Hero Honda (1) com

8/8/2019 Hero Honda (1) com

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HERO

HONDAA PIONEER IN 2

WHEELER SEGMENT



Universal customer expectation

These three are the universal customer expectation which most of

the consumer have.

These expectation has been f ulfilled by Hero Honda which has

made it num ber one in two wheeler segment.



Porter¶s model

Threat fromsubstitutes:

Low priced 4-

wheelers

Intensified competition

Huge num ber of

undifferentiated

products making

advertising important

Rural market potential

Threat from new entrants:

R educed entr y barriers

(FDI)

Import duty on foreign

bikes

Buyers power:

High

Price sensitivity

reduced

Supplier power:

Low (fragmented and

exclusive)

Further reduced by

threat of back ward

integration by buyers



Major players

Hero Honda, 39.8

Bajaj Auto, 24.4

VMotors, 17.7

Honda Motors, 8.5

Yamaha, 3.8 Others, 5.8



956 -Set u p HERO CYCLES to manufacture cycles.

1961 ± Setu p ROCKMAN CYCLES for for chains and hubs, today it is the

worlds largest manufacturer of chains and hubs.

1963 ± HERO CYCLES starts exports of cycles

1975 ± HERO CYCLES becomes the largest manufacturer of cycles in

India

1978 ± MAJESTIC AUTO set u p to manufacture mopeds.

1984 ± HERO HONDA set u p.

1985 ± MU NJAL SHOWA set u p for manufacture of shock a bsor bers.

1987 ± SU NBEAM CASTINGS set u p.

1988± HERO MOTORS set u p.

1998 ± HERO HONDA sales cross 500,000 units per year.

2000 ± HERO HONDA sales cross ,000,000 units per year.

2004 -HERO GROUP revenues cross US $ 2 billion HERO HONDA sales

cross 2,500,000 units per year

Timeline



FORMATION OF HERO HONDA:

MAJOR REASONSEngineering capa bility

Distri bution network

Cordial Industrial

R elations

Tight focus on

financial and raw

material processes

Low employee turnover

R elevance of HERO brand

Commitment to

Quality

K now-how and

experience in handling

large volumes



To strive for synergy between technology, systems and human resour ces, to

produce products and services that meet the quality, performance and price

aspirations of its customers. At the same time maintain the highest standards of

ethics and social responsi bilities.

MISSION

The vision of a mo bile and an empowered India, powered by Hero Honda.

Driven by Hero Honda¶s commitment to customer, quality and excellence, and

while doing so, maintaining the highest standards of ethics and societal

responsi bilities.

VISION



SWOTAbility to understand

customer¶s needs and wants

Esta blished brand

name

Effective advertising

capa bilityAfter sale service

Technology

Maintenance cost.

R esell value is high

Company¶s name is

synonymous with f uel-efficient bikes and

connectivity

R&D is not close to

the Hero manufacturing

plant.

Hero is vulnera ble in

the joint venture because

so much power.

Brand name of Hero itself has no influence in

the automo bile industr y.

STRENGTHS

WEAKNESSES



Glo bal expansion.

Expansion of

target market

(include women).

R elatively low

rate of interest and the discount of

prices.

Large market for

the high

performance segment which is

increasing.

Honda

Motor cycles and

Scooters India can

take away market

share.

Bajaj Motors is a strong competitor.

FDI announced in

Automo biles is

00%.

Petrol price increases.

Pollution norms.

Aluminum and

steel price

increase.

SWOTOPPORTUNITIES

THREATS



Product development

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



2008- bikes with power start

2007- new HUNK launch

2005-first scooter modelPLEASURE

2004-new modelAMBITION,CBZ

New plant at haridwar

Upgraded version of Splendor, passion, CD deluxe

New model of glamour, achiever

TOTAL SALES OF 10 MILLIONS

Product development continued««.



Bicycle business: integrated back wards to a large extent (various factories bought and set u p).

The main priority has been sour cing high-quality components for the

Munjal¶s business since then.

Always depends on foreign technologies.

For motor cycles, HH has 15 key vendors. ± economies of scale

± lower cost per unit for vendor.

± efficient planning and forecasting.

± Higher bargaining power over su ppliers.

± long-term relationship with Hero Honda

Integration



Financial Performance

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)



Profita bility

± Improvements in the margins yoy

Better control over material cost, marketing cost and sharp focus on operational efficiencies

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



Cash Flows

± Growth in sales turnover, better efficiencies in the

working capital management improved cash flows

from operations.

Net Cash from operations

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

Net Cash from operations



Working Capital Management

± Efficient use of the various components of working capital cycle.

± Effective control the receiva ble and inventories ena bling it to

continue to operate on negative working capital

Working Cap and liquidity ratios

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

Inventory Period 16.1 14.4 11.3 10.5 10.4 11.9 11 10.6

Operating Cycle 23.2 19.2 14 14.9 17.9 21.2 16.8 13.3

Cash Cycle -16.3 -28.3 -33 -23.9 -12.2 -10.6 -13.1 -17

Current Ratio 0.7 0.51 0.53 0.74 0.84 0.68 0.51 0.45

Dividend Policy

- Company has followed a policy of paying high dividends, keeping in

mind cash generating capacities, the expected capital needs of the

business and strategic considerations.

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

Div Payout(%) 26.7 75.5 69.8 61.9 56.3 46.88 46.29 45.86 36.45 31.3



De bt Str ucture

± Ver y minimal amount of de bt- de bt free company

Capital Structure

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

Reser ves & 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



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 iv l i i i

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

gm d ig xp c d g



Value proposition of hero Honda

Thorough understanding of :- New market segments

Market dynamics post slowdown

product opportunities through customer

interaction & feed back Su perior service orientation

Investments in Technology u p gradation

Using Foreign colla boration to assist in new design

and production processes Focus on ³Quality´

Productivity and Profita bility



Growth matrix

1 2

34



BASIC DRIVERS

³VALUE FOR MONEY´ provider

Strong alliancesand relationshipswith allstakeholders

Benchmark against bestglobal practices

ProductInnovation

Strong cultureof performance



THANKS

Hero Honda (1) com

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