hero moto corp
TRANSCRIPT
Hum Mein Hain Hero
Hero MotoCorp LtdHero MotoCorp Ltd
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CONTENTS
Introduction and Overview1
Ratio Analysis3
Summary and Questions4
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
• 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
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.”
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.
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
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
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.
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
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
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
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)
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)
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)
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.
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.
BSE- 52 WEEKS- HIGH & LOW
HIGH
LOW
AS ON DATE 2 MAY’12 1 MAR’13
BSE (IN rs. `) 2,279 1,616
NSE- 52 WEEKS- HIGH & LOW
AS ON DATE 2 MAY’12 1 MAR’13
NSE (IN rs. `) 2,279 1,615
HIGH
LOW
IN A NUTSHELL..
HERO MOTOCORP IS FINANCIALLY STABLE!