Description
Some Financial Analysis of Hero Honda
HERO HONDA LTD.
Click to edit Master subtitle style
1/19/13
INTRODUCTION
Formed: 19th January, 1984. Ø Joint Venture: Hero Group & Honda Motor Company (Japan) Ø Owned: Hero Group( Munjal Group) Ø Chairman: Mr. Brij Mohan Lal Munjal Ø Managing Director: Mr Pawan Kant Munjal Ø Domain: Motorcycles and scooters Ø Ownership: Inst. Investors-35% Indian Public- 9% Promoters of equity shares29%. 1/19/13 Ø Two plants in Haryana: Dharuhera and
Ø
INVESTMENT
§ During the year 2005-06, the company added Rs. 399 crore in fixed assets to expand the production capacity of Gurgaon plant from 5,000 to 6,500 units a day in the previous year. § To tap the increasing demand for the motorbikes, the company decided to carry the process of expansion further and increase the capacity at the Dharuhera plant to 6,500 units.
1/19/13
KEY ISSUE INVESTMENT IS TRYING TO ADDRESS
?The company is trying to improve its efficiency and cut down cost and has made investment in augmenting its welding capacity and invested in technology that will help in localizing the production of gear boxes. ?The company is setting up a third plant to take care of the demand in the medium term to become a global scale and world class manufacturer. ?By 2010, Hero Honda will invest Rs. 1,900 crore in the new plant 1/19/13
HERO HONDA investment in fixed assets over the years
1/19/13
capital budgeting
MARCH MARCH MARCH MARCH MARCH MARCH 2001 2002 2003 2004 2005 2006 GROSS FIXED 614.66 704.52 780.88 901.45 1074.7 1421.5 3 4 ASSET S
(IN CRORES)
TOTAL ASSET 1125.4 1733.3 2176.6 2652.0 3294.6 3875.0 7 4 7 8 8 7 S
(IN CRORES)
1/19/13
Investment IN FIXED ASSETS
Investment in crores
12 10
8
6
4
2
0
1/19/13
Investment in fixed assets and total assets
Rs. in crores
Gross Fixed Assets Increase in Fixed Assets Growth (%)
March 2002
704.52
March 2003
780.88
March 2004
901.45
March 2005
1074.73
March 2006
1421.54
89.86 14.62
76.36 10.84
2176.67
120.57 173.28 346.81 15.44
2652.08
19.22
3294.68
32.27
3875.07
Total assets Increase in total assets Growth (%)
1733.34
607.87 443.33 475.41 54.01 25.58 21.84
642.6 24.23
580.39 17.62
1/19/13
Growth (%) of total assets
Growth Percentage of total assets
10 9 8 7 6 5 4 3 2 1 0
1/19/13
Growth (%) of total assets
Growth Percentage of total assets
1/19/13
PROFITABILITY RATIOS (%) TOTAL ASSETS
Profitability Ratios (%) Total Assets
1/19/13
GROSS SALES
Growth (%)-Gross sales
10 9 8 7 6 5 4 3 2 1 0
1/19/13
STATISTICS AND ACHIEVEMENTS
World’s largest manufacturer & global leader of motorcycles. Sold over 15 million motorcycles and double digit growth since inception. Built on : 3 R’s- Reach, Research, Reliability. Strength: Excellent manpower, proven management, excellent dealer network, efficient supply chain, world class products, cutting edge technology. Feedback: Fully equipped R&D centre. Better designed, tested and harmonized products. Emphasis on road safety and quality. First company to drive a vehicle without polluting roads. New generation motorcycles:- Fuel thrift and low emission.
1/19/13
BRAND NAME
Achiever Karizma CBZ Splendor Splendor Plus Glamour Passion Passion Plus CD Deluxe CD 100S Sleek CD Dawn
1/19/13
FINANCING POLICY
? Company:
Debt free for last 5 years. ? Unsecured loans: 186 crore from state govt. on account of sales tax deferment is interest free and no holding costs. ? Expansion and growth needs met by internal sources of financing.
1/19/13
FINANCING MIX OF HERO HONDA vs BAJAJ AUTO
10 9 8 7 6 5 4 3 2 1 0
1/19/13
WORKING CAPITAL
? The
continued focus on working capital has helped the company to enhance cash flows through better management of inventory, receivables, and payables. ? Availed cash discount from its vendors by making the payments before due date. ? Improve operating margins . ? Deploy Surplus funds in the core business operation.
1/19/13
? Sustained
effort to prune manufacturing variable costs over the years through the process of localization and process improvement. ? These costs have been controlled and the cost per vehicle came down from INR 837 to INR 353 in march 2005. ? Due to sharp increase in the cost of electricity and its erratic supply, the declining trend in the variable manufacturing cost was reversed in 200506.
1/19/13
? The
company has commissioned HFO-based generator sets at each of its facilities. ? To improve plant efficiency and inventory turns, the company has extended Just in Time(JIT) beyond the shop floor. ? Online vendor connectivity programme has been implemented. ? Extent of vendors increased from 46 to 96. ? As a result ,the company has been able to access 70% of the materials by maintaining zero inventory.
1/19/13
? To
rationalize the supply chain further ,the company is now switching to system purchases and also looking at the possibilities for global procurement.
1/19/13
Working capital performance of Hero Marc March Honda Motors Ltd. March March March March
Working capital(cr) Avg. C A(cr) Avg.days of debtors Avg. days of creditors Gross working cap. Cycle Net working cap.cycle h 2002 2003 2004 2005 2006 2001
203. 550.3 808.7 1077. 1284.57 71 343.7 6 5 25 5 488. 600.1 1101. 1867. 2323. 2714.32 89 4 51 68 26 4 5 8 5 2 4 31 32 35 42 40 32 33 27 28 22 16 17 2 -5 -7 -20 -24 -15 Liquidity ratios(times)
1/19/13
DIVIDEND POLICY
Liberal dividend policy during past few years. Ø Company believes of shareholders benefit from company’s success. Ø Efficient use of capital employed . Ø Returns higher than cost. Ø Given 1000% for third year in succession seeing cash generating capacity and expected capital needs of business.
Ø
1/19/13
doc_792630551.pptx
Some Financial Analysis of Hero Honda
HERO HONDA LTD.
Click to edit Master subtitle style
1/19/13
INTRODUCTION
Formed: 19th January, 1984. Ø Joint Venture: Hero Group & Honda Motor Company (Japan) Ø Owned: Hero Group( Munjal Group) Ø Chairman: Mr. Brij Mohan Lal Munjal Ø Managing Director: Mr Pawan Kant Munjal Ø Domain: Motorcycles and scooters Ø Ownership: Inst. Investors-35% Indian Public- 9% Promoters of equity shares29%. 1/19/13 Ø Two plants in Haryana: Dharuhera and
Ø
INVESTMENT
§ During the year 2005-06, the company added Rs. 399 crore in fixed assets to expand the production capacity of Gurgaon plant from 5,000 to 6,500 units a day in the previous year. § To tap the increasing demand for the motorbikes, the company decided to carry the process of expansion further and increase the capacity at the Dharuhera plant to 6,500 units.
1/19/13
KEY ISSUE INVESTMENT IS TRYING TO ADDRESS
?The company is trying to improve its efficiency and cut down cost and has made investment in augmenting its welding capacity and invested in technology that will help in localizing the production of gear boxes. ?The company is setting up a third plant to take care of the demand in the medium term to become a global scale and world class manufacturer. ?By 2010, Hero Honda will invest Rs. 1,900 crore in the new plant 1/19/13
HERO HONDA investment in fixed assets over the years
1/19/13
capital budgeting
MARCH MARCH MARCH MARCH MARCH MARCH 2001 2002 2003 2004 2005 2006 GROSS FIXED 614.66 704.52 780.88 901.45 1074.7 1421.5 3 4 ASSET S
(IN CRORES)
TOTAL ASSET 1125.4 1733.3 2176.6 2652.0 3294.6 3875.0 7 4 7 8 8 7 S
(IN CRORES)
1/19/13
Investment IN FIXED ASSETS
Investment in crores
12 10
8
6
4
2
0
1/19/13
Investment in fixed assets and total assets
Rs. in crores
Gross Fixed Assets Increase in Fixed Assets Growth (%)
March 2002
704.52
March 2003
780.88
March 2004
901.45
March 2005
1074.73
March 2006
1421.54
89.86 14.62
76.36 10.84
2176.67
120.57 173.28 346.81 15.44
2652.08
19.22
3294.68
32.27
3875.07
Total assets Increase in total assets Growth (%)
1733.34
607.87 443.33 475.41 54.01 25.58 21.84
642.6 24.23
580.39 17.62
1/19/13
Growth (%) of total assets
Growth Percentage of total assets
10 9 8 7 6 5 4 3 2 1 0
1/19/13
Growth (%) of total assets
Growth Percentage of total assets
1/19/13
PROFITABILITY RATIOS (%) TOTAL ASSETS
Profitability Ratios (%) Total Assets
1/19/13
GROSS SALES
Growth (%)-Gross sales
10 9 8 7 6 5 4 3 2 1 0
1/19/13
STATISTICS AND ACHIEVEMENTS
World’s largest manufacturer & global leader of motorcycles. Sold over 15 million motorcycles and double digit growth since inception. Built on : 3 R’s- Reach, Research, Reliability. Strength: Excellent manpower, proven management, excellent dealer network, efficient supply chain, world class products, cutting edge technology. Feedback: Fully equipped R&D centre. Better designed, tested and harmonized products. Emphasis on road safety and quality. First company to drive a vehicle without polluting roads. New generation motorcycles:- Fuel thrift and low emission.
1/19/13
BRAND NAME
Achiever Karizma CBZ Splendor Splendor Plus Glamour Passion Passion Plus CD Deluxe CD 100S Sleek CD Dawn
1/19/13
FINANCING POLICY
? Company:
Debt free for last 5 years. ? Unsecured loans: 186 crore from state govt. on account of sales tax deferment is interest free and no holding costs. ? Expansion and growth needs met by internal sources of financing.
1/19/13
FINANCING MIX OF HERO HONDA vs BAJAJ AUTO
10 9 8 7 6 5 4 3 2 1 0
1/19/13
WORKING CAPITAL
? The
continued focus on working capital has helped the company to enhance cash flows through better management of inventory, receivables, and payables. ? Availed cash discount from its vendors by making the payments before due date. ? Improve operating margins . ? Deploy Surplus funds in the core business operation.
1/19/13
? Sustained
effort to prune manufacturing variable costs over the years through the process of localization and process improvement. ? These costs have been controlled and the cost per vehicle came down from INR 837 to INR 353 in march 2005. ? Due to sharp increase in the cost of electricity and its erratic supply, the declining trend in the variable manufacturing cost was reversed in 200506.
1/19/13
? The
company has commissioned HFO-based generator sets at each of its facilities. ? To improve plant efficiency and inventory turns, the company has extended Just in Time(JIT) beyond the shop floor. ? Online vendor connectivity programme has been implemented. ? Extent of vendors increased from 46 to 96. ? As a result ,the company has been able to access 70% of the materials by maintaining zero inventory.
1/19/13
? To
rationalize the supply chain further ,the company is now switching to system purchases and also looking at the possibilities for global procurement.
1/19/13
Working capital performance of Hero Marc March Honda Motors Ltd. March March March March
Working capital(cr) Avg. C A(cr) Avg.days of debtors Avg. days of creditors Gross working cap. Cycle Net working cap.cycle h 2002 2003 2004 2005 2006 2001
203. 550.3 808.7 1077. 1284.57 71 343.7 6 5 25 5 488. 600.1 1101. 1867. 2323. 2714.32 89 4 51 68 26 4 5 8 5 2 4 31 32 35 42 40 32 33 27 28 22 16 17 2 -5 -7 -20 -24 -15 Liquidity ratios(times)
1/19/13
DIVIDEND POLICY
Liberal dividend policy during past few years. Ø Company believes of shareholders benefit from company’s success. Ø Efficient use of capital employed . Ø Returns higher than cost. Ø Given 1000% for third year in succession seeing cash generating capacity and expected capital needs of business.
Ø
1/19/13
doc_792630551.pptx