Hero Honda Project Report 6f442j

TABLE OF CONTENTS

✔

OBJECTIVES OF THE PROJECT

✔

INTRODUCTION

✔ COMPANY PROFILE ✔

HERO HONDA'S MISSION

✔

OFFICERS & DIRECTORS

✔ KEY MILESTONES OF HERO HONDA ✔ PROMINENT AWARDS TO THE COMPANY ✔ CORPORATE SOCIAL RESPONSIBILITY ✔ TWO WHEELERS IN INDIA ✔

KEY FACTORS AFFECTING THE SALES OF MOTORCYCLES

✔

players in the Two-wheeler Industry

✔

HERO HONDA products

✔ SERVICES ✔ Market performance ✔

SWOT ANALYSIS

✔ RATIO ANALYSIS ✔ Balance sheet ✔ SUMMARY ✔ CONCLUSION ✔ LIMITATIONS ✔ RECOMMENDATIONS ✔

QUESTIONNAIRE

✔

BIBLIOGRAPHY

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OBJECTIVES OF THE PROJECT 1.

To analyze the liquidity position of the firm.

2.

To analyze the solvency position of the firm.

3.

To study and analyze the overall profitability of the firm.

4.

To study and analyze the changes in working capital and fund flow position.

5.

To relate the various items of profit and loss with sales.

6.

To compare the assets and liabilities of the current year and previous year.

7.

To study the and analyze the capital structure of the firm.

8.

To determine the efficiency with which the current assets are managed.

9.

To study the marketing mix of Hero Honda Company

10. To focus on comparative study of different products of Hero Honda company 11.

Different range of Products; their success and failure

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INTRODUCTION

Company profile Hero Honda Motors Limited was established in 1984, as a t venture between India's Hero Group (world's largest bicycle manufacturers) and Japan's Honda Motor Company. In 1985 production began with the launch of its first motorcycle, the CD100, which gave 80 km to the liter. In 1987 the engine plant was started and in 1989 the Company produced its 3,00,000th motorcycle. In 2001 Hero Honda manufactured its 50,00,000th motorbike. Hero Honda has a reputation of being the most fuelefficient and the world's single largest two wheeler Company. Shri Brijmohan Lall Munjal is the chairman and managing director of this Company.

As early as in 1960’s very few Indian bicycle manufacturers were interested in exports. However, the hero groups foray into the overseas markets in 1963 pioneered Indian exports in the bicycle segment. It was more prompted essentially by the need to remain attuned to the global marketplace. While initial exports ARVIND ARORA

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were restricted to Africa 50% of the exports from sophisticated markets in because of appropriate quality that hero offers..

and the middle east, today more than Hero Cycles Ltd. Meet the demands of Europe and America. This is primarily product development and excellent

Hero Honda has grown like no other company in the auto business. Several times in the path, savvy observers have insisted that it has grown just too big and that no company its size can continue to show growth rates. But Hero Honda has ignored that opinion and continued growing at the place it has set many years ago.

Hero Honda today faces more competitor than it has ever in the history. Now that is the undisputed two wheeler Numero Uno in the country. Every single two wheeler manufacturer in India if looking market share away from it. More over for the first time there are so many four- stroke challengers in the market. And Hero Hondas best selling products are ageing. Corporate Profile The Hero Honda story began with a simple vision – the vision of a mobile and an empowered India, powered by Hero Honda. This vision was driven by Hero Honda's commitment to customer, quality and excellence, and while doing so, maintain the highest standards of ethics and societal responsibilities. Twenty five years and 25 million two wheelers later, Hero Honda is closer to fulfilling this dream. This vision is the driving force behind everything that we do at Hero Honda. We understood that the fastest way to turn that dream into a reality is by remaining focused on that vision. There were many unknowns but we kept faith, and today, Hero Honda has been the largest two wheeler company in the world for eight consecutive years. Our growth ARVIND ARORA

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has kept compounding. The company crossed the ten million unit milestone over a 19-year span. In the new millennium, Hero Honda has scaled this to 15 million units in just five years! In fact, during the year in review, Hero Honda sold moretwo wheelers than the second, third and fourth placed two-wheeler company put together. With Hero Honda, the domestic two wheeler market was able to show positive growth during the year in review. Without Hero Honda, the domestic market would have actually shrunk. Over the course of two and a half decades, and three successive t venture agreements later, both partners have fine-tuned and perfected their roles as t venture partners. What the two partners did was something quite basic. They simply stuck to their respective strengths. As one of the world's technology leaders in the automotive sector, Honda has been able to consistently provide technical know-how, design specifications and R&D innovations. This has led to the development of world class, value - for- money motorcycles and scooters for the Indian market. On its part, the Hero Group has taken on the singular and onerous responsibility of creating world-class manufacturing facilities with robust processes, building the supply chain, setting up an extensive distribution networks and providing insights into the mind of the Indian customer. Since both partners continue to focus on their respective strengths, they have been able to complement each other. In the process, Hero Honda is recognized today as one of the most successful t ventures in the world. It is therefore no surprise that there are more Hero Honda bikes on this country's roads than the total population of some European countries put together! The company's meteoric growth in the two-wheeler market in India stems from an intrinsic ability to reach out and come closer to its customers, with every ing year. Hero Honda's bikes are sold and serviced through a network of over 3500 customer touch points, comprising a mix of dealers, service centres and stockists located across rural and urban India. Hero Honda has built two world-class manufacturing facilities at Dharuhera and Gurgaon in Haryana, and its third and most sophisticated plant at Haridwar has just completed a full year of operations. It is difficult to imagine that all this has happened in the span of just two and a half decades! The best is yet to come. During the year in review, Hero Honda powered its way in a market that, for all practical purposes, was feeling the full effects of the economic slowdown in India. With an economic recovery now clearly on the cards, Hero Honda is all set to ride into another summit. As Brijmohan Lall Munjal, the Chairman, Hero Honda Motors succinctly puts it, "We pioneered ARVIND ARORA

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India's two wheeler industry, we've steered it through difficult times; now it is our responsibility to set the pace again.'

CHAIRMAN OF HERO HONDA MOTERS LEADING WITH A DREAM

We had a dream. The dream of making motorcycles that would touch and transform the lives of our customers by giving them a mode of transport that was fuel-efficient, comfortable and environment friendly. One that would enhance their efficiency at work, enable them to share moments of joy with their families and add up to a better quality of life. In a scenario where the customer had a few choices, our vision was to offer the highest quality at a reasonable price, to meet our customer’s expectations, and to exceed them. Behind the success of Hero Honda, is the saga of team-work. We would like to acknowledge the role played by our JV partners, Honda Motor Company, Japan, and all our business associates, shareholders and employees. In the new millennium, we stand committed to innovation, to change, to achieving breakthroughs… to moving forward in the new century, while retaining the values that have been like a beacon in this journey thus far. Brijmohan Lall Chairman

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HERO HONDA'S MISSION Hero Honda’s mission is to strive for synergy between technology, systems and human resources, 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 responsibilities. This mission is what drives Hero Honda to new heights in excellence and helps the organization forge a unique and mutually beneficial relationship with all its stake holders.

HERO HONDA'S MANDATE Hero Honda is a world leader because of its excellent manpower, proven management, extensive dealer network, efficient supply chain and world-class products with cutting edge technology from Honda Motor Company, Japan. The teamwork and commitment are manifested in the highest level of customer satisfaction, and this goes a long way towards reinforcing its leadership status.

OFFICERS & DIRECTORS 005930.KS

sum

Board of directors of Hero Honda Motorcycles Ltd. ARVIND ARORA

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“Mr. Brijmohan Lall Munjal” (Chairman and Whole -Time Mr. Brijmohan Lall Director) Munjal Mr. Brijmohan Lall Munjal is the founder Director and Chairman of the Company and the $ 2.8 billion Hero Group. He is the Past President of Confederation of Indian Industry (CII), Society of Indian Automobile Manufacturers (SIAM) and was a Member of the Board of the Country's Central Bank (Reserve Bank of India). In recognition of his contribution to industry, Mr Lall was conferred the Pa Bhushan Award by the Union Government.

Chairman and Whole Time director Hero Honda Motors Limited

“MR. PAWAN MUNJAL” (Managing Director)

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Mr. Pawan Munjal

Mr Pawan Munjal is the Chief Executive Managing of the Company. He is responsible for Director growth and strategic planning for the entire Group. A graduate in mechanical Hero Honda Motors engineering, Mr. Munjal has been Limited instrumental in bringing about technological and managerial excellence in the Company's operations. He has been the Chairman of several Committees of CII. He is also on the board of Indian Institute of Management, Lucknow. An avid golfer, Mr Munjal is Past Chairman of the Asian PGA Tour Board of Directors and the Past President of Professional Golfers Association of India (PGAI). Under his guidance, Hero Honda launched the Hero Indian Sports Academy (HISA) in collaboration with Laureus Foundation to provide equal opportunities in sports to various communities and to reward talent in the country.

“MR. TOSHIAKI NAKAGAWA”

(Jt. Managing Director)

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MR. TOSHIAKI NAKAGAWA

Mr. Toshiaki Nakagawa ed the Jt. Managing Company as Additional Director and t. Director Managing Director on February 1, 2006. He ed Honda UK Ltd., as staff member & Hero Honda Motors later on took various assignments at senior Limited positions at various offices of Honda situated in Hong Kong, Prague, Czech Republic, , and Beijing. Currently, he also holds the position of Manager in the Overseas Operations Office No. 1, Honda Headquarters. His specializations include startup of new overseas companies and human resource management.

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N Name of the Directors o.

Designation

1

Mr. Brijmohan Lall Munjal

Chairman & Whole-time Director

2

Mr. Pawan Munjal

Managing Director & CEO

3

Mr. Toshiaki Nakagawa

t Managing Director

4

Mr. Sumihisa Fukuda

Technical Director

5

Mr. Om Prakash Munjal

Non-executive Director

6

Mr. Sunil Kant Munjal

Non-executive Director

7

Mr. Masahiro Takedagawa

Non-executive Director

8

Mr. Satoshi Matsuzawa (Alternate Director to Mr. Takashi Nagai)

Non-executive Director

9

Mr. Pradeep Dinodia

Non-executive & Independent Director

10 Gen.(Retd.) V. P. Malik

Non-executive & Independent Director

11 Mr. Analjit Singh

Non-executive & Independent Director

12 Dr. Pritam Singh

Non-executive & Independent Director

13 Ms. Shobhana Bhartia

Non-executive &

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Independent Director 14 Mr. Meleveetil Damodaran .

Non-executive & Independent Director

15 Mr. Ravi Nath .

Non-executive & Independent Director

16 Dr. Anand C. Burman .

Non-executive & Independent Director

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KEY MILESTONES OF HERO HONDA Year Event 1983 t Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed 1984 Hero Honda Motors Ltd. incorporated 1985 1987 1989 1991

First motorcycle "CD 100" rolled out 100,000th motorcycle produced New motorcycle model - "Sleek" introduced New motorcycle model - "CD 100 SS" introduced

500,000th motorcycle produced 1992 Raman Munjal Vidya Mandir inaugurated - A School in the memory of founder Managing Director, Mr. Raman Kant Munjal 1994 New motorcycle model - "Splendor" introduced 1,000,000th motorcycle produced 1997 New motorcycle model - "Street" introduced Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated 1998 2,000,000th motorcycle produced 1999 New motorcycle model - "CBZ" introduced Environment Management System of Dharuhera Plant certified with ISO14001 by DNV Holland Raman Munjal Memorial Hospital inaugurated - A Hospital in the memory of founder Managing Director, Mr. Raman Kant Munjal 2000 4,000,000th motorcycle produced Environment Management System of Gurgaon Plant certified ISO-14001 by DNV Holland

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Splendor declared 'World No. 1' - largest selling single two-wheeler model "Hero Honda port Programme" - CRM Programme launched 2001 New motorcycle model - "ion" introduced One million production in one single year New motorcycle model - "Joy" introduced 5,000,000th motorcycle produced 2002 New motorcycle model - "Dawn" introduced New motorcycle model - "Ambition" introduced Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and Zaheer Khan as Brand Ambassadors 2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark Splendor has emerged as the World's largest selling model for the third calendar year in a row (2000, 2001, 2002) New motorcycle model - "CD Dawn" introduced New motorcycle model - "Splendor +" introduced New motorcycle model - "ion Plus" introduced New motorcycle model - "Karizma" introduced 2004 New motorcycle model - "Ambition 135" introduced Hero Honda became the World No. 1 Company for the third consecutive year. Crossed sales of over 2 million units in a single year, a global record. Splendor - World's largest selling motorcycle crossed the 5 million mark ARVIND ARORA

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New motorcycle model - "CBZ*" introduced t Technical Agreement renewed Total sales crossed a record of 10 million motorcycles 2005 Hero Honda is the World No. 1 for the 4th year in a row New motorcycle model - "Super Splendor" introduced New motorcycle model - "CD Deluxe" introduced New motorcycle model - "Glamour" introduced New motorcycle model - "Achiever" introduced First Scooter model from Hero Honda - "Pleasure" introduced 2006 Hero Honda is the World No. 1 for the 5th year in a row 15 million production milestone achieved 2007 Hero Honda is the World No. 1 for the 6th year in a row New 'Splendor NXG' launched New 'CD Deluxe' launched New 'ion Plus' launched New motorcycle model 'Hunk' launched 20 million production milestone achieved 2008 Hero Honda Haridwar Plant inauguration New 'Pleasure' launched Splendor NXG lauched with power start feature New motorcycle model 'ion Pro' launched ARVIND ARORA

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New 'CBZ Xtreme' launched 25 million production milestone achieved CD Deluxe lauched with power start feature New 'Glamour' launched New 'Glamour Fi' launched 2009 Hero Honda GoodLife Program launched Hunk' (Limited Edition) launched Splendor completed 11 million production landmark New motorcycle model 'Karizma - ZMR' launched Silver jubilee celebrations

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PROMINENT AWARDS TO THE COMPANY

Year Awards & Recognitions 2010 Company of the Year awarded by Economic Times Awards for Corporate Excellence 2008-09. CNBC TV18 Overdrive Awards 2010 'Hall of Fame' to Splendor NDTV Profit Car & Bike Awards 2010 – • Two-wheeler Manufacturer of the Year • CnB Viewers' Choice Two-wheeler of the Year (Karizma ZMR) Bike Maker of the Year by ET-ZigWheels Car & Bike of the Year Awards 2009 2009 'Two-wheeler Manufacturer of the Year' by NDTV Profit Car & Bike Awards 2009 and ion Pro adjudged as CNB Viewers' Choice twowheeler Top Indian Company under the 'Automobile - Two-wheelers' sector by the Dun & Bradstreet-Rolta Corporate Awards Won Gold in the Reader's Digest Trusted Brand 2009 in the 'Motorcycles' category NDTV Profit Business Leadership Awards 2009 - two-wheeler category ARVIND ARORA

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2008 NDTV Profit Business Leadership Award 2008 - Hero Honda Wins the Coveted "NDTV Profit Business Leadership Award 2008" TopGear Design Awards 2008 - Hunk Bike of the Year Award NDTV Profit Car India & Bike India Awards - NDTV “Viewers’ Choice Award” to Hunk in Bike category IndiaTimes Mindscape and Savile Row ( A Forbes Group Venture ) Loyalty Awards - “Customer and Brand Loyalty Award” in Automobile (two-wheeler) sector Asian Retail Congress Award for Retail Excellence (Strategies and Solutions of business innovation and transformation) - Best Customer Loyalty Program in Automobile category NDTV Profit Car India & Bike India Awards - Bike Manufacturer of the year Overdrive Magazine - Bike Manufacturer of the year TNS Voice of the Customer Awards: • No.1 executive motorcycle Splendor NXG • No.1 standard motorcycle CD Deluxe • No. motorcycle CBZ Xtreme 2007 The NDTV Profit Car India & Bike India Awards 2007 in the following category: • Overall "Bike of the Year" - CBZ X-treme • "Bike of the Year" - CBZ X-treme (up to 150 cc category) • "Bike Technology of the Year" - Glamout PGM FI "Auto Tech of the Year" - Glamout PGM FI by Overdrive Magazine. "Bike of the Year" - CBZ X-treme by Overdrive Magazine. Ranked CBZ X-treme "Bike of the Year" - by B S Motoring Magazine “Most Trusted Company” , by TNS Voice of the Customer Awards 2006. CD Deluxe rated as "No 1 standard motorcycle" by TNS Voice of the Customer Awards 2006. 2006 Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler Company). ARVIND ARORA

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One of the 8 Indian companies to enter the Forbes top 200 list of world’s most reputed companies. No. 1 in automobile industry by TNS Corporate Social Responsibility Award. Best in its class awards for each category by TNS Total Customer Satisfaction Awards 2006: • Splendor Plus (Executive) • CD Deluxe (Entry) • Pleasure (Gearless Scooters) Splendor & ion - Top two models in two wheeler category by ET Brand Equity Survey 2006. Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler Company). Top Indian company in the Automobile - Two Wheeler sector by Dun & Bradstreet - American Express Corporate Awards 2006. Hero Honda Splendor rated as India's most preferred two-wheeler brand at the Awaaz Consumer Awards 2006. Certificate of Export Excellence for outstanding export performance during 2003-04 for two-wheeler & three- wheelers - Complete (Non SSI) by Engineering Export Promotion Council. The NDTV Profit Car India & Bike India Awards 2006 in the following category: • Bike Maker of the Year • Bike of the Year - Achiever • Bike of the Year - Achiever (up to 150 cc category) • Bike of the Year - Glamour (up to 125 cc category) • NDTV Viewers' Choice Award to Glamour in the bike category

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2005 Awaaz Consumer Awards 2005 - India's most preferred two-wheeler brand by CNBC in the 'Automobiles' category. Bike Maker of the Year Award by Overdrive Magazine. ICWAI National Award for Excellence (Second) in Cost Management 2004 in the private sector category by ICWAI. 10th Motilal Oswal Wealth Creator Award for as the most consistent wealth creator for the period 1991-2005. 2004 Winner of the Review 200 - Asia's Leading Companies Award (3rd Rank amongst the top 10 Indian companies). GVC Level 1 (Highest Rating) by CRISIL for corporate Governance. Adjudged as the Best Value Creator - Large Size Companies 2003-04 by The Outlook Money. Corporate Excellence Award 2004 by Indian Institute of Materials Management. Adjudged as the Organization with Innovative HR Practices by HT Power Jobs for HR Excellence. ICSI National Award for Excellence in Corporate Governance 2004 by The Institute of Company Secretaries of India. 2003 Winner of the Review 200 - Asia 's Leading Companies Award (3rd Rank amongst the top 10 Indian companies). Most Respected Company in Automobile Sector by Business World. Bike Maker of the Year by Overdrive Magazine. 2002 Bike Maker of the Year by Overdrive Magazine. Winner of the Review 200 - Asia 's Leading Companies Award (4th Rank amongst the top 10 Indian companies). Company of the Year of ET Awards for Corporate Excellence. Ranked 4th in 'Overall Best Managed Company' category, ranked 3rd in 'Best Financial Management' and 'Best Operational Efficiency' category, ranked 6th in 'Overall Best Investor Relations' category, by Asiamoney. Highest Wealth Creating Company of the Year Award by the Money. GVC Level 1 (Highest Rating) by CRISIL for Corporate Governance. ARVIND ARORA

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2001 Bike Maker of the Year by Overdrive Magazine. Winner of the Review 200 - Asia 's Leading Companies Award (9th Rank amongst the top 10 Indian Companies). Winner of Three Leaves Award for showing Corporate Environment Responsibility in the Automobile Sector by Centre for Science & Environment. 1999 National Productivity Award for the Best Productivity Award in the category of Automobile & Tractor presented by Vice President of India. 1995 The Analyst Award 1995 presented to Hero Honda Motors Ltd. on being ranked 9th amongst the most investor rewarding companies in India. 1995 National Award for outstanding contribution to the Development of Indian Small Scale Industry (NSIC Award - Presented by President of India). 1991 Economic Times-Harvard Business School Award for Corporate Performance to Hero Honda Motors Ltd.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

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STAKEHOLDER TIES AT THE GRASSROOTS Hero Honda Motors takes considerable pride in its stakeholder relationships, especially ones developed at the grassroots. The Company believes it has managed to bring an economically and socially backward region in Dharuhera, Haryana, into the national economic mainstream. An Integrated Rural Development Centre has been set up on 40 acres of land along the Delhi-Jaipur Highway. The Centre-complete with wide approach roads, clean water, and education facilities for both adults and children-now nurtures a vibrant, educated and healthy community. The Foundation has adopted various villages located within vicinity of the Hero Honda factory at Dharuhera for integrated rural development. This includes: • Installation of deep bore hand pumps to provide clean drinking water. • Constructing metalled roads and connecting these villages to the National Highway (NH -8). • Renovating primary school buildings and providing hygienic water and toilet facilities. • Ensuring a proper drainage system at each of these villages to prevent waterlogging.

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• Promoting non-conventional sources of energy by providing a 50 per cent subsidy on biogas plants. • KEY POLICIES AN ENVIRONMENTALLY AND SOCIALLY, AWARE COMPANY • At Hero Honda, our goal is not only to sell you a bike, but also to help you every step of the way in making your world a better place to live in. Besides its will to provide a high-quality service to all of its customers, Hero Honda takes a stand as a socially responsible enterprise respectful of its environment and respectful of the important issues. Hero Honda has been strongly committed not only to environmental conservation programmes but also expresses the increasingly inseparable balance between the economic concerns and the environmental and social issues faced by a business. A business must not grow at the expense of mankind and man's future but rather must serve mankind. "We must do something for the community from whose land we generate our wealth." A famous quote from our Worthy Chairman Mr.Brijmohan Lall Munjal. Environment Policy We at Hero Honda are committed to demonstrate excellence in our environmental performance on a continual basis, as an intrinsic element of our corporate philosophy. To achieve this we commit ourselves to: • Integrate environmental attributes and cleaner production in all our business processes and practices with specific consideration to substitution of hazardous chemicals, where viable and strengthen the greening of supply chain. • Continue product innovations to improve environmental compatibility. • Comply with all applicable environmental legislation and also controlling our environmental discharges through the principles of "alara" (as low as reasonably achievable). • Institutionalise resource conservation, in particular, in the areas of oil, water, electrical energy, paints and chemicals. ARVIND ARORA

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• Enhance environmental awareness of our employees and dealers / vendors, while promoting their involvement in ensuring sound environmental management. Quality Policy Excellence in quality is the core value of Hero Honda's philosophy. We are committed at all levels to achieve high quality in whatever we do, particularly in our products and services which will meet and exceed customer's growing aspirations through: • Innovation in products, processes and services. • Continuous improvement in our total quality management systems. • Teamwork and responsibility.

Safety Policy Hero Honda is committed to safety and health of its employees and other persons who may be affected by its operations. We believe that the safe work practices lead to better business performance, motivated workforce and higher productivity. We shall create a safety culture in the organization by: • Integrating safety and health matters in all our activities. • Ensuring compliance with all applicable legislative requirements. ARVIND ARORA

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• Empowering employees to ensure safety in their respective work places. • Promoting safety and health awareness amongst employees, suppliers and contractors. • Continuous improvements in safety performance through precautions besides participation and training of employees.

TWO WHEELERS IN INDIA

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The feeling of freedom and being one with the Nature comes only from riding a two wheeler. Indians prefer the two wheelers because of their small manageable size, low maintenance, pricing and easy loan repayments. Indian streets are full of people of all age groups riding a two wheeler. Motorized two wheelers are seen as a symbol of status by the populace. Thus, in India, we would see swanky four wheels jostling with our ever reliable and sturdy steed the two wheeler.

India is the second largest producer and manufacturer of two-wheelers in the world. It stands next only to Japan and China in of the number of two-wheelers produced and domestic sales

respectively.

Indian

two-wheeler

industry

has

got

spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. The Automobile Products of India (API) started manufacturing scooters in the country.

Bikes are a major segment of Indian two wheeler industry, the other two being scooters and mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. In the initial stages, the scooter segment was dominated by API; it was later overtaken by Bajaj Auto. Although various government ARVIND ARORA

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and private enterprises entered the fray for scooters, the only new player that has lasted till today is LML.

The motorcycle segment was initially dominated by Enfield 350cc bikes and Escorts 175cc bike. The two-wheeler market was opened to foreign competition in the mid-80s. And the then market leaders - Escorts and Enfield - were caught unaware by the onslaught of the 100cc bikes of the four Indo-Japanese t ventures. With the availability of fuel efficient low power bikes, demand swelled, resulting in Hero Honda - then the only producer of four stroke bikes (100cc category), gaining a top slot.

The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki and Hero Honda brought in the first twostroke and four-stroke engine motorcycles respectively. These two players initially started with assembly of CKD kits, and later on progressed to indigenous manufacturing. In the 90s the major growth for motorcycle segment was brought in by Japanese motorcycles, which grew at a rate of nearly 25% CAGR in the last five years. The industry had a smooth ride in the 50s, 60s and 70s when the Government

prohibited

new

entries

and

strictly

controlled

capacity expansion. The industry saw a sudden growth in the 80s. ARVIND ARORA

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The industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990. In 1990, the entire automobile industry saw a drastic fall in demand. This resulted in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94. Hero Honda showed a marginal decline in 1992.

The reasons for recession in the sector were the incessant rise in fuel prices, high input costs and reduced purchasing power due to significant rise in general price level and credit crunch in consumer financing. Factors like increased production in 1992, due to new entrants coupled with the recession in the industry resulted in company either reporting losses or a fall in profits. Later with development of economic situation, sales of two wheeler rapidly increased. The trend of owning two-wheelers is due to a variety of facts peculiar to India. One of the chief factors is poor public transport in many parts of India. Additionally, two-wheelers offer a great deal of convenience and mobility for the Indian family. In the last eight to ten years, the two-wheeler market has witnessed a marked shift towards motorcycles at the expense of scooters. In the rural ARVIND ARORA

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areas, consumers have come to prefer sturdier bikes to withstand the bad road conditions. All the new models are now being replaced by 4-stroke motorcycles. Excise duty on motorcycles has been reduced resulting in price reduction, which has aided in propelling the demand for motorcycles. Fierce competition has also forced players to cut prices in certain models. During the year 2006-07, 78.57 lakhs Two-wheelers were sold in India.

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KEY FACTORS AFFECTING THE SALES OF MOTORCYCLES

Government policy impact on petrol prices: Petrol prices determine the running cost of two wheelers expressed in rupees per kilometre. Petrol prices are the highest in India as GOI subsidizes kerosene and diesel. But with the change in the GOI policy to reduce the subsidy, the prices of petrol will remain constant at the current prices. This will have a positive effect on

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two wheelers market. This trend would actually affect positively the whole automotive industry.

Improvement in disposable income: With the increase in salary levels due to entry of multinationals following liberalization process the disposable income has improved exponentially over the years. This will have a multiplier effect on demand for consumer durables including two wheelers. This is already witnessed in improved demand two wheelers.

Availability of credit for vehicle purchase: The availability and cost of finance affects the demand for two wheelers as the trend for increased credit purchases for consumer durables have increased over the past few years.

Key players in the Two-wheeler Industry:

There are many two-wheeler manufacturers in India. Major players in the 2-wheeler industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS). ARVIND ARORA

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The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Types of Two-wheelers in India:

There are mainly three types of two-wheelers available in India. They are Motorcycles, Scooters and Scooterettes/Mopeds.

Motorcycles in India:

Bikes comprise a major segment of Indian two wheeler industry.

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Company : Bajaj Auto Ltd. * Bajaj Avenger * Bajaj CT 100 * Bajaj Platina * Bajaj Discover DTSi * Bajaj Pulsar DTSi * Bajaj Wave * Bajaj Wind 125

Company : HERO HONDA * Sonic DTSi * Hero Honda Achiever * Hero Honda CD Dawn * Hero Honda CD Deluxe * Hero Honda Glamour * Hero Honda Glamour-Fi * Hero Honda Karizma * Hero Honda ion Plus * Hero Honda Pleasure * Hero Honda Super Splendor * Hero Honda Splendor NXG ARVIND ARORA

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* Hero Honda CBZ X-Treme * Hero Honda Hunk Company: Kinetic Motor * Kinetic Aquila * Kinetic Boss * Kinetic Challenger * Kinetic Comet * Kinetic GF Company: TVS Motor • TVS Ind Suzuki AX 100 • TVS MAX 100 • TVS MAX R 100 • TVS Supra • TVS Suzuki Samurai • TVS Suzuki Shogun • TVS Suzuki Shalion • TVS Suzuki Fiero • TVS Fiero • TVS Star • TVS Star City • TVS Star city deluxe • TVS Star Sport • TVS Fiero F2 • TVS Fiero FX • TVS Centra ARVIND ARORA

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• TVS Victor (110 cc) • TVS Victor GLX (125 cc) • TVS Victor EDGE (125 cc) • TVS Flame (125 cc,ccvti technology) • TVS Apache (150 cc,13.7 Ps @8500rpm) • TVS Apache RTR 160 • TVS Apache RTR 160 EFI (Electronic Fuel Injection) Company: Yamaha Motor India * TVS Victor * Yamaha Crux * Yamaha G5 * Yamaha Gladiator

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.

Products of Hero Honda Motors

Scooters

○ Hero Honda Pleasure:

Hero Honda Pleasure

Manufact Hero Honda urer motorcycle Ltd. Producti on

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Price

Rs. 37990

Engine

102 cc, 7bhp@ 7000 rpm, torque,0.78 kgm @5000 rpm

Page 36

Motorcycles

Hero Honda CD 100 Deluxe

○ Hero Honda 100 Deluxe:

CD

Manufac Hero Honda turer motorcycle Ltd Producti 2001-present on

ARVIND ARORA

Price

Rs. 35642

Engine

97.cc,7.5bhp@8000rp m,4stroke engine, singal cylinder

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Hero Honda Ambition 135cc ○ Hero Honda Ambition 135cc:

Manufact urer

Hero Honda motorcycle Ltd

Productio 2004-present n

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Price

Rs, 49000

Engine

135 cc , four-stroke engin, single piston, kick start 11 bhp

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○ Hero Honda CBZ Extreme:

Hero Honda CBZ Extreme

Manufact urer

Hero Honda motorcycle Ltd

Productio 2005-present n

ARVIND ARORA

Price

Rs. 59213

Engine

149.2 cc , four-stroke cycle, single piston, kick start Power: 14.2 bhp hp @ 8500 rpm Torque: 1.26 kgm @ 6500rpm

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Hero Honda ion Plus ○ Hero Honda ion Plus:

Manufact urer

Hero Honda motorcycle Ltd

Productio 2006-present n

ARVIND ARORA

Price

Rs. 44265

Engine

97 CC, 4-stroke engine, singale cylinder. 7.4 bhp @8000 rpm

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○ Hero Honda CD Dawn:

Hero Honda CD Dawn

Manufact urer

Hero Honda motorcycle Ltd

Productio 2004-present n

ARVIND ARORA

Price

Rs. 33542

Engine

97 CC,7.5 bhp @8500 rpm, 4 stroke engine, torque of 8.05 Nm at 5,500 rpm

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Hero Honda Karizma 225 ○ Hero Honda Karizma 225:

Manufact urer

Hero Honda motorcycle Ltd.

Productio 2005-present n If you look at the 223c mill of the Price

Rs. 76393

Karizma, you can make out the familiar Engine

4 – Stroke,12.68 KW (17 PS) @ 7000 rpm,223 cc

streak that runs through the engines on the CBZ and the Ambition. No prizes on this count as to the reason but the

223cc Karizma engine represents - for the moment - the maximum capacity this modular design theme can be taken to. The crankcase is of virtually the same size though the covers do have some detail differences and the engine mounts are the same as in the other two bikes and completing the picture are the scaled-up barrel (with an additional fin) and head.

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○ Hero Honda Glamour:

Hero Honda Glamour

Manufact Hero Honda urer motorcycle Ltd

ARVIND ARORA

Producti on

2005-present

Price

Rs 49777-56529

Engine

124.7 cc , four-stroke cycle, single piston, kick start, 9 bhp @7000 rpm

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Hero Honda Achiever ○ Hero Honda Achiever:

Manufact urer

Hero Honda motorcycle Ltd

Productio 2006-present n

ARVIND ARORA

Price

Rs. 51298-56022

Engine

149.1 CC, 4-stroke engine, single cylinder.13.4 bhp @ 8000 rpm

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○ Hero Honda Splendor NXG:

Hero Honda Splendor NXG

Manufact urer

Hero Honda motorcycle Ltd

Productio 2004-present n

ARVIND ARORA

Price

Rs. 46500

Engine

124.7 CC,9 bhp @ 7000 rpm, 4 stroke engine,, torque of 8.05 Nm at 5,500 rpm

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SERVICES

HHML has constituted one the best after-sales service network in the industry. Apart from improving the quality of service and easy availability of spare parts, HHML has also focused on cleanliness and other aesthetics of the service stations and added amenities such as air-conditioned waiting area, internet browsing and coffee shops etc. to enhance the in-house experience of the consumers at those “customer touch-points”. To ensure that millions of customers in the rural areas are not left waiting for adequate service as it is impossible for HHML to introduce service stations at every nook & corner of the country, mobile service stations are regularly arranged with prior intimation to public about the route that the mobile workshop would take when ing through that region, so that consumers can come and get their two-wheelers serviced. All these activities are aimed to increase the customer loyalty and thus retaining customers. The value activities done by HHML in its value chain (both primary & activities) are given in Fig. IA1. The unique value activities of HHML that is at the heart of its competitive advantages

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Company Share Information: Share Holding Pattern Holder's Name % Share Holding

Promoters 28.96%

57833555

Other Companies 0.75%

1500702

Foreign NRI 0.09%

180204

Foreign Institutions 24.25%

48428475

Foreign Industries 0.00%

1250

Others 0.66%

1311172

Banks Mutual Funds 3.78%

7549210

General Public 7.34% ARVIND ARORA

No of Shares

14662220

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Financial Institutions 8.16%

16301962

Foreign Promoter 26.00%

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List of Exchanges:

• Bangalore Stock Exchange Ltd. • Calcutta Stock Exchange Association Ltd. • Cochin Stock Exchange Ltd. • Delhi Stock Exchange Assoc. Ltd. • Hyderabad Stock Exchange Ltd • Inter-connected Stock Exchange of India • Ludhiana Stock Exchange Assoc. Ltd. • Madras Stock Exchange Ltd., • National Stock Exchange of India Ltd. • Over The Counter Exchange Of India Ltd. • The Stock Exchange, Mumbai • Uttar Pradesh Exchange Assoc Ltd.

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Market performance

Marketing arm of HHML started the hugely successful “Fill it, Shut it, Forget it” campaign years ago to pitch for its better fuel efficiency and thus lower owning cost. It has been a constant strive for HHML’s marketing efforts (in ments, in promos) to focus the value for money and reliability of its products and thus attracting new customers and retaining customers as well. To ensure customer loyalty, HHML has come up with Hero Honda port Program which gives special privileges to its customers. HHML does not indulge in price wars in an effort to maintain the perception of enduring quality among present & potential customers. Of late, there were complaints from customers that HHML is not dynamic enough to present newer, flashier & more powerful bike models in the segment that competitors like recharged Bajaj is offering. Another complaint was that many of the variants offered by HHML have little or insignificant product differentiation which can justify the price difference. HHML has paid heed to these stated & unstated needs of its customers and improved the 4P’s (Product, Price, Place & Promotion). Its offerings now are well accepted in the market. HHML has roped in popular heartthrob Hrithik Roshan as its brand ambassador to give impetus to its marketing efforts. It has been a constant endeavor of HHML to cater to both urban and rural markets with similar zest, with advertising campaigns and promotional events clearly focusing on the two markets – “Har Gaon, Har

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Angaan” is the recent rural connect initiative to cover ~ 23,360 villages with a population of 5000 or more by 500 specially trained rural sales executives. HHML has a conscious strategy of penetrating new markets and unrepresented territories through its distribution network which is made up of dealers, authorized representatives, stockists and SSPs. In March 2001, the company had 826 such customers points in India. By March 2008, this number went up to over 3500. On an all India basis, 50 dealers, 150 SSPs, 267 dealers and 45 city work agents were added within this period. The distribution network of HHML is both wide & deep rooted; it is based on both mutual trust & relationship between HHML & its distributors and HHML’s philosophy of ensuring its partners to grow with its own growth. Trust & loyalty of distribution network is very important in maintaining the leadership position in this highly competitive industry. In fact, HHML’s strength in Supply Chain & distribution network is one of the unique intangible resources that it has; superior brand image & reliability perception of its brand is the outcome of these intangible & tangible key assets.

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FACTS & FIGURES Sale of Hero Honda in Rural area and Urban area In the survey of rural as well as urban area it is found that in rural area the sale of Hero Honda is less but in urban area it gives very exiting result. This may be because of the conditions of roads there. Area

% of Respondents

Urban Area

72

Rural Area

28

FAMILY INCOME OF RESPONDENTS

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The income distribution of the families of respondents shows that the bike, which was considered earlier to be out of range for middle class families is now becoming very fast an article for them. Family income (Rs.)

% of Responses

5000-10000

10

10000-15000

46

15000-20000

36

Above 20000

08

PERSONS WHO KNOW TODRIVE BIKE Almost every person know how to drive a Bike (In my Survey) Response Driving known Driving not know

ARVIND ARORA

% Of respondents 96 04

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FACTOR PROMPT TO BUY HERO HONDA It should be stated that the performance is the most important factor followed by look. The possible combination and corresponding number of respondents are shown in the table below. Features

% of respondents

Performance

18

Look

11

Availability

5

Price

1

Maintenance

4

Brand image

5

After sale service

6

HOW DID THE RESPONDENT CAME TO KNOW ABOUT THE BIKE? The best media of ment (according to which the respondents came to know about the bike) is the ads on television. Friends & magazine are the other sources. Only 2 % of them came to know through hoardings.

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Medium of ment

% of Respondents

Television

46

Magazine

36

Friends

14

Hoardings

02

Others

02

PURCHASE OF BIKE Almost 94 % of the respondents say that they have purchased the bike by cash. Only 6% of the respondents say that they have purchased their bike through bank loans.

Purchase Type

% of Respondents

Cash Purchase

94

Hire Purchase

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DECISION INFLUENCED BY Maximum no. of the Respondents have taken decision to buy the bike on their own. After that their friends and parents influenced them. Influencer Parents

% of Respondents 16

Self

54

Friends

18

Relatives

08

Others

04

BIKES PREVIOUSLY USED

More than 60% were using Hero Honda CD100 bikes. They were followed by Yamaha RX100 & very little have chosen other bikes.

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Previously Used

% of Respondents

CD100

62

Yamaha RX100

32

Others

06

RATING OF BIKES

42% of the respondents have rated as the best bike they have used, but it is facing a stiff competition from Pulsar & Fierro. Bikes

% rating by Respondents

Spleandor

38

ion

08

Ambition

06

Pulsar

28

Fierro

14

Others

06

4.2 SURVEY REPORT

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The Initial Quality Study of Two Wheelers in India Something to Ponder over. Which model of Motor Cycle would you recommend to your dear friend? Does the basic reliability of two-wheelers measure up to the promises made by the manufacturer…? Where exactly is the quality lacking…? Are buyers happy with the quality they get…? What is the trend over the years…? Would they buy the same model again or more importantly from the manufacturer’s point of view… would they advise their friends to buy it…? So let the people know just how the two-wheelers fared on the road…

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SWOT ANALYSIS STRENGTHS: ➢

Hero Honda introduced First stroke bike in the Indian

market. ➢

Hero Honda gives 80 Km/Liter Avg.

➢

Huge sale network (3500 Dealers).

➢

Better sale service.

➢

It has the highest share in automobile sector.

➢

It has a good brand image.

➢

It gives better service for customers.

➢

Best customer preference.

➢

Debt equity ratio is only 0.1.

➢

The company has clarified about its intention of

setting a third plant in addition to its existing two plants. The company has embarked upon a green field expansion plan and has earmarked Rs 2 bn for the same. It should be noted that the company has a strong cash flow position; it generated Rs 9 bn from operation in FY04 and is virtually a debt free company.

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WEEKNESS: ➢

Suppose to be very sophisticated.

➢

Not fit for ruler India.

➢

They have big gap between cubic capacities of its

products. ➢

Its market share is reducing from last few years.

➢

Spare parts are too costly.

OPPOURTUNITIES:

➢

Hero Hondas the first manufacture to launch eco

friendly bikes with 4-stroke engines. They have attained a stronger good will and popularity in the industry and the consumers. ➢

They should go in new segments of bikes.

➢

There is large no. of young consumers in the

market. Company has to focus on them. ➢

They

have

big

opportunities

in

heavy

bike

segments. ➢

As government polices are amended against

pollution in metro cities, Hero Honda being 4 stroke bike ARVIND ARORA

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manufacture have great opportunities to explore its new innovations and technologies.

THREATS:

Main threats to Hero Honda are their competitors

➢ like:-

➢

○

Bajaj Auto Ltd.

○

TVS motors Ltd.

○

Yamaha Motors India.

○

Honda motorcycle and scooter India. The cost of the product is very high in comparison

to other companies. ➢

ARVIND ARORA

Decreasing market share.

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FINDINGS

It is clear from the report that the Hero Honda Motors is facing cutthroat competition; hence the company’s manager has to be fast and smart so as to understand the customers needs. They have to come up with various new techniques or schemes to be able to cater to different categories of people. Customers are becoming more wise day by day and they are now willing to know all the in and out of the things happening around them. This has led to increased customer awareness. We can analyze that if the brand is reputed that doesn’t win the customers delight unless it’s provided same value-added features or else we can say competitive advantage. • For gaining a competitive advantage it has to continuously compare the product and services with the competitors and find the weak area of the rivals for gaining competitive advantage. • Surveys revealed that awareness of Hero Honda Motors is low among its target segment for creativity awareness. The ARVIND ARORA

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company has to take some keen step for promotional activity. • The company should regularly send the sales person who have good communication skill to the customers so that they should be aware about the product and services in market and know the quality of the services offered by the company.

RATIO ANALYSIS

Meaning and definition of ratio analysis:

Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two variables. Significance or Importance of ratio analysis:

•

It helps in evaluating the firms performance: With the help of ratio analysis conclusion can be drawn regarding several aspects such as financial health, profitability and operational efficiency of the undertaking. Ratio points out the operating efficiency of the firm i.e.

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whether the management has utilized the firm’s assets correctly, to increase the investor’s wealth. It ensures a fair return to its owners and secures optimum utilization of firms assets • It helps in inter-firm comparison: Ratio analysis helps in inter-firm comparison by providing necessary data. An interfirm comparison indicates relative position.It provides the relevant data for the comparison of the performance of different departments. If comparison shows a variance, the possible reasons of variations may be identified and if results are negative, the action may be initiated immediately to bring them in line.

It simplifies financial statement:

The information given in the basic financial statements serves no useful Purpose unless it s interrupted and analyzed in some comparable . The ratio analysis is one of the tools in the hands of those who want to know something more from the financial statements in the simplified manner. • It helps in determining the financial position of the concern:

whether ARVIND ARORA

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deteriorating or is constant over the years by setting a trend with the help of ratios The analysis with the help of ratio analysis can know the direction of the trend of strategic ratio may help the management in the task of planning, forecasting and controlling. • It is helpful in budgeting and forecasting: ing ratios provide a reliable data, which can be compared, studied and analyzed. These ratios provide sound footing for future prospectus. The ratios can also serve as a basis for preparing budgeting future line of action.

• Liquidity position: With help of ratio analysis conclusions can be drawn regarding the Liquidity position of a firm. The liquidity positon of a firm would be satisfactory if it is able to meet its current obligation when they become due. The ability to met short term liabilities is reflected in the liquidity ratio of a firm.

Long term solvency: Ratio analysis is equally for assessing the long term financial ability of the Firm. The long term solvency s measured by the leverage or capital structure and ARVIND ARORA

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profitability ratio which shows the earning power and operating efficiency, Solvency ratio shows relationship between total liability and total assets.

• Operating efficieny: Yet another dimension of usefulness or ratio analysis, relevant from the View point of management is that it throws light on the degree efficiency in the various activity ratios measures this kind of operational efficiency.

Classification of ratios

Different ratios are used for different purpose these ratios can be grouped into various classes according to the financial activity. Ratios are classified into four broad categories. 1. Liquidity Ratio 2. Leverage Ratio 3. Profitability Ratio

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4. Activity Ratio 1. Liquidity Ratio: Liquidity ratio measures the firms ability to meet its currentobligations i.e. ability to pay its obligations and when they become due. Commonly used ratios are: • Current ratio: Current ratio is the ratio, which express relationship between current asset and current liabilities. Current asset are those which can be converted into cash within a short period of time, normally not exceeding one year. The current liabilities which are short- term maturing to be met.

Current ratio = Current Asset

Current liabilities

Acid test ratio:

The acid test ratio is a measure of liquidity esigned to overcome the ARVIND ARORA

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Defect of current ratio. It is often referred to as quick ratio because it is a measurement of firms ability to convert its current assets quickly into cash in order to meet its current liabilities.

Current asset -Inventories Acid test ratio

= Current

liabilities

1. Leverage or capital structure ratio: Leverage or capital structure ratios are the ratios, which indicate the relative interest of the owners and the creditors in an enterprise. These ratios indicate the funds provided by the long-term creditors and owners. To judge the long term financial position of the firm following ratios are applied.

1.

Debt –equity ratio:

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Debt-equity ratio which expresses the relatonship between debt and equityThis ratio explains how far owned funds are sufficient to pay outside liabilities. It is calculated by following formula

Long term +short term debts +current liabilities Debt equity ratio = Net worth

. 2. Total Debt ratio: This ratio explains how far owned and borrowed funds are sufficient to pay debt of the firm

Long term+short term borrowing+current liabilities

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Capital employed 3. Profitability ratio: Profitability ratio are the best indicators of overall efficiency of the business concern, because they compare return of value over and above the value put into business with sales or service carried on by the firm with the help of assets employed. Profitablity ratio can be determined on the basis of: • Sales • Investment • Profitability ratios related to sale:

1. Gross profit to sales ratio. 2. Net profit to sales ratio or net profit of margin.

1. Gross profit to sales ratio: The gross profit to sales ratio establishes relationship between ARVIND ARORA

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gross profit efficency of

And sales to measure the relative operating

the firm to reflect pricing policy Sales-cost of goods sold Gross profit to sales ratio 100

=

* Sale

1. Net profit margin: The net margin indicates the managements ability to earn sufficient profit on sales to earn sufficient profit on sales not only to cover all revenue operating expenses of the business, the cost of borrowed funds and the cost of goods or servicing, but also to have sufficient margin to pay reasonable comparison to shareholders on their contributions to the firm.

Net profit after tax and interest Net profit margin =

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Sales

2. Profitability ratios related to investments: a. Return on assets b. Return on capital employed

a. Return on assets:

The profitability ratio here measures the relationship between net profit and assets.

Net profit after tax Return on assets =

Fixed assets

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b. Return on capital employed:

Net profit after taxes Return on capital employed = Total capital employed

1. Activity ratio: Activity ratio are sometimes are called efficiency ratios. Activity ratios are concerned with how efficiency the assets of the firm are managed. These ratio express relatonship between level of sales and the investment in various assets inventores, receivables, fixed assets etc.

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The important activity ratios are as follows:

1.

Inventory turnover ratio: Raw materials

consumed Inventory turnover ratio = Average stock of raw materials

2. Debt turnover ratio: This ratio shows quickly debtors are converted into cash

=

Total sales Debtors

3.

Average collection period ratio:

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This ratio indicates how quickly the inventory is converted into cash.

Days in a year = Debtors turnover

4.

Working capital turnover ratio:

This ratio shows the number of times the working capital turns in trading transaction. If it has an increasing trend over the previous year it shows that the working capital is being used efficiently.

LIQUIDITY RATIOS

Meaning of liquidity:

The term liquidity refers to ability to pay its obligations when they become due. Liquidity ratios measure the ability of a firm to meet its short-term obligations and reflect the short-term financial strength or solvency of a firm. ARVIND ARORA

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Liquidity ratios are classified into two types:

1. Short term liquidity and 2. Long term liquidity

1. short term liquidity: Short term liquidity refers to finance required by a firm for a period of one year or less. Short –term finance is also called working capital finance as it is required for investment in working capital or current assets like cash and bank balances, inventories, s receivables and marketable securities.

Further short term liquidity ratios are categories into three types they are as follows:

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Hero Honda Motors Ltd. -

Profit loss Mar ' 09

Mar ' 08

Mar ' 07

Income Operating income

12,325. 10,345. 9,905. 38 01 95

Expenses Material consumed

8,820.0 7,479.5 7,252. 5 0 46

Manufacturing expenses 427.78 360.66 332.62 Personnel expenses

448.65 383.45 353.81

Selling expenses

582.16 503.62 507.10

strative expenses

293.72 250.01 258.00

Expenses capitalised

-

Cost of sales

10,572. 8,977.2 8,703. 36 4 99

Operating profit

1,753.0 1,367.7 1,201. 2 7 96

Other recurring income

108.56 88.85

Adjusted PBDIT

1,861.5 1,456.6 1,285. 8 2 69

Financial expenses

13.04

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-

13.47

-

83.73

13.76 Page 77

Depreciation

180.66 160.32 139.78

Other write offs

-

Adjusted PBT

1,667.8 1,282.8 1,132. 8 3 15

Tax charges

499.70 442.40 388.21

Adjusted PAT

1,168.1 840.43 743.94 8

Non recurring items

113.58 127.45 113.95

Other non cash adjustments

-

Reported net profit

1,281.7 967.88 857.89 6

Earnigs before appropriation

3,303.5 2,562.6 2,081. 3 6 94

Equity dividend

399.38 379.41 339.47

Preference dividend

-

-

-

Dividend tax

67.87

64.48

57.69

Retained earnings

2,836.2 2,118.7 1,684. 8 7 78

-

-

-

-

Hero Honda Motors Ltd. -

(Rs crore)

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Balance sheet Mar ' 09

Mar ' 08

Mar ' 07

Sources of funds Owner's fund Equity share capital

39.94

39.94

39.94

Share application money

-

-

-

Preference share capital

-

-

-

Reserves & surplus

3,760.8 2,946.3 2,430. 1 0 12

Loan funds Secured loans

-

-

Unsecured loans

78.49

132.00 165.17

Total

3,879.2 3,118.2 2,635. 4 4 23

-

--

Uses of funds Fixed assets Gross block

2,516.2 1,938.7 1,800. 7 8 63

Less : revaluation reserve

-

Less : accumulated depreciation

942.56 782.52 635.10

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-

Page 79

Mar ' 09

Mar ' 08

Mar ' 07

Net block

1,573.7 1,156.2 1,165. 1 6 53

Capital work-in-progress

120.54 408.49 189.92

Investments

3,368.7 2,566.8 1,973. 5 2 87

Net current assets Current assets, loans & advances

1,022.1 942.00 914.65 4

Less : current liabilities & provisions

2,205.9 1,955.3 1,608. 0 3 74

Total net current assets

1,183.7 1,013.3 694.09 6 3

Miscellaneous expenses not written Total

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-

-

3,879.2 3,118.2 2,635. 4 4 23

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RATIO OF HERO HONDA LTD. Profitability ratios

2009 2008 2007

Operating margin (%)

14.22 13.22 12.13

Gross profit margin (%)

12.75 11.67 10.72

Net profit margin (%)

10.30 9.27

8.58

Adjusted cash margin (%)

10.84 9.59

8.84

Adjusted return on net worth (%)

30.73 28.14 30.11

Reported return on net worth (%)

33.72 32.41 34.73

Return on long term funds (%)

43.33 41.57 43.48

Leverage ratios Long term debt / Equity

0.02

0.04

0.06

Total debt/equity

0.02

0.04

0.06

Owners fund as % of total source

97.97 95.76 93.73

Fixed assets turnover ratio

5.34

5.89

6.01

Current ratio

0.46

0.48

0.56

Current ratio (inc. st loans)

0.46

0.48

0.56

Quick ratio

0.31

0.31

0.39

Liquidity ratios

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Inventory turnover ratio

47.53 42.82 47.48

Payout ratios Dividend payout ratio (net profit)

36.45 45.86 46.29

Dividend payout ratio (cash profit)

31.95 39.34 39.80

Earning retention ratio

60.01 47.19 46.62

Cash earnings retention ratio

65.36 55.65 55.06

Coverage ratios Adjusted cash flow time total debt

0.05

Financial charges coverage ratio

142.7 108.1 93.44 6 4

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0.13

0.18

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RATIO ANALYSES

Liquidity Ratio’s. 1)CURRENT RATIO: CURRENT ASSETS

CURRENT LIABILITIES

2007 2008

2009 0.51

0.62

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Interpretation:

The ideal ratio 2:1 . The liquidity position of the company is not satisfactory because it is not reached the ideal ratio 2:1 . The company should increase the current assets and decrease the current liabilities.

Quick Ratio:

Current assets –inventories. Current liabilities 2007

2008

2009 0.31

0.36

0.33

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Interpretation: the liquidity position of the company is not satisfactory because the ratio is decrease and not reached the ideal ratio 1:1 the company should increase quick assets such as cash and bank balance and decrease the current liabilities.

LEVERAGE RATIO’ 1)Proprietary Ratio 2)Fixed Asset Ratio 3)Interest Coverage RatiO

Proprietary Ratio: Net Worth /Total Assets 2007

2008

0.09 ARVIND ARORA

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2009

0.07 0.04 Page 85

Interpretation: These ratio is the indicative of strong financial position of business . The higher the ratio , the better it is. but the company Should increase the shareholders funds.

Fixed Assets Ratio: Fixed Assets Net worth 2007

= 2008

2009 0.45

0.51

0.50 Interpretation: This ratio is satisfactory and the ideal ratio is 0.67 and it will never be more than 1 , the long term funds are used to buy or acquire the fixed assets.

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Turn Over Ratios 1)working capital turnover 2)inventory turnover ratio 3)fixed assets turnover ratio

Working Capital TurnOver Ratio

Net Sales/Working Capital 2007

2008

2009 -11.75

-17.49

-11.64

Interpretation: The Company should increase the sales and also increase the working capital i.e., increase the current assets and decrease current liabilities .

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Inventory TurnOver Ratio: CGS/Avg. Inventory

2007 34.02

2008 34.56

2009 30.17

Interpretation: The ideal ratio is 8. the company should control the cost of goods sold expenses and increase the sales in order to increase the ratio.

Fixed Assets Turn Over Ratio: TurnOver/ Fixed Assets ARVIND ARORA

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2007

2008

2009

8.77

7.30

6.67

Interpretation: The ideal ratio is 5. the ratio is decreasing from year to year and we should increase the sales up to the maximum level and we should use the fixed assets up to full 100% capacity.

Profitability Ratio’s: 1)Gross Profit Ratio 2)Operating Ratio

Gross profit ratio:

gross profit X 100 ARVIND ARORA

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Sales

2007

2008

15.91

2009

12.34

13.46

Interpretation: The profitability position of the company is satisfactory because of the Gross profit ratio is increasing from year to year but it is not enough the company should control the cost of goods sold expenses and increase the sales.

Operating Ratio: CGS + Operating Exp X 100 Net Sales

2007 85.40

2008 89.07

2009 88.09

Interpretation: The company had controlled the operating expenses that’s why the ratio is decreased ,the lower the ratio the better it is, the company should continue this performance in the future also. It is satisfactory

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SUMMARY 1) After the analysis of Financial Statements, the company status is better, because the Net working capital of the company is doubled from the last year’s position. 2) The company profits are huge in the current year; it is better to declare the dividend to shareholders. 3) The company is utilising the fixed assets, which majorly help to the growth of the organisation. The company should maintain that perfectly. 4) The company fixed deposits are raised from the inception, it gives the other income i.e., Interest on fixed deposits. ARVIND ARORA

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CONCLUSION

The company’s overall position is at a good position. Particularly the current year’s position is well due to raise in the profit level from the last year position. It is better for the organization to diversify the funds to different sectors in the present market scenario.

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LIMITATION

Financial analysis is a powerful mechanism of determining financial strength and weakness of a firm. But the analysis is based on the information available in the financial statements. Thus the financial analysis suffers from some serious inherent limitation of financial statements, which are as follows :-

1.

It is only a study of interim reports.

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2.

Financial analysis is based only upon monetary information & non-

monetary factors are ignored.

3.

It does not consider changes in price level.

4.

As financial statement are prepared on the basis of a going concern; it does not give exact position.

5.

Analysis is only a mean not an end in itself. The analyst has to make interpretation and draw his own conclusion.

RECOMMENDATION

While Hero Honda has strong foothold in the industry, the company should look into the areas of weakness. In this connection, It is suggested that the company can look into the following areas:

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• In order to expand its business it should introduce innovative schemes for young generations, better financial schemes, etc.

• The company should expand its service centers.

• The must move towards the rural areas to expand its sale.

Questionnaire for the survey of Motorbikes.

1.

2.

Name

__________________________________________________

Address _____________________________________________ _____________________________________________

3.

Phone No.

___________________

Mobile No.

___________________

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4.

Age

18 – 22 years [ ]

23 – 27 years [ ]

28 – 32 years [ ]

above 32 years

[ ]

5.

Do you have any bike in your house?

Yes

[ ]

No

[ ]

6. If yes, Name and Company of the bike. ________________________________________________________.

7. If No, Do you have any plan to buy it in next 6 months?

Yes [ ]

No

[ ]

8. If Yes, Name and Company of the Bike. ________________________________________________________.

9. Which Bike does you like most? ________________________________________________________. ARVIND ARORA

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10.Rank the Motorbike manufacturing company.

1.

Hero Honda

[ ]

2.

Yamaha

[ ]

3.

Bajaj

[ ]

4.

L.M.L.

[ ]

11.Do you any ment of Hero Honda? ________________________________________________________.

12.What should the price range in your opinion?

Splendor + ___________________ Sufficient [ ] CD dawn ___________________ Sufficient [ ] ion + ___________________

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Sufficient [ ]

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CBZ

___________________

Sufficient

[ ]

Karizma ___________________

Sufficient

[ ]

13.Any new facilities or any improvement that you want. ________________________________________________________ _____________________________________________________________ ___________________________________________________.

14.Give remark to your old Bike Company.

Good

[ ]

Excellent [ ]

Very Good

[ ]

Out standing

[ ]

Don’t have a Bike

[ ]

15Give remark to Hero Honda. ARVIND ARORA

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Good

[ ]

Excellent [ ]

Very Good

[ ]

Out standing

[ ]

Don’t have a Bike

[ ]

Thanks

Surveyed by: ……………………… Checked by: ………………………

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BIBLIOGRAPHY

BOOKS:



Name of the book:- Marketing research Author :- Dr. C.B.Mamoria



Name of the book:- Marketing research Author :- Mr. Kothari.

MAGAZINES, JOURNALS AND NEWSPAPERS:

 Journals published by Hero Honda, Annual Report  Auto India  Business World

INTERNET:

 

www.herohonda.com www.google.com

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