hero honda (1) [edocfind.com]
TRANSCRIPT
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HERO
HONDAA PIONEER IN 2
WHEELERSEGMENT
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Universal customerexpectationUniversal customerexpectation
MAXIMUM CHOICE
MAXIMUM CONVENIENCE
LOWEST COST
Thesethreearethe universal customerexpectation which mostof
the consumerhave.
Theseexpectation has beenfulfilled by Hero Honda which has
madeitnumberoneintwo wheelersegment.
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PortersmodelPortersmodel
Threat fromsubstitutes:
Low priced 4-
wheelers
Intensified competition
Hugenumberof
undifferentiated
productsmaking
advertisingimportant
Ruralmarketpotential
Thre t fr new entr nts:
Reduced entryarriers
(FDI)
Import duty on forei n
i es
Buyers po er:
High
Pricesensitivity
reduced
Supplier po er:
Low (fragmentedand
exclusive)
urtherreduced by
threatofbackward
integration by buyers
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Majorplayers
HeroHonda, 39.8
BajajAuto, 24.4
VMotors, 17.7
HondaMotors,8.5
Yamaha, 3.8 Others,5.8
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1956 -Set up HERO CYCLES tomanufacture cycles.
1961 Setup ROCKMAN CYCLES forforchainsand hubs,today itistheworldslargestmanufacturerofchainsand hubs.
1963HERO CYCLES startsexportsofcycles
1975 HERO CYCLES becomesthelargestmanufacturerofcyclesin India
1978 MAJESTIC AUTO set uptomanufacturemopeds.
1984 HERO HON A set up.
1985 MUNJAL SHOWA set upformanufactureofshockabsorbers.
1987 SUNBEAM CASTINGS set up.
1988 HERO MOTORS set up.
1998 HERO HON A sales cross500,000 unitsperyear.
2000 HERO HON A sales cross,000,000 unitsperyear.
2004 -HERO GROUP revenues crossUS $ 2 billion HERO HON A salescross 2,500,000 unitsperyear
Timeline
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F RMATI F ROONDA:
MA
JOR
REASONS
Engineering capability
Distributionnetwork
Cordial Industrial
Relations
Tightfocuson
financialandraw
materialprocesses
Low employeeturnover
RelevanceofERO brand
Commitmentto
Quality
Know-how and
experiencein handling
largevolumes
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Tostriveforsynergy betweentechnology,systemsand humanresources,to
produceproductsandservicesthatmeetthe quality,performanceandprice
aspirationsofits customers. Atthesametimemaintainthe higheststandardsof
ethicsandsocialresponsibilities.
MISSION
Thevisionofamobileandanempowered India,powered by Hero Honda.
riven by Hero Hondas commitmentto customer, quality andexcellence,andwhiledoingso,maintainingthe higheststandardsofethicsandsocietal
responsibilities.
VISION
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SWOTSWOT
Ability to understand
customersneedsandwants
Established brand
name
Effectiveadvertising
capabilityAftersaleservice
Technology
Maintenance cost.
Resellvalueis high
Companysnameis
synonymous with fuel-efficient bikesand
connectivity
R& isnot closeto
the Heromanufacturing
plant.
Heroisvulnerablein
thejointventure because
somuch power.
BrandnameofHeroitselfhasnoinfluencein
theautomobileindustry.
STRENGTHS
WEAKNESSES
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Globalexpansion.
Expansionof
targetmarket
(include women).
Relatively low
rateofinterestandthediscountof
prices.
Largemarketfor
the high
performanc
esegment which is
increasing.
Honda
Motorcyclesand
Scooters India can
takeaway market
share.
Bajaj Motorsisastrong competitor.
I announcedin
Automobilesis
00%.
Petrolpriceincreases.
Pollutionnorms.
Aluminumand
steelprice
increase.
SWOTSWOTOPPORTUNITIES
THREATS
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Product de elopmentProduct de elopment
1985-89 1991-94 199 -2000 2001-03
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2008- bikes with power start
2007- new HUNK launch
2005-first scooter modelPLEASURE
2004-new modelAMBITION,CBZ
New plant at haridwar
Upgraded version ofSplendor, passion, CD deluxe
New model of glamour, achiever
TOTAL SALES OF 10 MILLIONS
Productdevelopment continued.Productdevelopment continued.
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y
Bicycle business:integrated backwardstoalargeextent (variousfactoriesboughtandset up).
y Themainpriority has beensourcing high-quality componentsforthe
Munjals businesssincethen.
y Alwaysdependsonforeigntechnologies.
y Formotorcycles, HH has15key vendors. economiesofscale
lowercostperunitforvendor.
efficientplanningandforecasting.
Higherbargainingpoweroversuppliers.
long-termrelationship with Hero Honda
Integration
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Financial PerformanceFinancial Performance
y
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)
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Profitability
Improvementsinthemargins yoy
Bettercontrolovermaterial cost,marketing costandsharpfocusonoperationalefficiencies
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
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Cash Flows
Growth insalesturnover, betterefficienciesinthe
working capitalmanagementimproved cash flows
fromoperations.
Ne a h o ope a on
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
Ne a h o ope a on
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Working Capital Management
Efficient useofthevarious componentsofworking capital cycle.
Effective controlthereceivableandinventoriesenablingitto
continuetooperateonnegative working capital
Work ng Cap and qu d y ra os
2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10
nven o Pe od 16 1 14 4 11 3 10 5 10 4 11 9 11 10 6
Ope a ng C e 23 2 19 2 14 14 9 17 9 21 2 16 8 13 3
Ca h C e 16 3 28 3 33 23 9 12 2 10 6 13 1 17
Cu en Ra o 0 7 0 51 0 53 0 74 0 84 0 68 0 51 0 45
2000 01 2001 02 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10
D v Pa ou 26 7 75 5 69 8 61 9 56 3 46 88 46 29 45 86 36 45 31 3
Dividend Policy
- Company hasfollowedapolicy ofpaying high dividends,keepingin
mind cash generating capacities,theexpected capitalneedsofthe
businessandstrategic considerations.
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Debt Structure
Very minimalamountofdebt- debtfree company
Capital Str cture
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
Reserves & 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
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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 i l i i i
d m k i FY E du g c m b ck i
gm d ig xp c d g
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Valuepropositionofhero HondaValuepropositionofhero Honda
y
Thorough understandingof:-New marketsegments
Marketdynamicspostslowdown
productopportunitiesthrough customer
interaction & feedbacky Superiorserviceorientation
y Investmentsin Technology upgradation
y UsingForeign collaborationtoassistinnew design
andproductionprocessesy Focuson Quality
y Productivity and Profitability
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Growth matrixGrowth matrix
1 2
34
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BASIC DRIVERSBASIC DRIVERS
VALUE FORMONEY provider
Stro g allia cesa d relatio ships
ith allstakeholders
Be chmarkagai st bestglobal practices
ProductI ovatio
Stro g cultureof performa ce
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THANKS