hero moto corp

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Hum Mein Hain Hero Hero MotoCorp Ltd

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Page 1: Hero moto corp

Hum Mein Hain Hero

Hero MotoCorp LtdHero MotoCorp Ltd

Page 2: Hero moto corp

RULES TO BE FOLLOWED DURING THE PRESENTATION

Please turn your mobile off

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

Silence=Approval

Critical remarks have no negative consequences

Please WAIT until the presentation is done with, to ask questions.

Have some fun- You may laugh! (with permission of-course)

Page 3: Hero moto corp

CONTENTS

Introduction and Overview1

Ratio Analysis3

Summary and Questions4

Page 4: Hero moto corp

INTRODUCTION

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

1983—Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed and incorporated in 1984.

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

Hero MotoCorp Ltd., company's new identity, reflects its commitment towards providing world class mobility solutions with renewed focus on expanding company's footprint in the global arena. 

It is a public company, listed on BSE and NSE

Page 5: Hero moto corp

• Hero Cycles transferred all its shareholdings to HIPL on 28 May’10

• Hero Investment private limited (HIPL)

• Bahadur Chand Investment Private Limited (BCIPL)

• Hero Cycle Ltd.

• As a result of these transactions, IPG of Companies now comprises of HIPL and BCIPL owned and controlled by Munjall Family.

BRAND REALIGNMENT

In 2010,Indian Promoter

GroupOf Company

Re-alignedShareholdings

Of Company

HIPLand

BCIPL

Page 6: Hero moto corp

BUSINESS INDIA ON THE SEPARATION OF HERO AND HONDA

“As divorce parties (Hero and Honda)go, this one too, was a bit over the top, brimming with optimism about the future. But no one badmouthed the erstwhile spouse(Honda). Instead, Honda was fondly remembered. That may be because Hero got a true sweetheart deal; it got to keep the house, the car and the kids.”

Page 7: Hero moto corp

THE SPLIT..

HondaHero MotoCorp Ltd

Hero Honda(1984 – 2010)

Paid `2,479.33 Crore for Assembly, Manufacture, Selling, Distribution and Exports Licenses, which have been Amortized over a period of 42 months upto 30 June’14

Entered into a share transfer agreement on 22 Jan’11 .

Entire share holding of 26% transferred to Hero, bringing an end to the Joint Venture.

Page 8: Hero moto corp

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 to`23,579 crores in 2011-12.

The Company’s Profit after Tax (PAT) increased from `1,928 crores in 2010-11 to `2,378 crores in 2011-12.

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

Page 9: Hero moto corp

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 3,622.00

Net 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 Per Share(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

Page 10: Hero moto corp

GROSS PROFIT RATIO

Mar 10 Mar 11 Mar 12 0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

19.18%

14.47%

16.80%

Gross Profit Ratio

Gross Profit Ratio : (Gross

Profit/Net Sales)*100

The gross profit ratio shows the proportion of

profits generated by the sale of products or

services, before selling and

administrative expenses.

There is a dip in the gross profit in the year 2010-11 due to increase in prices of raw materials, namely, Steel,

Aluminium and Nickel.

Page 11: Hero moto corp

NET PROFIT RATIO Net Profit

Ratio : (Net Profit/Net Sales)*100

Even after steady increase in sales, the company saw a fall in net profit in 2011 and 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 the remaining profit after all costs of production and administration have been deducted from sales, and income taxes recognized.Mar 10 Mar 11 Mar 12

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%13.21%

9.50% 9.18%

Net Profit Ratio

Page 12: Hero moto corp

CURRENT RATIO Current Ratio:

Current Assets/Current

Liabilities

There is a steep fall in the current ratio in 2010-11, because of the drastic increase in the current liabilities

incurred due to the infamous split with Honda.

It signifies the liquidity of an organization. In layman terms, it tells us how much cash or cash equivalents a company has, in order to pay off it’s immediate Liabilities.

Mar 10 Mar 11 Mar 12 0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.60

0.21

0.43

Current Ratio

Page 13: Hero moto corp

ACID TEST RATIO(QUICK RATIO) Acid Test

Ratio:Quick

Assets/Current Liabilities

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 with Honda as

seen in the current ratio.

This ratio is similar to that of the Current Ratio. The only difference being, items which are highly liquid in nature are considered as a part of quick assets. Current ratio includes inventories while This does NOT include inventories.

Mar 10 Mar 11 Mar 12 0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.34

0.03 0.07

Acid Test Ratio

Page 14: Hero moto corp

INVENTORY TURNOVER RATIO- ITR( IN DAYS)

ITR: 365*(Average

Inventory/ Sales)

After the split with Honda, Continual pressures on margins forced the company and its supply chain partners to find

innovative and alternative ways to combat inflation. Attention was given to managing inventories in the system. This resulted

in better ITRs.

This Ratio indicates the number of times the inventory is rotated during the relevant accounting period(365 days). This gives the number of days it takes for the stock to exhaust. Also, the number of days it takes for sales to proceed.

Mar 10 Mar 11 Mar 12 9.40

9.60

9.80

10.00

10.20

10.40

10.60

10.80

11.00

10.79

10.67

9.98

Inventory Turnover Ratio(Days)

Page 15: Hero moto corp

CREDITORS TURNOVER RATIO- CTR(IN DAYS)

CTR:365*(Average

Creditors/ Purchases)

Due to the expenses incurred by Hero after separating from Honda, in the name of Assembly, Manufacture, Selling,

Distribution and exports licenses, It went from being a debt-free enterprise to a leveraged one.

This ratio implicates the number of days it would take to pay off the creditors.

Mar 10 Mar 11 Mar 12 0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

0.00

19.85

45.89

Creditors Turnover(Days)

Page 16: Hero moto corp

DEBTORS TURNOVER RATIO-DTR (IN DAYS)

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

working capital is rotating.

DTR:365*(Average

Debtors/ Sales)

This ratio implicates the number of days it would take to collect the dues from debtors.

Mar 10 Mar 11 Mar 12 0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2.99

2.25

3.12

Debtors Turnover(Days)

Page 17: Hero moto corp

EARNINGS PER SHARE(EPS)- IN rs. ` EPS:

Profit After Tax/ No. of Equity

Shares

Mar 10 Mar 11 Mar 12 0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

111.77

96.55

119.09

Earnings Per Share(EPS)

EPS or earning per share measures the profit available to the equity sh. Holders on a per share basis i.e. how much net profit one share of the company is producing.

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

Page 18: Hero moto corp

PRICE EARNING RATIO (P/E RATIO)

PE Ratio:Market price

per share/ EPS

Mar 10 Mar 11 Mar 12 15.00

15.50

16.00

16.50

17.00

17.50

18.00

18.50

18.17

16.43

16.31

Price Earnings Ratio

The P/E ratio looks at the relationship between the stock price and the company’s earnings . This ratio measures the amount investor are willing to pay for each Rupee Of earnings.

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.

Page 19: Hero moto corp

BSE- 52 WEEKS- HIGH & LOW

HIGH

LOW

AS ON DATE 2 MAY’12 1 MAR’13

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

Page 20: Hero moto corp

NSE- 52 WEEKS- HIGH & LOW

AS ON DATE 2 MAY’12 1 MAR’13

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

HIGH

LOW

Page 21: Hero moto corp

IN A NUTSHELL..

HERO MOTOCORP IS FINANCIALLY STABLE!

Page 22: Hero moto corp