MASTER OF BUSINESS ADMINISTRATION

CAPSTONE PROJECT
FINANCIAL MODELLING -2024

Financial Analysis Of TATA MOTORS

Presented By
VIGNESHKANNA V
20232MBA0051

OVERVIEW
This project aims to conduct a comprehensive financial analysis of Tata Motors using a
discounted cash flow (DCF) valuation model. The objective is to estimate the intrinsic value
of Tata Motors by analyzing its historical financial performance, projecting future cash flows,
and assessing industry and macroeconomic trends. This analysis will evaluate Tata Motors’
investment potential and provide actionable recommendations for stakeholders. The thesis
highlights the application of financial modeling principles to a leading Indian automotive
company with a global footprint.

GOALS
 To apply financial modeling principles to estimate the intrinsic value of Tata Motors.
 To evaluate whether Tata Motors is undervalued, fairly valued, or overvalued by the
market.
 To recommend actionable investment strategies based on the findings.

OUTCOMES
 A deeper understanding of Tata Motors’ value proposition and investment potential.
 A professional financial model showcasing real-world application of financial
concepts.
 Insights into the impact of industry trends and macroeconomic factors on Tata Motors’
valuation.

METHODS OF DATA COLLECTION

1. Annual reports and financial disclosures of Tata Motors.

2. Financial statement analysis tools like Screener.in.
3. Market returns data from the Bombay Stock Exchange (BSE) and National Stock
Exchange (NSE).

Why Tata Motors?

Strong Brand Presence:
Tata Motors is one of India’s largest automotive companies, with renowned brands like Tata
Cars, Jaguar Land Rover (JLR), and Tata Commercial Vehicles. Its product diversity ensures
a steady revenue stream, ranging from passenger vehicles to electric and commercial fleets.

Industry Leadership:
Tata Motors holds a dominant position in the commercial vehicle (CV) segment and has
become a significant player in electric vehicles (EVs), capturing a growing share of India’s
emerging EV market.

DCF Suitability:
Tata Motors’ ongoing expansion in EVs, coupled with JLR’s turnaround strategy, makes it
ideal for projecting future cash flows. Consistent cost management efforts and increased
demand for EVs further enhance the reliability of a DCF model.

Macro and Microeconomic Impact:

Tata Motors’ performance reflects broader trends such as GDP growth, increasing
urbanization, rising disposable incomes, and governmental push toward EV adoption.

Market Sentiment:
Tata Motors is a market favorite due to its robust domestic market presence and global
success with JLR. Its investments in EVs and sustainability contribute to positive market
sentiment.

Financial Data Availability:

The financial data for Tata Motors is readily available through platforms such as
Moneycontrol, NSE, and annual reports, ensuring a comprehensive and reliable analysis.

Industry Analysis – Automotive Industry

Growing Demand:
• India is the world’s fourth-largest automotive market, with domestic sales expected to
grow at a CAGR of 10% over the next five years.
• The push for electric mobility has created new opportunities for EVs, with a goal of
30% EV penetration by 2030 under government initiatives.

Increasing Investments:
• Investments in India’s automotive sector reached ₹74,850 crore in FY23, with
significant focus on EV and battery manufacturing.
• Tata Motors itself has committed to investing $2 billion in its EV segment over the
next five years.

Policy Support:
• The Indian government has implemented the Faster Adoption and Manufacturing of
Hybrid and Electric Vehicles (FAME) scheme to accelerate EV adoption.
• Tax incentives for EV purchases and production-linked incentives (PLIs) are boosting
the automotive sector.

Opportunities:
• Rising middle-class income and urbanization drive demand for passenger vehicles.
• Increasing global acceptance of sustainable vehicles creates export opportunities for
Tata Motors.

Market Size:
India’s automotive market size was valued at $222 billion in 2022 and is projected to reach
$300 billion by 2030. The EV market alone is expected to grow at a CAGR of 49% during
this period.

Company Analysis of Tata Motors

Business Model:

Tata Motors operates a diversified business model across three key segments:
Passenger Vehicles (Tata Cars):
• Offers a wide range of vehicles, including EVs like the Nexon EV and Tiago EV,
which are market leaders in India’s EV segment.
Commercial Vehicles (CVs):
• Dominates the Indian CV market with buses, trucks, and small commercial vehicles
(SCVs).
Luxury Vehicles (Jaguar Land Rover):
• Operates as a premium segment brand with a strong presence in Europe, North
America, and China.

SWOT ANALYSIS:

Strengths Weaknesses

1. Dominant position in India’s EV market. 1.High debt levels.

2. Strong brand equity with diverse 2.Cyclical nature of the auto industry.
offerings.

Opportunities Threats

1. Expansion in global EV markets. 1. Intense competition from Tesla, BYD,

and other global players.
2. New launches in the luxury EV segment. 2. Regulatory changes impacting cost
structures.

Financial Modeling & Valuation

Historical Performance (2020–2024):
• Revenue: Consistent growth, driven by PV and EV segments.
• Profitability: Improved margins due to cost-cutting measures and operational
efficiencies.
• Debt: High debt-to-equity ratio, but manageable due to strong cash flows.

Growth Projections:
Future growth rates were projected based on Tata Motors’ historical performance, EV
adoption trends, and JLR’s recovery efforts. Forecasts include revenues from passenger and
commercial vehicles, cost management, and market share expansion in EVs.

Weighted Average Cost of Capital (WACC):

The WACC is calculated using data from market indices, annual reports, and the cost of debt
from Tata Motors’ disclosures. It serves as the discount rate for the DCF model, reflecting the
average return required by equity and debt holders.

Discounted Cash Flow (DCF):

The DCF analysis involves estimating unlevered free cash flows (UFCF) for Tata Motors
over a five-year projection period and discounting them using the WACC. Terminal value,
which accounts for the long-term growth of the company,. DCF = 3,931,417

Unlevered Free Cash Flows (UFCF):

The UFCF reflects cash available after operating expenses and capital expenditures.

Terminal Value (TV):

Terminal value accounts for the majority of Tata Motors’ valuation due to its long-term
growth potential, particularly in EVs and sustainable transportation solutions.
TV = 30,00,459

Intrinsic Value Calculation

Based on the DCF analysis, the intrinsic value of Tata Motors is ₹851per share, while its
current market price is ₹725. This indicates that the stock is slightly undervalued, with the
market pricing in high expectations of future growth.
CONCLUSION
Based on the discounted cash flow (DCF) valuation, Tata Motors appears to be undervalued.
The calculated intrinsic value of INR 851.28 per share is significantly higher than the current
market price of INR 725 per share, suggesting a potential upside of 17.14%. This analysis
indicates that the company may be a good investment opportunity for investors with a long-
term investment horizon and a moderate risk tolerance.

 WACC : 13.8%
 Discounted Cash Flow (DCF) : INR 3,931,417
 Terminal Value : INR 3,000,459
 Intrinsic Value : INR 851.28 per share
 Current Market Price (CMP) : INR 725 per share
 Percentage Difference : 17.14%
RECOMMENDATION

Buy (or potentially Hold): The calculated intrinsic value of INR 851.28 per share is
significantly higher than the current market price of INR 725 per share, indicating a potential
upside of 17.14%. This suggests that the company may be undervalued based on the current
assumptions and data.

Why Hold/Buy?
 Undervalued: The calculated intrinsic value of INR 851.28 per share is significantly
higher than the current market price of INR 725 per share. This indicates that the market may
currently be undervaluing the company. In other words, the stock price is below what the
company is truly worth based on its projected future cash flows and growth potential.

 Upside Potential: The percentage difference between the intrinsic value and the current
market price is 17.14%. This represents the potential upside for investors if the market price
were to converge with the intrinsic value.

 Strong Fundamentals: The analysis suggests that Tata Motors has strong fundamentals,
with positive projected cash flows and a healthy growth rate. This provides a foundation for
future growth and value appreciation.

However, it's important to remember that:

 Valuation is not an exact science: The intrinsic value is an estimate based on

assumptions and projections. Changes in economic conditions, industry dynamics, or
company performance can impact the actual value of the company.

 Risk Factors: Investing in any company carries inherent risks. Tata Motors may face
challenges such as competition, regulatory changes, economic downturns, and
technological disruptions.
REFERENCE :

1.Balance Sheet :

2.Profit and loss Statement :

3.Cashflow Statement :

Source Of Data Collection :

• The Historical data has been collected from the Annual report of Tata Motors
https://www.tatamotors.com/annual-reports/

• Historical Data is hence cleaned and formatted by third party software,

https://www.screener.in/company/TATAMOTORS/consolidated/

• Market returns data is collected from National stock exchange database.

https://www.nseindia.com/home