenue. A higher
ratio indicates efficient use of working capital, while a lower ratio suggests that excess working capital
is being tied up in current assets, leading to inefficiency.
• The Working Capital Turnover Ratio declined from 6.0 in 2020 to 3.0 in 2024, indicating that Tata
Motors is utilizing its working capital less efficiently over time.
• Possible reasons for this decline include:
• Increasing Working Capital – If the company holds excess inventory or has more receivables, it can tie
up funds and reduce efficiency.
• Declining Sales Growth – If net sales decrease while working capital remains high, turnover naturally
declines.
• A declining ratio suggests that the company may need to optimize inventory management, improve
receivables collection, or increase sales to enhance efficiency.
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Interest coverage ratio
Table 1.3
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.
Interpretation and analysis
• The Interest Coverage Ratio measures the company's ability to pay its interest expenses
from its operating earnings (EBIT). A higher ratio indicates strong financial stability, while a lower
ratio suggests financial distress and a risk of default. Investors and creditors use this ratio to assess
the company's creditworthiness capacity to handle debt
Tata Motors' Interest Coverage Ratio has declined from 4.0 in 2020 to 2.0 in 2024, indicating a
reduced ability to cover interest expenses. This trend suggests increasing financial risk and
potential challenges in meeting debt obligations. A ratio below 3 is often a warning sign, implying
the company should consider strategies to improve earnings or reduce debt.
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• Financial break-even point :
Table 1.4
.
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Interpretation and analysis
• The Financial Break-even Point (FBEP) is the level of EBIT required to cover all fixed financial
costs, including interest expenses. If EBIT falls below this point, the company will incur financial
losses.
• This means Tata Motors must generate EBIT of at least ₹3,571 crores to avoid financial losses.
If the company’s EBIT falls below this threshold, it may face liquidity issues and difficulty in servicing its
financial obligations.
• Over the years, as observed in the Interest Coverage Ratio analysis, EBIT has been decreasing,
bringing it closer to the Financial Break-even Point. If EBIT continues to decline, Tata Motors will
need to take corrective actions such as:
• Reducing debt to lower interest costs
• Increasing revenue through higher sales or price optimization
• Controlling operating expenses
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Findings
• Fixed Asset Turnover Ratio (FATR)
Tata Motors' Fixed Asset Turnover Ratio has improved over the years, peaking at 3.6 in 2023-24. This
indicates efficient utilization of fixed assets to generate higher revenue. The steady increase in this
ratio signifies better operational efficiency and asset management, reflecting the company’s strong
financial and strategic positioning
• Working Capital Turnover Ratio (WCTR)
The Working Capital Turnover Ratio fluctuates, reflecting inconsistent liquidity management. A
higher ratio indicates better utilization of working capital, whereas a lower ratio suggests
inefficiencies in short-term asset management. Tata Motors needs to stabilize this ratio to ensure
smooth operations and maintain a healthy balance between current assets and liabilities.
• Interest Coverage Ratio (ICR)
Tata Motors' Interest Coverage Ratio has shown improvements, highlighting better debt
management. A rising means the company is more capable of meeting interest obligations. However,
occasional declines indicate financial strain due to borrowing costs. Strengthening debt reduction
strategies can further enhance financial stability and minimize interest payment risks.
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• Financial Break-even Point (FBEP)
• The Financial Break-even Point analysis reveals Tata Motors' ability to cover fixed financial
costs efficiently. A lower break-even point in recent years indicates improved profitability and cost
management. Reducing reliance on debt and increasing operational efficiency will further
strengthen profitability and financial resilience in the competitive automobile industry.
• DU Pont Analysis
•
Tata Motors has demonstrated a strong turnaround in financial performance over the past five
years. The improvement in net profit margin and asset turnover, coupled with a slight reduction in
financial leverage, ha led to a significant enhancement in shareholder value as reflected in the rising
ROE.
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DU PONT ANALYSIS
Interpretation and Analysis
Net Profit Margin: Tata Motors
experienced negative net profit margins in FY 2020 and FY 2021 due to losses. However, profitability
improved significant from FY 2022 onwards, reaching over 7% in FY 2023 and FY 2024.
Equity Multiplier: This ratio indicates
the level of financial leverage. Tata Motors maintained a relatively high equity multiplier, suggesting
significant use of debt financing. However, a slight decrease from 5.82 in FY 2021 to 5.69 in FY 2024
indicates a gradual reduction in leverage.
ROE: The Return on Equity
Was negative in FY 2020 and FY 2021 due to net losses. As profitability improved and asset utilization
became more efficient ROE turned positive in FY 2022 and showed substantial growth in the
subsequent years, reaching 36.73% in FY 2024.
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Chapter 5: Discussion and Conclusion
Discussion:
• Fixed Asset Turnover Ratio (FATR): Tata Motors' FATR has shown an increasing trend in recent
years, indicating better utilization of fixed assets to generate revenue. The highest ratio of 3.6 in
2023-24 reflects strong operational efficiency.
• Working Capital Turnover Ratio (WCTR): This ratio determines how effectively Tata Motors is
utilizing its working capital. A fluctuating trend suggests variations in liquidity management and
operational efficiency.
• Interest Coverage Ratio (ICR): The company’s ability to meet interest obligations has improved
post pandemic, but debt levels still impact financial stability. A higher ICR indicates better financial
health.
• Financial Break-even Point (FBEP): Tata Motors' FBEP analysis highlights its ability to cover fixed
financial costs. A lower break-even point signifies improved profitability.
• Impact of COVID-19: The ratios dipped in 2020-21 due to disruptions, but Tata Motors recovered
well, showing resilience in financial management.
• Revenue Growth vs. Asset Utilization: The company has significantly increased revenue
generation using existing assets, as reflected in rising FATR and WCTR.
• Debt Management: Interest coverage trends show that Tata Motors has taken measures to
reduce debt pressure, leading to better financial sustainability.
• Efficiency in Capital Utilization: Tata Motors has balanced asset expansion and operational
efficiency, evident from the rising turnover ratios.
• Market Demand Influence: Higher turnover ratios align with increasing market demand and
strategic business decisions.
• Financial Stability: The company’s ability to meet fixed obligations and sustain profitability is
improving, suggesting effective financial planning.
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Conclusion:
Tata Motors has demonstrated improved financial performance over the years, reflected in its
turnover ratios and fin break-even point. The Fixed Asset Turnover Ratio indicates efficient asset
utilization, while the Working Capital Turn Ratio shows fluctuating liquidity management. The
Interest Coverage Ratio highlights the company's ability to manage debt obligations effectively. The
pandemic impacted financial metrics, but Tata Motors recovered well. The financial break-even point
suggests improved profitability. Overall, the company has maintained financial stability, ensuring
growth through efficient asset and capital management, though continuous improvement debt
management and liquidity strategies are required.
Tata Motors has demonstrated a strong turnaround in financial performance over the past five years.
The improvement in net profit margin and asset turnover, coupled with a slight reduction in financial
leverage, has led to a significant enhancement in shareholder value as reflected in the rising ROE.
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi-110085
Chapter 6: Recommendations
• Enhance working capital management for better liquidity.
• Continue optimizing asset utilization to sustain high turnover ratios.
• Reduce debt further to improve interest coverage.
• Diversify revenue sources to minimize dependency on market fluctuations.
• Strengthen financial risk management strategies.
• Focus on cost control measures to improve profitability.
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Chapter 7: Learnings
Learnings:
• Efficient asset utilization leads to higher revenue generation.
• Managing working capital effectively is crucial for liquidity.
• Interest coverage is a key indicator of debt-handling capacity.
• Economic downturns impact financial ratios significantly.
• A lower financial break-even point improves profitability.
• Business resilience and strategic planning are essential for financial recovery.
• Continuous monitoring of financial ratios helps in decision-making.
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Challenges:
• Fluctuating working capital turnover affects liquidity.
• Debt management remains a concern despite improvements.
• External economic factors impact financial stability.
• Maintaining a balance between asset expansion and efficiency.
• Variations in sales trends affect turnover ratios.
• High competition in the automobile industry influences profitability.
Jagan Institute of Management Studies
3, Institutional Area, Sector-5, Rohini, Delhi-110085
References
• www.profitndtv.com
• https://www.screener.in
• https://www.tatamotors.com
• https://www.nseindia.com
• https://www.bseindia.com
• https://financial.com/home
