Description
FINANCIAL ANALYSIS OF HERO MOTO CORP AND BAJAJ AUTO
HISTORY
BOARD OF DIRECTORS
Hero MotoCorp Ltd & Bajaj Auto
Financial Analysis
Submitted to Prof. Manipadma Datta Department of Business Sustainability Teri University
Structure
• Introduction • Hero MotoCorp Ltd. • Bajaj Auto Ltd. • Financial performances • Peer comparison • Conclusion
Companies In Wheeler Industry
Hero MotoCorp Ltd
• Formerly Hero Honda Motors Ltd • World's largest manufacturer of two - wheelers, based in India
• 'World No.1' two-wheeler company in terms of unit volume sales
• Over 41.7 million two wheelers sold
• Portfolio of Products • 17 different products across100cc, 125cc, 150cc, 225cc and scooter category
• Three globally benchmarked facilities, with a combined installed capacity of 6.35 million units
History
Started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan
The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108
In 2010, when Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. In August 2011 the company was renamed Hero MotoCorp with a new corporate identity. On June 4, 2012, Hero MotoCorp approved a proposal to merge the investment arm of its parent Hero Investment Pvt. Ltd. into the automaker. The decision comes after 18 months of its split from Honda Motors
In December 2010 , the Board of Directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner.
The Hero Group got the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export
Hero MotoCorp can now export to Latin America, Africa and West Asia. Hero is free to use any vendors for its components instead of just Honda-approved vendors.
Milestones
Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed Environment Management System of Dharuhera Plant certified with ISO-14001 by DNV Holland Environment Management System of Gurgaon Plant certified ISO-14001 by DNV Holland "Hero Honda Passport Programme" - CRM Programme launched Hero Honda is the World No. 1 for the 6th year in a row 20 million production milestone achieved Hero Honda Haridwar Plant inauguration 25 million production milestone achieved Splendor completed 11 million production landmark & Silver jubilee celebrations New licensing arrangement signed between Hero and Honda (Hero Honda is renamed as Hero) Launch of new refreshed versions of Glamour, Glamour Fi, CBZ Xtreme, Karizma Crosses the landmark figure of 5 million cumulative sales in a single year
• 12 Directors • 3 Directors, including the Chairman, are Executive Directors, • 2 are Non-Executive Directors & 7 are Non-Executive & Independent Directors. • More than 50% of the Board consists of Independent Directors
Board of Directors
Clause 49 of the Listing Agreement
Corporate Information
• A.F. Ferguson & Co. • The Royal Bank Of Scotland • Bank Of America • Canara Bank, • Citibank etc
Principal Bankers
• Ramanath Iyer & Co.
Statutory Auditors
Cost Auditors
• New Delhi
• Gurgaon, • Haridwar, • Dharuhera
Registered & Corporate office
Plant locations
Bajaj Auto Ltd.
Type- Public Headquarters- Pune Key people -Rahul Bajaj (Chairman) Products- Motorcycles, Scooters Principal Subsidiaries: Bajaj Auto Finance Ltd., Bajaj Auto Holdings Ltd., Bajaj Electricals Ltd., Bajaj Hindustan Ltd., Maharashtra Scooters Ltd.; Mukand Ltd. Auditors-Dalal and Shah-Chartered Accountants Cost Auditor- A P Raman Cost Accountant
History
1945 : Bajaj Auto is founded. 1960 : Rahul Bajaj becomes the Indian licensee for Vespa scooters. 1977: Technical collaboration with Piaggio ends. 1984: Work begins on a second plant. 1998: Bajaj plans to build its third plant to meet demand. 2000: Thousands of workers are laid off to cut costs.
Board of Directors
16 Directors, of whom 4 Directors were executive. 9 out of 12 Non-Executive Directors were Independent. The Board has no institutional nominee directors.
According to clause 49, if the chairman is executive or a promoter, at least one half of the Board should consist of non-executive, independent directors.
Domestic Two Wheeler Market Share
Domestic Motorcycle Market Share
50 45 40 35 30 25 20 15 10 5 0
45.45
43.74
60
50 21.36 40 30 20 10
55.74
53.44
19.84
26.03
27.79 2011 2010
Hero MotoCorp Ltd
Bajaj Auto Ltd
2011 2010
0 Hero MotoCorp Ltd Bajaj Auto Ltd
Financial Performances of Hero Motors Ltd. & Bajaj Auto Ltd
Profitability Management
Profitability
RATIO NAME FORMULA Hero Motors Ltd Bajaj Auto Ltd. PROFIT MARGIN PROFIT/NET SALES 10.17 15.9
EPS N=
PAT-PREF DIV/N NO OF EQ SHARES
119.09
103.8
RETURN ON FA
PAT/FA
0.62
0.51
RETURN ON TA
PAT/TA
0.24
0.271
RETURN OF EQTY EF=
(PAT-PREF DIV)/EF) EQTY FUND
0.5543
0.497
ROCE TCE=
EBIT/TCE TOTAL CAP EMPLOYED
0.4313
0.623
Capital Market Analysis
? Market Potential
Capital Market Analysis
Ratio Name Average Mps Of Ordinary Shares Formula BSE High + BSE Low/ 2 Hero Motors Ltd Bajaj Auto Ltd. 1990.575 1662
Dps Of Ordinary Shares Dividend Payout Ordinary Shares Dividend Yield- Ordinary Shares Basic
DIVIDEND PER SHARE DPS/EPS DPS/ AVG MPS
45 0.377 0.022
45 0.433526012 0.027075812
Price Earning : Ordinary Shares- Basic Cost Of Equity: Oridnary Shares- Basic Growth Ratio B Or Retention Ratio Ordinary Shares R Or ROE
MPS/EPS EPS/MPS b*r 1-DPR (PAT-PD)/EQTY FUND
16.7148795 0.059826934 0.3453289 0.623 0.5543
16.01156069 0.062454874 0.281537572 0.566473988 0.497
Financial Obligation Management
? Short Term:
? Long Term:
? Bankruptcy:
Liquidity Test
Ratio Name Current Ratio Formula CA/CL Hero Motors Ltd 1.11 Bajaj Auto Ltd. 1.12
Quick/Acid Test
(CA-Inventory)/CL
0.95
0.975
Debt Equity
Total L/ Equity Fund
1.3
0.834
Solvency Test
Ratio Name Total Debt Formula Total Debt/Tce Hero Motors Ltd 1.009 Bajaj Auto Ltd. 0.781
Operations Management
Ratio Name Inventory Turnover COGSs= Avg Inventory= Formula COGS/Avg Inventory Cost Of Goods Sold (Closing+opening)/2 Hero Motors Ltd Bajaj Auto Ltd. 130.86 23.009
Total Assets Turnover
Net Sales/Avg Total Assets
22.69
4.59
Human Asset Test
Ratio Name Profit Per Employee Formula PBIT/ No Of Employees Hero Motors Ltd Bajaj Auto Ltd. . 39 0.469
Output Per Employee
Sales/ No Of Employees
3.82
2.33
Bankruptcy Test
Altman's Z score
Z Value? 1.81 Z Value ? 2.99 Z Value in between
Z = 1.2 (WC/TA) + 1.4 (RE/TA) + 3.3(PBIT/ TA) + .06( MVOF EQUITY/ BV OF DEBT) + 1 (SALES/ TA)
UNSAFE AREA SAFE AREA GREY AREA
Ratio Name WC/TA RE/TA PBIT/TA MV_EQ/BV_DEBT SALES/TA
Formula Working Cap/Total Assets Retained Earnings/Total Assets Profit B4 Tax/ Total Assets Market Value Of Equity/ Book Value Of Of Equity Sales / Total Assets
Hero Motors Ltd Bajaj Auto Ltd. 0.049 0.42 0.2419 9.265 2.363 0.05 0.519 0.36 0.968 1.703
Both Hero Motors Ltd. And Bajaj Motors Ltd. Are in the safe area with Hero Motors having a Z score of 4.36 and Bajaj Auto Ltd. Having a Z score of 3.735
Du pont analysis for Hero Motor Corp
It is useful in understanding the inter-relationships between Assets-Turnover and Profitability Profit Margin(Profit Return after tax / on Sales) Assets10.17% 24% Return on Equity55.43% Leverage Assets Turnover ( Assets/ (Sales/ Assets)Equity)22.69 2.305
Du pont analysis for Bajaj Auto Ltd
Profit Margin (Profit after tax/ Sales 15.9%
Return on Equity49.7%
Return on Assets27.1%
Leverage ( Assets/ Equity)1.83
Assets Turnover ( Sales/ Assets) 4.9
Conclusion
Thank you !
Department of Business Sustainability
MBA Business Sustainability MBA Infrastructure
1235 MPS Ankita Bist 1225MPS Poorva Sharma 1241MPS Shivani Sahai 1234 MPS Yoshita Singh 1203 MPB Deepshikha Dixit 1214 MPB Upasana Bisht
doc_719326441.pdf
FINANCIAL ANALYSIS OF HERO MOTO CORP AND BAJAJ AUTO
HISTORY
BOARD OF DIRECTORS
Hero MotoCorp Ltd & Bajaj Auto
Financial Analysis
Submitted to Prof. Manipadma Datta Department of Business Sustainability Teri University
Structure
• Introduction • Hero MotoCorp Ltd. • Bajaj Auto Ltd. • Financial performances • Peer comparison • Conclusion
Companies In Wheeler Industry
Hero MotoCorp Ltd
• Formerly Hero Honda Motors Ltd • World's largest manufacturer of two - wheelers, based in India
• 'World No.1' two-wheeler company in terms of unit volume sales
• Over 41.7 million two wheelers sold
• Portfolio of Products • 17 different products across100cc, 125cc, 150cc, 225cc and scooter category
• Three globally benchmarked facilities, with a combined installed capacity of 6.35 million units
History
Started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan
The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108
In 2010, when Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. In August 2011 the company was renamed Hero MotoCorp with a new corporate identity. On June 4, 2012, Hero MotoCorp approved a proposal to merge the investment arm of its parent Hero Investment Pvt. Ltd. into the automaker. The decision comes after 18 months of its split from Honda Motors
In December 2010 , the Board of Directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner.
The Hero Group got the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export
Hero MotoCorp can now export to Latin America, Africa and West Asia. Hero is free to use any vendors for its components instead of just Honda-approved vendors.
Milestones
Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed Environment Management System of Dharuhera Plant certified with ISO-14001 by DNV Holland Environment Management System of Gurgaon Plant certified ISO-14001 by DNV Holland "Hero Honda Passport Programme" - CRM Programme launched Hero Honda is the World No. 1 for the 6th year in a row 20 million production milestone achieved Hero Honda Haridwar Plant inauguration 25 million production milestone achieved Splendor completed 11 million production landmark & Silver jubilee celebrations New licensing arrangement signed between Hero and Honda (Hero Honda is renamed as Hero) Launch of new refreshed versions of Glamour, Glamour Fi, CBZ Xtreme, Karizma Crosses the landmark figure of 5 million cumulative sales in a single year
• 12 Directors • 3 Directors, including the Chairman, are Executive Directors, • 2 are Non-Executive Directors & 7 are Non-Executive & Independent Directors. • More than 50% of the Board consists of Independent Directors
Board of Directors
Clause 49 of the Listing Agreement
Corporate Information
• A.F. Ferguson & Co. • The Royal Bank Of Scotland • Bank Of America • Canara Bank, • Citibank etc
Principal Bankers
• Ramanath Iyer & Co.
Statutory Auditors
Cost Auditors
• New Delhi
• Gurgaon, • Haridwar, • Dharuhera
Registered & Corporate office
Plant locations
Bajaj Auto Ltd.
Type- Public Headquarters- Pune Key people -Rahul Bajaj (Chairman) Products- Motorcycles, Scooters Principal Subsidiaries: Bajaj Auto Finance Ltd., Bajaj Auto Holdings Ltd., Bajaj Electricals Ltd., Bajaj Hindustan Ltd., Maharashtra Scooters Ltd.; Mukand Ltd. Auditors-Dalal and Shah-Chartered Accountants Cost Auditor- A P Raman Cost Accountant
History
1945 : Bajaj Auto is founded. 1960 : Rahul Bajaj becomes the Indian licensee for Vespa scooters. 1977: Technical collaboration with Piaggio ends. 1984: Work begins on a second plant. 1998: Bajaj plans to build its third plant to meet demand. 2000: Thousands of workers are laid off to cut costs.
Board of Directors
16 Directors, of whom 4 Directors were executive. 9 out of 12 Non-Executive Directors were Independent. The Board has no institutional nominee directors.
According to clause 49, if the chairman is executive or a promoter, at least one half of the Board should consist of non-executive, independent directors.
Domestic Two Wheeler Market Share
Domestic Motorcycle Market Share
50 45 40 35 30 25 20 15 10 5 0
45.45
43.74
60
50 21.36 40 30 20 10
55.74
53.44
19.84
26.03
27.79 2011 2010
Hero MotoCorp Ltd
Bajaj Auto Ltd
2011 2010
0 Hero MotoCorp Ltd Bajaj Auto Ltd
Financial Performances of Hero Motors Ltd. & Bajaj Auto Ltd
Profitability Management
Profitability
RATIO NAME FORMULA Hero Motors Ltd Bajaj Auto Ltd. PROFIT MARGIN PROFIT/NET SALES 10.17 15.9
EPS N=
PAT-PREF DIV/N NO OF EQ SHARES
119.09
103.8
RETURN ON FA
PAT/FA
0.62
0.51
RETURN ON TA
PAT/TA
0.24
0.271
RETURN OF EQTY EF=
(PAT-PREF DIV)/EF) EQTY FUND
0.5543
0.497
ROCE TCE=
EBIT/TCE TOTAL CAP EMPLOYED
0.4313
0.623
Capital Market Analysis
? Market Potential
Capital Market Analysis
Ratio Name Average Mps Of Ordinary Shares Formula BSE High + BSE Low/ 2 Hero Motors Ltd Bajaj Auto Ltd. 1990.575 1662
Dps Of Ordinary Shares Dividend Payout Ordinary Shares Dividend Yield- Ordinary Shares Basic
DIVIDEND PER SHARE DPS/EPS DPS/ AVG MPS
45 0.377 0.022
45 0.433526012 0.027075812
Price Earning : Ordinary Shares- Basic Cost Of Equity: Oridnary Shares- Basic Growth Ratio B Or Retention Ratio Ordinary Shares R Or ROE
MPS/EPS EPS/MPS b*r 1-DPR (PAT-PD)/EQTY FUND
16.7148795 0.059826934 0.3453289 0.623 0.5543
16.01156069 0.062454874 0.281537572 0.566473988 0.497
Financial Obligation Management
? Short Term:
? Long Term:
? Bankruptcy:
Liquidity Test
Ratio Name Current Ratio Formula CA/CL Hero Motors Ltd 1.11 Bajaj Auto Ltd. 1.12
Quick/Acid Test
(CA-Inventory)/CL
0.95
0.975
Debt Equity
Total L/ Equity Fund
1.3
0.834
Solvency Test
Ratio Name Total Debt Formula Total Debt/Tce Hero Motors Ltd 1.009 Bajaj Auto Ltd. 0.781
Operations Management
Ratio Name Inventory Turnover COGSs= Avg Inventory= Formula COGS/Avg Inventory Cost Of Goods Sold (Closing+opening)/2 Hero Motors Ltd Bajaj Auto Ltd. 130.86 23.009
Total Assets Turnover
Net Sales/Avg Total Assets
22.69
4.59
Human Asset Test
Ratio Name Profit Per Employee Formula PBIT/ No Of Employees Hero Motors Ltd Bajaj Auto Ltd. . 39 0.469
Output Per Employee
Sales/ No Of Employees
3.82
2.33
Bankruptcy Test
Altman's Z score
Z Value? 1.81 Z Value ? 2.99 Z Value in between
Z = 1.2 (WC/TA) + 1.4 (RE/TA) + 3.3(PBIT/ TA) + .06( MVOF EQUITY/ BV OF DEBT) + 1 (SALES/ TA)
UNSAFE AREA SAFE AREA GREY AREA
Ratio Name WC/TA RE/TA PBIT/TA MV_EQ/BV_DEBT SALES/TA
Formula Working Cap/Total Assets Retained Earnings/Total Assets Profit B4 Tax/ Total Assets Market Value Of Equity/ Book Value Of Of Equity Sales / Total Assets
Hero Motors Ltd Bajaj Auto Ltd. 0.049 0.42 0.2419 9.265 2.363 0.05 0.519 0.36 0.968 1.703
Both Hero Motors Ltd. And Bajaj Motors Ltd. Are in the safe area with Hero Motors having a Z score of 4.36 and Bajaj Auto Ltd. Having a Z score of 3.735
Du pont analysis for Hero Motor Corp
It is useful in understanding the inter-relationships between Assets-Turnover and Profitability Profit Margin(Profit Return after tax / on Sales) Assets10.17% 24% Return on Equity55.43% Leverage Assets Turnover ( Assets/ (Sales/ Assets)Equity)22.69 2.305
Du pont analysis for Bajaj Auto Ltd
Profit Margin (Profit after tax/ Sales 15.9%
Return on Equity49.7%
Return on Assets27.1%
Leverage ( Assets/ Equity)1.83
Assets Turnover ( Sales/ Assets) 4.9
Conclusion
Thank you !
Department of Business Sustainability
MBA Business Sustainability MBA Infrastructure
1235 MPS Ankita Bist 1225MPS Poorva Sharma 1241MPS Shivani Sahai 1234 MPS Yoshita Singh 1203 MPB Deepshikha Dixit 1214 MPB Upasana Bisht
doc_719326441.pdf