hero honda (1) [edocfind.com]

8/7/2019 Hero honda (1) [EDocFind.com]

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2/23

HERO

HONDAA PIONEER IN 2

WHEELERSEGMENT


3/23

Universal customerexpectationUniversal customerexpectation

MAXIMUM CHOICE

MAXIMUM CONVENIENCE

LOWEST COST

Thesethreearethe universal customerexpectation which mostof

the consumerhave.

Theseexpectation has beenfulfilled by Hero Honda which has

madeitnumberoneintwo wheelersegment.


4/23

PortersmodelPortersmodel

Threat fromsubstitutes:

Low priced 4-

wheelers

Intensified competition

Hugenumberof

undifferentiated

productsmaking

advertisingimportant

Ruralmarketpotential

Thre t fr new entr nts:

Reduced entryarriers

(FDI)

Import duty on forei n

i es

Buyers po er:

High

Pricesensitivity

reduced

Supplier po er:

Low (fragmentedand

exclusive)

urtherreduced by

threatofbackward

integration by buyers


5/23

Majorplayers

HeroHonda, 39.8

BajajAuto, 24.4

VMotors, 17.7

HondaMotors,8.5

Yamaha, 3.8 Others,5.8


6/23

1956 -Set up HERO CYCLES tomanufacture cycles.

1961 Setup ROCKMAN CYCLES forforchainsand hubs,today itistheworldslargestmanufacturerofchainsand hubs.

1963HERO CYCLES startsexportsofcycles

1975 HERO CYCLES becomesthelargestmanufacturerofcyclesin India

1978 MAJESTIC AUTO set uptomanufacturemopeds.

1984 HERO HON A set up.

1985 MUNJAL SHOWA set upformanufactureofshockabsorbers.

1987 SUNBEAM CASTINGS set up.

1988 HERO MOTORS set up.

1998 HERO HON A sales cross500,000 unitsperyear.

2000 HERO HON A sales cross,000,000 unitsperyear.

2004 -HERO GROUP revenues crossUS $ 2 billion HERO HON A salescross 2,500,000 unitsperyear

Timeline


7/23

F RMATI F ROONDA:

MA

JOR

REASONS

Engineering capability

Distributionnetwork

Cordial Industrial

Relations

Tightfocuson

financialandraw

materialprocesses

Low employeeturnover

RelevanceofERO brand

Commitmentto

Quality

Know-how and

experiencein handling

largevolumes


8/23

Tostriveforsynergy betweentechnology,systemsand humanresources,to

produceproductsandservicesthatmeetthe quality,performanceandprice

aspirationsofits customers. Atthesametimemaintainthe higheststandardsof

ethicsandsocialresponsibilities.

MISSION

Thevisionofamobileandanempowered India,powered by Hero Honda.

riven by Hero Hondas commitmentto customer, quality andexcellence,andwhiledoingso,maintainingthe higheststandardsofethicsandsocietal

responsibilities.

VISION


9/23

SWOTSWOT

Ability to understand

customersneedsandwants

Established brand

name

Effectiveadvertising

capabilityAftersaleservice

Technology

Maintenance cost.

Resellvalueis high

Companysnameis

synonymous with fuel-efficient bikesand

connectivity

R& isnot closeto

the Heromanufacturing

plant.

Heroisvulnerablein

thejointventure because

somuch power.

BrandnameofHeroitselfhasnoinfluencein

theautomobileindustry.

STRENGTHS

WEAKNESSES


10/23

Globalexpansion.

Expansionof

targetmarket

(include women).

Relatively low

rateofinterestandthediscountof

prices.

Largemarketfor

the high

performanc

esegment which is

increasing.

Honda

Motorcyclesand

Scooters India can

takeaway market

share.

Bajaj Motorsisastrong competitor.

I announcedin

Automobilesis

00%.

Petrolpriceincreases.

Pollutionnorms.

Aluminumand

steelprice

increase.

SWOTSWOTOPPORTUNITIES

THREATS


11/23

Product de elopmentProduct de elopment

1985-89 1991-94 199 -2000 2001-03


12/23

2008- bikes with power start

2007- new HUNK launch

2005-first scooter modelPLEASURE

2004-new modelAMBITION,CBZ

New plant at haridwar

Upgraded version ofSplendor, passion, CD deluxe

New model of glamour, achiever

TOTAL SALES OF 10 MILLIONS

Productdevelopment continued.Productdevelopment continued.


13/23

y

Bicycle business:integrated backwardstoalargeextent (variousfactoriesboughtandset up).

y Themainpriority has beensourcing high-quality componentsforthe

Munjals businesssincethen.

y Alwaysdependsonforeigntechnologies.

y Formotorcycles, HH has15key vendors. economiesofscale

lowercostperunitforvendor.

efficientplanningandforecasting.

Higherbargainingpoweroversuppliers.

long-termrelationship with Hero Honda

Integration


14/23

Financial PerformanceFinancial Performance

y

Sales

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Sales ( Nos) 761623 1029510 1425303 1677537 2070147 2621400 3000751 3336756 3337142 3722000 4600130

Growth in sales (%) 43.6 35.2 38.4 17.7 23.4 26.6 14.5 11.2 0.01 11.53 23.59

Sales ( Nos)

0

500000

1000000

15000002000000

2500000

3000000

3500000

4000000

4500000

5000000

1999-

00

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

Sales ( Nos)


15/23

Profitability

Improvementsinthemargins yoy

Bettercontrolovermaterial cost,marketing costandsharpfocusonoperationalefficiencies

PAT & Profitabilty Ratios

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Total Income(in crores) 2269 3191 4539 5195 5997 7563 8870 10090 10517 12565 16099

growth in total income(%) 50.7 40.7 42.3 14.4 15.5 26.1 17.4 13.7 4.2 19.5 28.1

PBT(crores) 285 377 694 885 1072 1217 1412 1246 1410 1781 2832

PAT(crores) 192 247 463 581 728 810 971 858 968 1282 2232

PAT/Income from operations(%) 8.5 7.7 10.2 11.2 12.1 10.7 11.1 8.6 9.3 10.4 14.1

Return on Cap employed(%) 66.1 64.9 94.5 98.9 92.8 80.9 72.3 51.6 49 50.9 76.4

EPS(Rs) 9.6 12.4 23.2 29.1 36.5 40.6 48.6 43 48.5 64.2 111.8

Return on Equity(%) 52.2 46.9 72.1 75.6 72.9 61.6 55.5 38.3 35.5 37.8 61.4

EPS

0

20

40

60

80

100

120

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

EPS


16/23

Cash Flows

Growth insalesturnover, betterefficienciesinthe

working capitalmanagementimproved cash flows

fromoperations.

Ne a h o ope a on

0

500

1000

1500

2000

2500

3000

99 00 00 01 2001 02 2002 03 2003 04 2005 06 2006 07 2007 08 2008 09 2009 10

Ne a h o ope a on


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Working Capital Management

Efficient useofthevarious componentsofworking capital cycle.

Effective controlthereceivableandinventoriesenablingitto

continuetooperateonnegative working capital

Work ng Cap and qu d y ra os

2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10

nven o Pe od 16 1 14 4 11 3 10 5 10 4 11 9 11 10 6

Ope a ng C e 23 2 19 2 14 14 9 17 9 21 2 16 8 13 3

Ca h C e 16 3 28 3 33 23 9 12 2 10 6 13 1 17

Cu en Ra o 0 7 0 51 0 53 0 74 0 84 0 68 0 51 0 45

2000 01 2001 02 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10

D v Pa ou 26 7 75 5 69 8 61 9 56 3 46 88 46 29 45 86 36 45 31 3

Dividend Policy

- Company hasfollowedapolicy ofpaying high dividends,keepingin

mind cash generating capacities,theexpected capitalneedsofthe

businessandstrategic considerations.


18/23

Debt Structure

Very minimalamountofdebt- debtfree company

Capital Str cture

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

total debt(in crores) 51 66 116 134 175 202 186 165 132 78

Share Cap(in crores) 39.94 39.94 39.94 39.94 39.94 39.94 39.94 39.94 39.94 39.94

Reserves & Surplus (in crores) 408 696 802 995 1314 1453 1969 2430 2946 3761

Long Term Debt/ Equity 0 0 0 0 0 0 0 0 0 0


19/23

The Road Ahead

T PE R i lik l b l li i i i

H H

BAL d TV xp c d p l i l i i i

d m k i FY E du g c m b ck i

gm d ig xp c d g


20/23

Valuepropositionofhero HondaValuepropositionofhero Honda

y

Thorough understandingof:-New marketsegments

Marketdynamicspostslowdown

productopportunitiesthrough customer

interaction & feedbacky Superiorserviceorientation

y Investmentsin Technology upgradation

y UsingForeign collaborationtoassistinnew design

andproductionprocessesy Focuson Quality

y Productivity and Profitability


21/23

Growth matrixGrowth matrix

1 2

34


22/23

BASIC DRIVERSBASIC DRIVERS

VALUE FORMONEY provider

Stro g allia cesa d relatio ships

ith allstakeholders

Be chmarkagai st bestglobal practices

ProductI ovatio

Stro g cultureof performa ce


23/23

THANKS

hero honda (1) [edocfind.com]

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