heromotocorp-02

8/13/2019 heromotocorp-02

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um Mein ain eroHero Moto orp Ltd


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RULES TO BE FOLLOWED DURING THE PRESENTATION

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After the introduction, this presentation contains FINANCIAL aspects of HeroMotoCorp Ltd only. Please refrain from asking questions beyond them.

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CONTENTS

Introduction and Overview1

Ratio Analysis3

Summary and Questions4


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INTRODUCTION

Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is theworld's largest manufacturer of two - wheelers, based in India.

1983Joint Collaboration Agreement with Honda Motor Co.Ltd. Japan signed Shareholders Agreement signed andincorporated in 1984.

Dr. Brijmohan Lall, Chairman, Mr. Pawan Munjal, ManagingDirector & Chief Executive Officer, Hero MotoCorp Ltd.

Hero MotoCorp Ltd., company's new identity, reflects itscommitment towards providing world class mobility solutionswith renewed focus on expanding company's footprint in the

global arena. It is a public company, listed on BSE and NSE


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Hero Cyclestransferred all itsshareholdings to

HIPL on 28 May10

Hero Investmentprivate limited(HIPL)Bahadur Chand

Investment PrivateLimited (BCIPL)Hero Cycle Ltd.

As a result ofthese transactions,IPG ofCompanies nowcomprises of

HIPL and BCIPLowned andcontrolled byMunjall Family.

BRAND REALIGNMENT

In 2010,Indian Promoter

GroupOf Company

Re-alignedShareholdings

OfCompany

HIPLand

BCIPL


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BUSINESS INDIA ON THE SEPARATION OF HEROAND HONDA

As divorce parties (Hero and Honda)go, this onetoo, was a bit over the top, brimming with

optimism about the future. But no onebadmouthed the erstwhile spouse(Honda).Instead, Honda was fondly remembered. Thatmay be because Hero got a true sweetheart

deal; it got to keep the house, the car and thekids.


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THE SPLIT..

HondaHero MotoCorp Ltd

Hero Honda(19842010)

Paid 2,479.33

Crore for Assembly,Manufacture,Selling,Distribution and

Exports Licenses,which have beenAmortized over aperiod of 42 monthsupto 30 June14

Entered into ashare transferagreement on 22Jan11 .Entire share

holding of 26%transferred to Hero,bringing an end tothe Joint Venture.


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OVERVIEW

Fuelled by its landmark sales of over 62,35,205units in this financial year compared to 54,02,444units for the last financial.

Net Income from Operations of the Companygrew from 19,398 crores to23,579 crores in 2011-12.

The Companys Profit after Tax (PAT)increased from 1,928 crores

in 2010-11 to 2,378 crores in2011-12.

15.41% growth in Sales

21.55% increase in Operations

23.35% increase in PAT

A Brief Overview of Hero MotoCorp Ltd, with respect to a few parameters

*Data from Annual Report 2011 - 12


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YEAR( Crores)

Mar-10 Mar-11 Mar-12

Total Current Assets 2,882.58 1,108.55 1,540.66

Total Current Liabilities 4,831.41 5,323.36 3,622.00Net Sales

( FROM P/L Account) 15,758.18 19,397.93 23,579.03

Purchases(FROM P/L Account) 10,730.41 14,135.17 17,365.41

Gross Profit( FROM P/L Account) 3,023.20 2,807.14 3,962.05

Net Profit(FROM P/L Account) 2,081.80 1,842.11 2,163.42

Profit After Tax(PAT-FROM P/L Account) 2,231.83 1,927.90 2,378.10

Number of Equity Shares 199,687,500 199,687,500 199,687,500

Market Price PerShare(MPS) 2030.8 1586.55 1942.55

Average Inventory465.96 567.31 644.65

Average Debtors129.17 119.49 201.45

Average CreditorsNIL 768.64 2183.24


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GROSS PROFIT RATIO

19.18%

14.47%

16.80%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Mar 10 Mar 11 Mar 12

Gross Profit Ratio

Gross Profit Ratio :

(Gross Profit/NetSales)*100

The gross profit ratioshows the proportion

of profits generatedby the sale of

products or services,before selling and

administrativeexpenses.

There is a dip in the gross profit in the year 2010-11 due to increase inprices of raw materials, namely, Steel, Aluminium and Nickel.


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NET PROFIT RATIO

Net Profit Ratio :

(Net Profit/NetSales)*100

Even after steady increase in sales, the company saw a fall in net profit in 2011and 2012 because of establishment of two new plants and introduction of 5 new

bikes in the market. Also, new emission laws were implemented in that year,amounting to more indirect expenses.

It reveals theremaining profit

after all costs ofproduction andadministration havebeen deducted fromsales, and incometaxes recognized.

13.21%

9.50% 9.18%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%


Net Profit Ratio


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CURRENT RATIO

Current Ratio:Current

Assets/CurrentLiabilities

There is a steep fall in the current ratio in 2010-11, because of thedrastic increase in the current liabilities incurred due to the infamous

split with Honda.

It signifies the liquidityof an organization.

In layman terms, it tellsus how much cash orcash equivalents acompany has, in order topay off its immediateLiabilities.

0.60

0.21

0.43

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70


Current Ratio


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ACID TEST RATIO(QUICK RATIO)

Acid Test Ratio:Quick

Assets/CurrentLiabilities

Acid Test ratio should ideally be 1:1. Since Hero Honda was always debt free,the quick ratio was lesser than the industry average to begin with. We see a steep

dip in the ratio in 2010-11. This was because of the split of the company withHonda as seen in the current ratio.

This ratio is similar tothat of the Current Ratio.The only differencebeing, items which arehighly liquid in natureare considered as a partof quick assets. Currentratio includesinventories while Thisdoes NOT include

inventories.

0.34

0.030.07

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40


Acid Test Ratio


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INVENTORY TURNOVER RATIO- ITR( IN DAYS)

ITR:

365*(AverageInventory/ Sales)

After the split with Honda, Continual pressures on margins forced the companyand its supply chain partners to find innovative and alternative ways to combat

inflation. Attention was given to managing inventories in the system. Thisresulted in better ITRs.

This Ratio indicates thenumber of times theinventory is rotated

during the relevantaccounting period(365days). This gives thenumber of days it takesfor the stock to exhaust.Also, the number of daysit takes for sales to

proceed.

10.79

10.67

9.98

9.40

9.60

9.80

10.00

10.20

10.40

10.60

10.80

11.00


Inventory Turnover Ratio(Days)


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CREDITORS TURNOVER RATIO- CTR(IN DAYS)

CTR:

365*(AverageCreditors/Purchases)

Due to the expenses incurred by Hero after separating from Honda, in the nameof Assembly, Manufacture, Selling, Distribution and exports licenses, It went

from being a debt-free enterprise to a leveraged one.

This ratio

implicates thenumber of days itwould take to payoff the creditors.

0.00

19.85

45.89

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00


Creditors Turnover(Days)


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DEBTORS TURNOVER RATIO-DTR (IN DAYS)

There is a positive DTR ranging from 2-3 days. This shows that thedebtors are paying off and there by the working capital is rotating.

DTR:

365*(AverageDebtors/ Sales)

This ratioimplicates the

number of days itwould take tocollect the duesfrom debtors.

2.99

2.25

3.12

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50


Debtors Turnover(Days)


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EARNINGS PER SHARE(EPS)- IN rs.

EPS:Profit After Tax/

No. of EquityShares

111.77

96.55

119.09

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00


Earnings Per Share(EPS)

EPS or earning pershare measures theprofit available to the

equity sh. Holders on aper share basis i.e. howmuch net profit oneshare of the companyis producing.

. Here we can see a decrease in the EPS of the co. This was because of fall inprofits of the co. Higher the value of this ratio, better will be the share value.


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PRICE EARNING RATIO (P/E RATIO)

PE Ratio:

Market price pershare/ EPS

18.17

16.43

16.31

15.00

15.50

16.00

16.50

17.00

17.50

18.00

18.50


Price Earnings Ratio

The P/E ratio looks at therelationship between the

stock price and thecompanys earnings . Thisratio measures the amountinvestor are willing to payfor each Rupee Ofearnings.

Higher the P/E ratio, the larger the investors confidence in the firms future.Historically, the average P/E ratio in the market has been around 15-25.


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BSE- 52 WEEKS- HIGH & LOW

HIGH

LOW

AS ON DATE 2 MAY12 1 MAR13

BSE (IN rs. `) 2,279 1,616


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NSE- 52 WEEKS- HIGH & LOW

AS ON DATE 2 MAY12 1 MAR13

NSE (IN rs. `) 2,279 1,615

HIGH

LOW


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IN A NUTSHELL..

HERO MOTOCORP IS FINANCIALLY

STABLE!


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