Hero Honda
Hero Honda Motors Limited (HHML) is a 26:26 joint venture between the Hero group and Japanese major, Honda Motor Co.
The remaining stake is in the hands of financial institutions and the public.
The company has earned the distinction of being the world’s largest individual motorcycle-making company.
The volumes of HHML have been growing at 40% p.a. over the last five years.
This company's net worth has increased 6.5 times in the last five years, from Rs96 crores to Rs629 crores.
The company has also given a dividend of Rs140 crores in the same period.
It generates a return of over 50% on its capital employed in the business. Hero Honda is operating on a negative working capital since Financial Year 1996.
Hero Honda has a 55% share of the motorcycles segment.
Hero Honda sold over one million motorcycles last year.
The company plans to increase its sales by 50% in the next two years. It has targeted sales of 1.5 million motorcycles in FY2003.
Hero Honda's brand equity, its distribution network, efficient operations, quality products coupled with continuous product introductions shall spruce up the sales.
In fact, even in 2001, Hero Honda has introduced two new models-Passion and Joy.
Passion is already selling more than 15,000 vehicles a month. And Joy, another 100cc bike too is reported to have started on a good note.
Honda Motors expects to sell about seven million two-wheeler vehicles globally in 2003 of which Hero Honda will contribute about 21% sales (i.e. 1.5 million).
In fact, Hero Honda's Splendor is already the world's largest selling two-wheeler. Hero Honda’s legacy of a solid after sales service and brand equity will continue to drive volume growth.
HHL's present market share for motorcycles stands at nearly 55%. Much of its success comes from an unprecedented success of its Splendor model, which now contributes over 65% of sales.
Sure CBZ and Street have clocked decent volumes, but they look pale in comparison with Splendor. This also raises concerns on the future growth of the company.
With LML and now BAL coming into their own with newer models, it's only a matter of time before the Splendors of the world start fading away.
It is strongly believe that the lack of suitable product offerings from BAL, TVS and others earlier allowed HHL to dominate and benefit from the massive shift in consumer preferences from scooters to motorcycles. The past is history.
BAL with its Caliber has threatened the seemingly unstoppable growth of Splendor. BAL has now also started to think the Lever way by launching products with varying features.
An upgraded Boxer and introduction of new models like Eliminator, Acer and Pulsar are a clear market segmentation exercise from BAL, which is already beginning to show results. BAL grew by 65% in the motorcycle segment even as the industry grew less than 25% for Financial Year 2001.
HHL being a pure motorcycle company has been working at an operating spread of around 13%, while operating margins for BAL stands at less than 7% (excluding other income).
One more thought as we speak on margins. HHL pays around 0.5% royalty for every Splendor and CD100 sold, while BAL pays 2% for CBZ and as much as 5% for the Street.
This equation is set to change for the worse for HHL. From the current financial year, it will need to pay 2% for every vehicle sold which goes to 4% by year 2005. There are no such issues for Bajaj.
It is also worth noting that the 26% shareholding of the Munjal family is a joint holding of every faction of the family and transmission to any one faction of the next generation is unlikely to be automatic.
And adding fuel to the entire future of HHL is a growing interest amongst some family members to foray into IT-enabled services and the likes.
Such diversifications would only mean less dedication to the core business of HHL by the new generation of Munjals.
So, we have some unanswered questions with regards to ownership of HHL in the future. Will it be Munjal, Honda or a JV or…well, one can only wait to see how the dice eventually rolls out.
Hero Honda Motors Limited (HHML) is a 26:26 joint venture between the Hero group and Japanese major, Honda Motor Co.
The remaining stake is in the hands of financial institutions and the public.
The company has earned the distinction of being the world’s largest individual motorcycle-making company.
The volumes of HHML have been growing at 40% p.a. over the last five years.
This company's net worth has increased 6.5 times in the last five years, from Rs96 crores to Rs629 crores.
The company has also given a dividend of Rs140 crores in the same period.
It generates a return of over 50% on its capital employed in the business. Hero Honda is operating on a negative working capital since Financial Year 1996.
Hero Honda has a 55% share of the motorcycles segment.
Hero Honda sold over one million motorcycles last year.
The company plans to increase its sales by 50% in the next two years. It has targeted sales of 1.5 million motorcycles in FY2003.
Hero Honda's brand equity, its distribution network, efficient operations, quality products coupled with continuous product introductions shall spruce up the sales.
In fact, even in 2001, Hero Honda has introduced two new models-Passion and Joy.
Passion is already selling more than 15,000 vehicles a month. And Joy, another 100cc bike too is reported to have started on a good note.
Honda Motors expects to sell about seven million two-wheeler vehicles globally in 2003 of which Hero Honda will contribute about 21% sales (i.e. 1.5 million).
In fact, Hero Honda's Splendor is already the world's largest selling two-wheeler. Hero Honda’s legacy of a solid after sales service and brand equity will continue to drive volume growth.
HHL's present market share for motorcycles stands at nearly 55%. Much of its success comes from an unprecedented success of its Splendor model, which now contributes over 65% of sales.
Sure CBZ and Street have clocked decent volumes, but they look pale in comparison with Splendor. This also raises concerns on the future growth of the company.
With LML and now BAL coming into their own with newer models, it's only a matter of time before the Splendors of the world start fading away.
It is strongly believe that the lack of suitable product offerings from BAL, TVS and others earlier allowed HHL to dominate and benefit from the massive shift in consumer preferences from scooters to motorcycles. The past is history.
BAL with its Caliber has threatened the seemingly unstoppable growth of Splendor. BAL has now also started to think the Lever way by launching products with varying features.
An upgraded Boxer and introduction of new models like Eliminator, Acer and Pulsar are a clear market segmentation exercise from BAL, which is already beginning to show results. BAL grew by 65% in the motorcycle segment even as the industry grew less than 25% for Financial Year 2001.
HHL being a pure motorcycle company has been working at an operating spread of around 13%, while operating margins for BAL stands at less than 7% (excluding other income).
One more thought as we speak on margins. HHL pays around 0.5% royalty for every Splendor and CD100 sold, while BAL pays 2% for CBZ and as much as 5% for the Street.
This equation is set to change for the worse for HHL. From the current financial year, it will need to pay 2% for every vehicle sold which goes to 4% by year 2005. There are no such issues for Bajaj.
It is also worth noting that the 26% shareholding of the Munjal family is a joint holding of every faction of the family and transmission to any one faction of the next generation is unlikely to be automatic.
And adding fuel to the entire future of HHL is a growing interest amongst some family members to foray into IT-enabled services and the likes.
Such diversifications would only mean less dedication to the core business of HHL by the new generation of Munjals.
So, we have some unanswered questions with regards to ownership of HHL in the future. Will it be Munjal, Honda or a JV or…well, one can only wait to see how the dice eventually rolls out.