MIRA
INFORM REPORT
|
Report Date : |
26.08.2008 |
IDENTIFICATION
DETAILS
|
Name : |
HERO HONDA MOTORS LIMITED |
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Registered Office : |
34, Community Centre Basant Lok, Vasant Vihar, New Delhi, Delhi-110057 |
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Country : |
India |
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Financials (as on) : |
31.03.2007 |
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Date of Incorporation : |
19.01.1984 |
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Com. Reg. No.: |
17354 |
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CIN No.: [Company
Identification No.] |
L35911DL1984PLC017354 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
DELH00028A |
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Legal Form : |
A Public Limited Liability Company. The company’s Shares are listed on
Stock Exchange. |
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Line of Business : |
Manufacture of
motor bikes. |
RATING &
COMMENTS
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MIRA’s Rating : |
Aa |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
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Maximum Credit Limit : |
USD 120000000 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well established and reputed
company having fine track. Available information indicates high financial
responsibility of the company. Trade relations are fair. Fundamentals are
strong and healthy. Payments are usually correct and as per commitments. The company can be considered good for any
normal business dealing at usual trade terms. |
LOCATIONS
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Registered Office/ Factory : |
34, Community Centre Basant Lok, Vasant Vihar, New Delhi,
Delhi-110057, India |
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Tel. No.: |
91-11-26142451 /
26144121 |
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Fax No.: |
91-11-26153913 |
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E-Mail : |
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Website : |
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Factory 1 : |
Dharuhera Plant 69 KM Stone, Delhi-Jaipur
Highway, Dharuhera, District Rewari, Haryana – 121 006, India |
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Tel. No.: |
91-1274-264012-015 |
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Fax No.: |
91-1274-267024 |
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Factory 2 : |
Gurgaon Plant 37 KM Stone,
Delhi-Jaipur Highway, Sector33-34, Gurgaon, Haryana – 121 001, India |
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Tel. No.: |
91-124-2372123-134 |
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Fax No.: |
91-124-2373141-142 |
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Zonal Office : |
Located at:
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Regional Offices: |
NORTH ZONE
SOUTH ZONE
EAST ZONE
WEST ZONE
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DIRECTORS
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Name : |
Mr. Brijmohan
Lall Munjal |
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Designation : |
Chairman |
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Name : |
Mr. Toshiaki Nakagawa |
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Designation : |
Joint Managing Director |
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Name : |
Mr. Pawan Munjal |
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Designation : |
Managing Director
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Name : |
Mr. Yutaka Kudo |
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Designation : |
Whole-time Director (w.e.f. April 01, 2007) |
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Name : |
Mr. Om Prakash Munjal |
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Designation : |
Non Executive Director |
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Name : |
Mr. Sunil Kant Munjal |
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Designation : |
Non-Executive Director |
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Name : |
Mr. Masahiro Takedagawa |
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Designation : |
Non-Executive Director |
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Name : |
Mr. Takashi Nagai |
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Designation : |
Non- Executive Director |
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Name : |
Mr. Satoshi Toshida |
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Designation : |
Non- Executive Director |
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Name : |
Mr. Motohide Sudo |
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Designation : |
Non- Executive Director |
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Name : |
Mr. Satyanand Munjal |
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Designation : |
Non- Executive Director |
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Name : |
Mr. Takao Eguchi |
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Designation : |
Whole-time Director |
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Name : |
Mr. Tastushiro Oyama |
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Designation : |
Non- Executive Director |
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Name : |
Mr. Pradeep Dinodia |
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Designation : |
Non- Executive and Independent Director |
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Name : |
Mr. Ved Prakash Malik |
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Designation : |
Non- Executive and Independent Director |
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Name : |
Mr. Narinder Nath Vohra |
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Designation : |
Non- Executive and independent Director |
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Name : |
Mr. Analjit Singh |
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Designation : |
Non- Executive and Independent Director |
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Name : |
Dr. Vijay Laxman Kelkar |
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Designation : |
Non- Executive and Independent Director |
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Name : |
Ms. Shobhana Bhartia |
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Designation : |
Non- Executive and Independent Director |
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Name : |
Dr. Pritam Singh |
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Designation : |
Non- Executive and Independent Director |
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Name : |
Mr. Sunil Bharti Mittal |
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Designation : |
Non- Executive and Independent Director |
KEY EXECUTIVES
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AUDIT COMMITTEE |
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Name : |
Mr. Pradeep Dinodia |
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Designation : |
Chairman |
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Name : |
Genral (Retired) Ved Prakash Malik |
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Designation : |
Member |
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Name : |
Dr. Pritam Singh |
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Designation : |
Member |
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Name : |
Mr. Narinder Nath Vohra |
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Designation : |
Member |
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REMUNERATION COMMITTEE |
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Name : |
General (Retired) Ved Prakash Malik |
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Designation : |
Chairman |
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Name : |
Mr. Narinder Nath Vohra |
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Designation : |
Member |
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Name : |
Mr. Pradeep Dinodia |
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Designation : |
Member |
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SHAREHOLDERS CRIEVANCE COMMITTEE |
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Name : |
Mr. Narinder Nath Vohra |
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Designation : |
Chairman |
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Name : |
Mr. Pradeep Dinodia |
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Designation : |
Member |
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Name : |
Dr. Pritam Singh |
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Designation : |
Member |
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COMPLIANCE OFFICER |
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Name : |
Mr. Ilam C Kamboj |
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Designation : |
General Manager, Legal and Company Secretary |
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SENIOR MANAGEMENT TEAM |
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Name : |
Mr. Ravi Sud |
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Designation : |
Senior Vice President and CFO |
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Name : |
Mr. N. N. Akhouri |
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Designation : |
Senior Vice President HRM |
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Name : |
Mr. Rajeev Kapoor |
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Designation : |
Vice President and Plant Head (DHR) |
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Name : |
Mr. Anil Dua |
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Designation : |
Vice President Sales ad Marketing |
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Name : |
Dr. Anadi Pande |
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Designation : |
Vice President Corporate Planning and Strategy |
MAJOR SHAREHOLDERS
/ SHAREHOLDING PATTERN
As on 31.03.2007
|
Names of Shareholders |
No. of Shares |
Percentage of
Holding |
|
Shareholding of
Promoter and promoter Group |
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Indian |
4022840 |
2.01 |
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Bodies corporate |
53788840 |
26.94 |
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Individuals (Non
Resident Individuals / Foreign Individuals) |
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Bodies Corporate |
51918750 |
26.00 |
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Public
Shareholding |
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Mutual Funds/ UTI |
1908663 |
0.96 |
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Financial Institutions/ Banks |
787365 |
0.39 |
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Insurance Companies |
11818703 |
5.92 |
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Foreign Institutional Investors |
55430514 |
27.76 |
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Any other (Foreign Banks) |
135734 |
0.07 |
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Non Institutions |
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Bodies Corporate |
2319400 |
1.16 |
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Individual Shareholders holding nominal share capital up to Rs. 0.100
Millions |
15990774 |
8.01 |
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Individual shareholders holding nominal shares capital in excess up to
Rs. 0.100 Million |
1351215 |
0.68 |
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Any other NRI
and OCB |
214702 |
0.11 |
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Total Public Shareholding |
89957070 |
45.05 |
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Grand Total |
199687500 |
100.00 |
BUSINESS DETAILS
|
Line of Business : |
Manufacture of
motor bikes. |
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Products : |
ITC Code: 87112003 |
GENERAL
INFORMATION
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No. of Employees : |
3888 |
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Bankers : |
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Facilities : |
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Banking
Relations : |
Good |
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Auditors : |
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Name : |
A F Ferguson and Company Chartered Accountant |
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Address : |
9, Scindia House, Kasturba Gandhi Marg, New Delhi- 110001, India |
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Memberships : |
Confederation of
Indian Industry |
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Financial Collaborators : |
Honda Motor
Company Limited 1-1, Minami Aoyama, 2 Chome, MNinato- Ku, Tokyo-101-8556, Japan |
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Associates/Subsidiaries : |
·
·
Majestic Auto Limited ·
·
Highway Cycle Industries
Limited ·
·
Hero Financial Services
Limited ·
·
Rama Investments Limited ·
·
Munjal Auto Industries
Limited ·
·
Hero Honda Finlease Limited ·
·
Munjal Brothers (Private)
Limited ·
·
Hero Briggs & Stratton
Auto Private Limited ·
Hero Global Design Private
Limited ·
Brijmohan Lall Associates ·
A.G. Industries Private Limited |
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Joint venture Company: |
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CAPITAL STRUCTURE
As on 31.03.2007
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
250000000 |
Equity Shares |
Rs. 2/- each |
Rs. 500.000 Millions |
|
400000 |
Cumulative Preference |
Rs. 100/- each |
Rs. 40.000 Millions |
|
400000 |
Cumulative redeemable preference shares |
Rs. 100/- each |
Rs. 40.000 Millions |
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Total |
|
Rs. 580.000
Millions |
Issued, Subscribed & Paid-up Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
199687500 |
Equity Shares |
Rs. 2/- each |
Rs. 399.400
Millions |
Note:
Of the above 119812500 (Previous year
119812500) shares had been allotted fully paid bonus shares by capitalization
of general reserve.
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
|
SOURCES OF FUNDS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
399.400 |
399.400 |
399.400 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
24301.200 |
19693.900 |
14534.400 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
24700.600 |
20093.300 |
14933.800 |
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LOAN FUNDS |
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1] Secured Loans |
0.000 |
0.000 |
0.000 |
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2] Unsecured Loans |
1651.700 |
1857.800 |
2017.600 |
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TOTAL BORROWING |
1651.700 |
1857.800 |
2017.600 |
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DEFERRED TAX LIABILITIES |
1295.800 |
1201.000 |
1015.300 |
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TOTAL |
27648.100 |
23152.100 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
13554.500 |
9935.600 |
7153.300 |
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Capital work-in-progress |
0.000 |
0.000 |
0.000 |
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INVESTMENT |
19738.700 |
20618.900 |
20266.500 |
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DEFERREX TAX ASSETS |
13.800 |
13.200 |
6.300 |
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CURRENT ASSETS, LOANS & ADVANCES |
|
|
|
|
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Inventories |
2755.800
|
2265.500 |
2042.600 |
|
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Sundry Debtors |
3352.500
|
1586.600 |
895.500 |
|
|
Cash & Bank Balances |
357.800
|
1587.200 |
176.000 |
|
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Other Current Assets |
36.000
|
35.300 |
35.100 |
|
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Loans & Advances |
2630.600
|
2737.800 |
2396.100 |
|
Total
Current Assets |
9132.700
|
8212.400 |
5545.300 |
|
|
Less : CURRENT
LIABILITIES & PROVISIONS |
|
|
|
|
|
|
Current Liabilities |
10419.200
|
10728.800 |
10157.600 |
|
|
Provisions |
4372.400
|
4899.200 |
4847.100 |
|
Total
Current Liabilities |
14791.600
|
15628.000 |
15004.700 |
|
|
Net Current Assets |
[5658.900]
|
[7415.600] |
[9459.400] |
|
|
|
|
|
|
|
|
MISCELLANEOUS EXPENSES |
0.000 |
0.000 |
0.000 |
|
|
|
|
|
|
|
|
TOTAL |
27648.100 |
23152.100 |
17966.700 |
|
PROFIT & LOSS
ACCOUNT
|
PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
|
Sales Turnover |
98999.600 |
87139.800 |
75626.800 |
|
|
Other Income |
1898.500 |
1562.800 |
0.000 |
|
|
Total Income |
100898.100 |
88702.600 |
75626.800 |
|
|
|
|
|
|
|
|
Profit/(Loss) Before Tax |
12461.000 |
14122.400 |
12172.500 |
|
|
Provision for Taxation |
3882.100 |
4409.000 |
4067.800 |
|
|
Profit/(Loss) After Tax |
8578.900 |
9713.400 |
8104.700 |
|
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Earnings in Foreign Currency : |
|
|
|
|
|
|
FOB Values of Exports |
2635.000 |
2536.100 |
1817.000 |
|
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Imports : |
|
|
. |
|
|
|
Raw Materials |
75.800 |
288.300 |
N.A |
|
|
Stores & Spares |
0.000 |
0.000 |
|
|
|
Capital Goods |
1091.300 |
771.300 |
|
|
|
Others |
1663.600 |
1742.300 |
|
|
Total Imports |
2830.700 |
2801.900 |
|
|
|
|
|
|
|
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Expenditures : |
|
|
|
|
|
|
Manufacturing Expenses |
87269.200 |
73495.300 |
|
|
|
Interest |
[229.900] |
[61.300] |
63454.300 |
|
|
Depreciation & Amortization |
1397.800 |
1146.200 |
|
|
Total Expenditure |
88437.100 |
74580.200 |
6354.300 |
|
SUMMARISED RESULTS
|
PARTICULARS |
|
|
31.03.2008 [Full Year] |
|
Sales Turnover |
|
|
103318.000 |
|
Other Income |
|
|
1854.200 |
|
Total Income |
|
|
10517.220 |
|
Total Expenditure |
|
|
89824.300 |
|
Operating Profit |
|
|
153.790 |
|
Interest |
|
|
[358.100] |
|
Gross Profit |
|
|
15706.000 |
|
Depreciation |
|
|
1603.200 |
|
Tax |
|
|
4412.000 |
|
Reported PAT |
|
|
9678.800 |
|
Dividend (%) |
|
|
9500.000 |
QUARTERLY
RESULTS
|
PARTICULARS |
|
|
30.06.2008 1st
Quarter |
|
Sales Turnover |
|
|
28435.300 |
|
Other Income |
|
|
467.200 |
|
Total Income |
|
|
28902.500 |
|
Total Expenditure |
|
|
25024.900 |
|
Operating Profit |
|
|
3877.600 |
|
Interest |
|
|
3877.600 |
|
Gross Profit |
|
|
[49.700] |
|
Depreciation |
|
|
3927.300 |
|
Tax |
|
|
422.000 |
|
Reported PAT |
|
|
756.300 |
|
Dividend (%) |
|
|
2728.700 |
KEY RATIOS
|
PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
Debt Equity Ratio |
0.08 |
0.11 |
0.14 |
|
Long Term Debt
Equity Ratio |
0.08 |
0.11 |
0.14 |
|
Current Ratio |
0.53 |
0.42 |
0.36 |
|
TURNOVER RATIOS |
|
|
|
|
Fixed Assets |
7.05 |
7.83 |
8.51 |
|
Inventory |
45.97 |
46.82 |
43.81 |
|
Debtors |
46.74 |
81.27 |
128.94 |
|
Interest Cover
Ratio |
774.98 |
484.64 |
631.71 |
|
Operating Profit
Margin (%) |
12.02 |
15.17 |
15.22 |
|
Profit Before
Interest and Tax Margin (%) |
10.81 |
14.03 |
14.18 |
|
Cash Profit
Margin (%) |
8.64 |
10.77 |
10.47 |
|
Adjusted Net
Profit Margin (%) |
7.43 |
9.63 |
9.43 |
|
Return on Capital
Employed (%) |
51.66 |
72.75 |
81.04 |
|
Return on Net
Worth (%) |
38.30 |
55.46 |
61.58 |
LOCAL AGENCY
FURTHER INFORMATION
BUSINESS
PERFORMANCE
The
Company achieved an impressive sales of 33,36,756 units this year registering a
growth of 11.2 per cent compared to 30,00,751 units in the previous fiscal The
Company retains the coveted position of being the World's No 1 two-wheeler
company in unit sales for six years in a row. The Company maintained its market
leadership position with more than 41 per cent share in the two-wheeler
industry.
At the financial end, total income (net of excise duty) of the Company grew by
14 per cent from Rs 88700.000 Millions in 2005-06 to Rs. 100900.000 Millions in
2006-07. The Company posted Profit After Tax (PAT) of Rs. 8580.000 Millions in
2006-07 compared to Rs. 9710.000 Millions in 2005-06.
During the year, the Company launched eight new models (including
variants) targeting all the segments. These included CBZ X treme, new Karizma,
Glamour Fl, Glamour with alloy wheels, CD Deluxe, CD Dawn, Passion Plus Limited
Edition and the new Achiever with Alloy Wheels
A detailed discussion on the business performance and future outlook is
provided in the chapter on Management Discussion and Analysis (MDA)
DIVIDEND
They believe that no manufacturing Company in Indian Corporate has a better
dividend payout record in recent years They have recommended a Dividend of 850
per cent (Rs 17) per equity share of Rs 2 aggregating to Rs 3394.700 Millions
(exclusive of corporate dividend tax) for the approval for the financial year
ended March 31, 2007 The dividend, if approved, will be paid to the eligible
members well within the stipulated period
Their dividend policy is in line with the strong belief that if funds are not
required for capital investments, they should be optimally distributed to
shareholders.
TRANSFER TO GENERAL RESERVE
A sum of Rs.900.000 Millions have been transferred to the General Reserve of
the Company. This reaffirms the inherent financial strength of the
Company.
CONTINGENT
LIABILITIES:
|
Particulars |
31.03.2007 (Rs.
In Millions) |
|
In respect of –tax cases pending various stages of appeal with the
authorities |
202.400 |
The above matters are subject to legal proceedings in the ordinary
course of business. The legal proceeding when ultimately concluded will not, in
the opinion of management, have a material effect on the result of operation or
the financial position of the Company.
As the company’s business activity falls within a single primary
business segment viz. “Two wheelers and its parts” and is single geographical
segments, the disclosure requirements of According Standard (AS-17) “Segment
Reporting” issued by the institute of Chartered Accountants of India are not
applicable.
MANAGEMENT
DISCUSSION AND ANALYSIS
India appears to have acquired a ravenous appetite for growth that shows
no signs of abating. A GDP growth of 9.4 percent in 2006-07 makes it the second
successive year of 9 per cent plus growth. The country's GDP crossed the
billion-dollar mark for the first time ever in April 2007, and India now finds
itself in an elite club of trillion dollar nations
There is little doubt that the changing savings and investment profile is
powering India's growth engine. The savings rate shot up to 32.4 per cent of
GDP during the year in review This is at par with some of the top ASEAN
nations.
Two forces have been infiluencing the portfolio behaviour of Indian households.
First, there's the ongoing construction boom being driven by residential
buildings financed through housing loans. While the construction boom has
helped inflate household savings in physical form, maturing financial markets
have resulted in higher financial savings.
The investment scenario also looks optimistic. The difference between gross
fixed capital formation and changes in stocks has narrowed. This indicates a
definite appetite for fresh investments and for creating additional capacity
through fixed capital formation As a result, the investment level touched 33.8
percent of GDP during the year.
Manufacturing posted a growth of over 12 percent Capacity expansion was fueled
by a boom in capital goods, electronics and automobile sectors, emphasising the
consumer boom.
Of course, with more than 55 per cent of India's GDP the services sector
continues to be at the forefront of India's performance. Service sector in
double digits during the year. Besides the IT and ITES sector, growth was powered
by the rapid expansion in the trade, financing, real estate, hotels, logistics
and telecom industries
Though agricultural growth has been less than spectacular, rainfall has been
near normal for the last four years, allowing non-agricultural sectors to
flourish unimpeded on the base of sufficient demand for rural India.
There is little doubt that India's growth is demand-driven. The impetus is
being provided by an expanding consumer base, the increased integration with
the global economy, the emergence of competitive business entities and the
surge in domestic and foreign investments.
With 30-40 million persons joining the middle class each year, demographics has
emerged as a source of competitive advantage. Approximately 50 per cent of India
is under 25, and it will remain this way for some time What this means is that
a higher percentage of people will be in the working age till the
mid-twenty-first century- which is when India is projected to take over the US
as the second largest economy of the world
Urbanisation is also becoming increasingly relevant in the growth story Cities
like Pune, Chandigarh, Kolkata, Indore, Ahmedabad, Cochin, Chennai, Hyderabad,
Secuderabad, Jaipur, Rajkot, and Nagpur are gaining attractiveness primarily due
to their lower operating costs relative to a Tier I city.
Based on current trends, the western and southern parts of India, as well as
large pockets in the north, are likely to be largely middle class (by local
definition) and urban by 2020 The pockets of modernity - mainly wealthy cities,
their hinterlands, and some prosperous rural areas - will continue to grow but
will be complemented by new growth centers, largely transforming about half of
India's states into middle income economies.
With Tier II cities as alternative magnets of growth, no obvious concerns on
demand slowdown are apparent over the medium to long term, especially for Hero
Honda.
To be sure, there were dampeners during the year as well. Inflation rose on
demand and supply side pressures. To prevent an overheating in the economy and
yo reduce the growth in credit, the Reserve Bank periodically forced banks to
raise interest rates on several occasions during 2006-07.
However, it is unlikely that inflation and high interest rates will drag
down the economy, and has RBI forecasted 8.5-9 per cent GDP growth for 2007-08.
Going forward, the long term challenges remain significant. From a corporate
perspective, there are other serious concerns; Indirect tax liability on
industry is very high, impacting competitiveness; while labour laws are
restricting employment growth in the organized sector.
At a broader level, huge resources are required for public investments in basic
infrastructure, particularly power. Human capacity building, or education and
skill development, is a major hurdle and work force dependency on agriculture
and agricultural stagnation are major concerns.
There are limits to the ability of the agriculture sector in providing gainful
employment to the over 600 million people dependent on it. This means that
industrial growth, particularly that of agroprocessing, needs to be maintained
at double-digit rates. Yet the sustainability of high industrial growth will
depend on the availability of infrastructure, which appears to be a problem in
the short term
The Union Budget for 2007-08 has sought to address some of these shortcoming
Allocations under the Bharat Nirman project have been upped by 32 per cent;
education by 34 per cent, health and family welfare by 22 per cent. The impact
of these initiatives is expected to tie seen by the end of this decade.
The base effect finally seems to be catching up with the two wheeler
industry in India. After growing at 16 per cent in the previous year, the pace
of growth slipped to 12 per cent in 2006-07. Total volumes were pegged at a
little less than eight and a half million, an incremental addition of nearly
1.000 million
On the bright side, however, the motorcycle industry continues to be a dominant
driver of this growth, by notching volumes of 7.09 million. The segment
accounted for 83.7 per cent of two wheeler sales - up from 81.9 per cent in the
previous year
To understand the pace of growth in this segment, consider these facts first,
in 1999-2000 motorcycles accounted for just 48% of two wheelers sold, in India
Similarly, In 2005, the National Council of Applied Economic Research had
projected that motorcycle sales would cross the 8.000 million mark by 2010.
However, at the current pace of growth, this target is expected to be met
during the current year itself
Given the emerging demographic profile in a country, where young salary earners
are Increasingly making up the workforce, the growth of motorcycles has come at
the cost of scooters whose sales dipped by 1 per cent at 9,82,384 units
Scooters now make up 11.6 per cent of the two wheeler segment. Surprisingly,
the moped category bucked this declining trend and grew at 5 per cent during
the year
During the year, the three price points in the motorcycle segment continued
to grow at different paces.
After maintaining at a scorching pace of 40 per cent in the previous year,
sales of entry level bikes grew at just 5 per cent during the year in review,
ending with volumes of a little over 2.700 million. The modest growth meant
that the share of entry level bikes in the motorcycle segment slipped to 38.2
per cent, from 41 per cent.
During 2005-06, the entry bike category was the star growth performer During
the year, it was the turn of deluxe bikes, which is the cash cow of Hero Honda
by a long distance Sales of deluxe bikes grew by 20 per cent, and volumes were
pegged at close to 3.600 million units, or 50.6 per cent of the motorcycle
market. During the previous year, the share of deluxe bikes in the overall motorcycle
mix had gone down to 48.7 percent,
The recovery in market share and the 20 per cent growth in a high volume market
are clear indications of robust potential and scope for category growth.
In 2001-02, there were 61 million Indians belonging to families that earned
more than Rs 200,000 a year; by last year (2005-06), that number had crossed
100 million. In 2009-10, this number is projected to increase to 173 million It
is safe to assume that the bulk of the buyers from these segments will opt for
either entry or deluxe segment motorcycle offerings.
The premium segment increased its share in the overall motorcycle mix
from 10.3 per cent to 11.3 per cent, and improved its pace of growth at 25 per
cent from 18 per cent last year. Given the growth in this segment, there is no
doubt that in the long term, this category will play a determining role in the
overall growth of the motorcycle segment
However, in the short to medium term, most of the action is expected to take
place in the deluxe and entry segments, given the current income profiles of
Indian households Another uncertain variable is the possible entry of low-cost,
Rs. 0.100 Millions cars by 2008, as is being envisaged Pricing at these levels
could pit the premium segment directly against four wheelers.
RESULTS AND
FINANCIAL ANALYSIS
Sales:
Annual
sales volumes grew at 11.2 per cent. Hero Honda clocked sales volume of
3,336,756 units in 2006-07 compared to 3,000,751 units in 2005-06, the highest
ever. In value terms total sales (net of excise duty) increased by 13.6 per
cent to Rs. 99000.000 Millions from Rs.87140.000 Millions in 2005-06.
Profitability:
Stiff competition, a sharp Increase in input costs because of hardening
metal prices and higher royalty payout reduced operating margins As a result,
earnings before interest, depreciation and taxes (EBIDTA) margins decreased
from 15.7 per cent in 2005-06 to 11.8 per cent in 2006-07 Operating profit (PBT
before other income) declined by 15.9 per cent from Rs.12560.000 Millions in 200506
to Rs.10560.000 Millions In 2006-07.
Other Income:
Other income Increased by 21.5 per cent from Rs 1560.000 Millions in
200506 to 11900.000 Millions in 2006-07.
Cash Flows:
Despite the double digit growth in sales turnover, pressure on margins
continued because of an increase In metal prices. This caused a decline in
operating profit margins, and in turn led to a decline In cash flows during the
year The net cash flow from operations were pegged at Rs. 6250.000 Millions
compared to Rs. 9360.000 Millions in the previous year
The Company also spent Rs 2730.000 Millions in investing activities mainly on
account of purchase of fixed assets worth Rs. 5190.000 Millions to further
enhance production capacities Financing activities accounted for an outflow of
Rs.4740.000 Millions mainly on account of liberal dividend outflows;
Debt Structure:
Hero Honda has been a debt-free company for the last 6 years. The unsecured
loan of Rs.1650.000 Millions from the state government of Haryana on account of
sales tax deferment, is interest free and has no holding costs. Net interest
payment by the Company has been negative during the last few years,
RISKS AND
CONCERNS:
Slowdown: Sales in the entry segment
slowed during the year. and the Company's share in this segment dropped from 32
per cent to 27 percent.
Competition: The fight for market
share has become more intense. The push to gain market share at all costs,
especially through discounts and interest-free schemes has started affecting
bottomlines across the industry
Input costs: Prices of
critical inputs such as steel, aluminium and nickel continue to remain high,
and affected profitability during the year. Input prices continue to remain a
cause for concern
Interest rates: Banks raised
interest rates several times during the year, and acquisition costs of a
twowheeler went up as a result: Since more than 50 per cent of sales are
financed through loans, higher interest rates are likely to slow down overall
sales to some extent.
OUTLOOK
After a decade of scorching growth, it appears that the base effect
might be settling in the two wheeler industry. While absolute growth -
incremental sales of around 1 million - is still substantial, maintaining
double digit growth in the coming year might be difficult for some
players
India's inherent growth story however remains. Hero Honda believes that two
wheeler sales will increasingly be driven by growth in India's Tier II cities and
towns in the coming years. Nevertheless, it might take a few years for these
regions to generate volumes similar to those in metropolitan cities.
Interest rates and rising inflation was a cause for concern during the year.
However, the Company has reason to believe that monetary and fiscal measures
effected by RBI and the government, should have a cooling effect on interest
rates and inflation, going forward.
Margins were under pressure throughout the year because of high input costs.
Unless these costs stabilise at a lower level, profitability will remain under
pressure
SEGMENT
PERFORMANCE
Hero Honda in 2006-07 accounted for 39 4 per cent of the Indian two
wheeler market The Company maintained its grip in the motorcycle segment with a
market share of 45.7 percent.
In the entry segment, Hero Honda upgraded the existing CD Dawn and CD
Deluxe to give its customers more value for money. The new CD Deluxe sports a
stylish visor a nontemporary trapezoidal multi-reflector headlight and larger
fuel-tank with knee grip along with other aesthetic features.
Earlier, market share in the entry segment had dipped to 16 per cent but
the new CD Dawn and CD Deluxe helped Hero Honda recover lost ground
dramatically The Company ended March 2007 with a 33.4 per cent share in the
entry segment.
Hero Honda continued to stride the deluxe segment like a colossus with a 67 per
cent share for the entire financial year During the year, sales rose by 16 per cent
to 24,03,065 units, and the flagship Splendor family accounted for sales of
more than 1.500 million.
Hero Honda capped its performance in the premium segment with the CBZ X -treme
From a segment share of 1.2 per cent in October 06, CBZ commanded a segment
share of more than 20 per cent by the end of March 2007 The sparkling sales of
this bike came about even as the rest of the industry went into a tailspin in
the last quarter of 2006-07.
In January 2006, Hero Honda made its debut in the scooter segment with a
100 cc offering called Pleasure aimed at women commuters and homemakers. Apart
from regular dealerships, this product is also being sold through' Just 4 Her'
exclusive women showrooms, and is clearly having an impact on target customers.
During the year, Hero Honda sold close to 1,00,000 scooters. Between January
and March 2006, around 12,000 units of scooters were sold; a year later, close
to 20,000 scooters was sold in the same period, indicating a growth
momentum
The Company's performance across various segments during the year sends out
some important lessons. First, despite the high base, the deluxe segment
continues to be the prime driver of the motorcycle industry in India, and Hero
Honda's strong Offerings in this segment give it a virtually unassailable
position going forward.
Second, the performance of models like CD Dawn, CD Deluxe and CBZ X-treme have
proved that it is possible to regain market share with fundamentally strong
products that are carefully positioned, and are backed by strong marketing
support.
Sustaining market share will not be an easy task Yet the company is confident
about consolidating its position in the market with thoughtful planning and
smart execution.
Export performance:
During the year, Hero Honda increased exports by 5 per cent compared to
the previous year. The new models, CD Dawn, Glamour and CBZ X - treme have been
launched successfully in each of the present export markets, narnely Sri Lanka,
Bangladesh and Nepal, and the initial response has been extremely
positive
Meanwhile, Hero Honda, which sells its bikes in these countries through Honda
approved distributors, is consolidating its presence. In each of these
countries, training centres have been made operational and the workshop in Nepal
has been standardises
CUSTOMER
FOCUS
Some of the targeted customer programs are instinctive, but most are extremely
well thought out, and executed only after sifting through considerable amounts
of market research and feedback.
When it comes to making two wheelers, Hero Honda has always believed in 'safety
first' It has introduced Ride Safe, a 'first of Its kind' school for
two-wheeler training. This school helps learners acquire better riding skills
and awareness about vehicle maintenance, road safety and their
importance.
The course comprises of lessons on riding and road safety, on-road training,
tips on vehicle maintenance and guidance for acquiring driving licenses.
As a policy, all new dealerships will make their debut as 4S (sales, spares,
service and safety) dealers These dealerships will be conducting 'Ride Safe'
programs in their respective localities to promote safe riding.
Hero Honda launched a 0 per cent retail financing/exchange mela in north
and west zone in October and November 2006. A festive 'Mobike pe Mobile' offer
was also made during the same period. This hugely successful program netted
sales of over 500,000 in a single month in October, an unprecedented event in
global automobile history.
To gain deeper insights from customers about the Company's products a dealer
engagement/satisfaction and a product satisfaction survey was carried out
during the year. A price sensitivity study was also done to assess price
elasticities of various models. Customer feedback studies were also conducted
on new product features such as disc brakes, self start and alloy wheels.
The Hero Honda Passport Program where members are eligible for discounts on
purchase of spare parts, accessories and services - continues to grow
from strength to strength, and now has more than 3 million members Pan
India service camps for Passport members - Shubh Laabh Utsavs -were also held
during the year, and direct contact with customers was established via
SMS.
During the year, Hero Honda SURE certified pre-owned two wheeler program,
rolled out across India SURE Outlets facilitate buying, selling and exchange of
pre-owned Hero Honda two wheelers. Each refurbished two wheeler is certified
O.K. after a stringent 110 point check The refurbishment is done as per the
Hero Honda Refurbishment Quality Standards using only genuine Hero Honda
parts
Awards:
Several awards and recognitions were bestowed upon the Company during the
year. The prominent ones are:
* The NDTV Profit Car India and
Bike India Awards 2007 in the following category:
- Overall 'Bike of the Year' - CBZ X - treme
- 'Bike of the Year' - CBZ X - Creme (up to 150 cc category)
- 'Bike Technology of the Year' Glamour PGM FI
* 'Auto Tech of the
Year' - Glamour PGM FI by Overdrive Magazine
* 'Bike of the Year' - CBZ X - treme by Overdrive Magazine
* 'Bike of the Year' - CBZ X-treme by B S Motoring Magazine
* Adjudged 7th Top Indian Company by Wall Street Journal Asia (Top Indian
Two Wheeler Company).
* One of the 8 Indian Companies to enter the Forbes Top 200 list of
world's most reputed Companies.
* Top Indian Company in the automobile - two wheeler sector by Dun and
Bradstreet -American Express Corporate Awards 2006.
* No. 1 in automobile industry by TNS Corporate Social Responsibility
Award.
* Hero Honda Splendor - India's most preferred two wheeler brand by CNBC
Awaaz Consumer Awards 2006.
* Best in its class awards for each category by TNS Total Customer
Satisfaction Awards 2006;
- Splendor Plus (Executive)
- CD Deluxe (Entry)
- Pleasure (Gearless Scooters)
Top two models in two wheeler category - Splendor and Passion by ET Brand
Equity Survey 2006.
MANUFACTURING
During the year, Hero Honda completed its capacity expansion at its Dharuhera
plant This will take Company's total Installed capacity to 3.9 million units a
year The expansion at the two plants (capacity expansion at the Gurgaon plant
was completed in 2005-06) should take care of Hero Honda's market requirements
in the short term.
For the medium term, the Company is in the process of setting up a state-of-the
art new manufacturing facility at Haridwar in the state of Uttrakhand. A
suitable ancillary park is also being set up in close proximity to the new
plant.
Tier II and III suppliers are also in the process of setting up units in the
region, to ensure a fully integrated supply chain.
In a competitive market where quality is a crucial differentiate[, Hero Honda
has placed considerable emphasis on efficiency, cost and productivity During
the year, the Company made investments to augment a number of its process
capabilities
Direct online networks with vendors are now in place to ensure seamless
flow of parts from vendor units to the factories. The machine shop and welding
facilities have been automated, and the paint shops have been revamped. Each of
these upgrades will significantly boost the Company's production and process
capabilities.
The efforts are, in fact, already visible and manufacturing costs as a
proportion of total costs came down from 1.74 per cent to 1.67 per cent
Creditably, these costs have been pruned despite erratic electricity supply and
repeated hikes in the tariffs during the year.
VENDOR MANAGEMENT
Vendor management is critical to Hero Honda, as nearly 73 per cent of the
production is currently made up of material cost. A national network of 256
vendors - Including 36 ancillaries - forms the backbone of the plant
operations.
To improve plant efficiencies and inventory turns, Hero Honda has extended
'Just in Time' (JIT) beyond the shop floor. Vendors are also making critical
investments in quality and capacity in collaboration with us For example, the
online vendor connectivity program has made rapid progress Two years ago, the
Company had only 46 vendors connected online to the factories, and there are
135 As a result, Hero Honda is able to manage with 2 hour inventories for 40
per cent of its components In all, HHML does not have to keep more than a day's
inventories for the balance These inventory levels are among the best in the
Indian industry, and the Company's efficient materials management system has
helped it cope in an extremely difficult market.
To rationalise the supply chain further, the company is now switching to system
purchases and also looking at global procurement It is exploring the
possibility of sourcing from nearby countries like Thailand - with which India
has a free trade agreement
DISTRIBUTION NETWORK
The Company has a conscious strategy of penetrating new markets and
unrepresented territories through its distribution network, dealers, authorised
representatives, stockists and service and spares points (SSPs). In March 2001,
the Company had 826 such sales and service points in India By March 2007, this
number went up to over 3000 All the four marketing zones of Hero Honda showed
an increase in new dealerships and SSPs during the year in review.
During the year, the Company added 36 customer touch points in east India, 53
touch points in north India, 36 touch points in south India and 61 touch points
in west India.
The increased penetration in east and north east India is particularly
heartening The Company added eight new customer touch points each in Assam and
Orissa, and 11 in West Bengal Hero Honda also increased its reach into India's
interiors, especially in states like Madhya Pradesh, where 15 new customer
touch points were added.
The company is in trade terms with :-
·
Brijmohan Lall Associates
·
A. G. Industries Private
Limited
·
Hero Corporate Services Limited
·
Highway Cycle Industries
Limited
·
Honda Trading Corporation
·
M and M Auto Industries Limited
·
Majestic Auto Limited
·
Munjal Auto Components
·
Munjal Showa Limited
·
Omax Autos Limited
·
Rockman Cycle Industries
Limited
·
Sunbeam Auto Limited
·
Sunbeam Steels Limited
·
Unitech Machines Limited
·
Munjal Auto Industries Limited
Fixed Assets:
- Freehold Land
- Leasehold Land
- Buildings
- Plant and Machinery
- Furniture, Fixtures and Office Equipments
- Vehicles
- Computer and data Processing Machines
- Model Fee
AS PER WEBSITE
Profile:
The joint venture between India's Hero Group and Honda Motor Company,
Japan has not only created the world's single largest two wheeler company but
also one of the most successful joint ventures worldwide.
During the 80s, Hero Honda became the first company in India to prove
that it was possible to drive a vehicle without polluting the roads. The
company introduced new generation motorcycles that set industry benchmarks for
fuel thrift and low emission. A legendary 'Fill it - Shut it - Forget it' campaign captured the
imagination of commuters across India, and Hero Honda sold millions of bikes
purely on the commitment of increased mileage.
Over 20 million Hero Honda two wheelers tread Indian roads today. These
are almost as many as the number of people in Finland, Ireland and Sweden put
together!
Hero Honda has consistently grown at double digits since inception; and
today, every second motorcycle sold in the country is a Hero Honda. Every 30
seconds, someone in India buys Hero Honda's top -selling motorcycle – Splendor.
This festive season, the company sold half a million two wheelers in a single
month—a feat unparalleled in global automotive history.
Hero Honda bikes currently roll out from its three globally benchmarked
manufacturing facilities. Two of these are based at Dharuhera and Gurgaon in
Haryana and the third state of the art manufacturing facility was inaugurated
at Haridwar, Uttrakhand in April this year. These plants together are capable
of producing out 4.4 million units per year.
Hero Honda's extensive sales and service network now spans over 3000
customer touch points. These comprise a mix of dealerships, service and spare
points, spare parts stockiest and authorized representatives of dealers located
across different geographies.
Hero Honda values its relationship with customers. Its unique CRM
initiative - Hero Honda Passport Program, one of the largest programs of this
kind in the world, has over 3 million members on its roster. The program has
not only helped Hero Honda understand its customers and deliver value at
different price points, but has also created a loyal community of brand
ambassadors.
Having reached an unassailable pole position in the Indian two wheeler
market, Hero Honda is constantly working towards consolidating its position in
the market place. The company believes that changing demographic profile of
India, increasing urbanization and the empowerment of rural India will add
millions of new families to the economic mainstream. This would provide the
growth ballast that would sustain Hero Honda in the years to come. As Brijmohan
Lall Munjal, the Chairman, Hero Honda Motors succinctly points out, "They pioneered India's motorcycle
industry, and it's the responsibility now to take the industry to the next
level. We'll do all it takes to reach there.''
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 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.
MILSTONES
|
YEAR |
EVENTS |
|
1983 |
Joint Collaboration Agreement with Honda Motor Co. Limited Japan signed |
|
1984 |
Hero Honda Motors Limited incorporated |
|
1985 |
First motorcycle "CD 100" rolled out |
|
1987 |
100,000th motorcycle produced |
|
1989 |
New motorcycle model - "Sleek" introduced |
|
1991 |
New motorcycle model - "CD 100 SS" introduced |
|
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 |
|
1997 |
New motorcycle model - "Street" introduced |
|
1998 |
2,000,000th motorcycle produced |
|
1999 |
New motorcycle model - "CBZ" Environment Management System of Dharuhera Plant certified with ISO-14001
by DNV Holland
|
|
2000 |
4,000,000th motorcycle produced Environment Management System of Gurgaon Plant certified ISO-14001 by
DNV Holland Splendor declared 'World No. 1' - largest selling single two-wheeler
model "Hero Honda Passport Programme" - CRM Programme launched |
|
2001 |
New motorcycle model - "Passion" introduced One million production in one single year New motorcycle model - "Joy" introduced ,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 - "Passion 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 New motorcycle model - "CBZ*" introduced Joint 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 |
CMT REPORT
(Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts, India Prisons Service,
Interpol, etc.
1] INFORMATION ON
DESIGNATED PARTY
No exist designating subject or any of its beneficial owners, controlling
shareholders or senior officers as terrorist or terrorist organization or whom
notice had been received that all financial transactions involving their assets
have been blocked or convicted, found guilty or against whom a judgement or
order had been entered in a proceedings for violating money-laundering,
anti-corruption or bribery or international economic or anti-terrorism sanction
laws or whose assets were seized, blocked, frozen or ordered forfeited for
violation of money laundering or international anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper payments
to government officials for engaging in prohibited transactions or with
designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No
available information exist that suggest that subject or any of its principals
have been formally charged or convicted by a competent governmental authority
for any financial crime or under any formal investigation by a competent
government authority for any violation of anti-corruption laws or international
anti-money laundering laws or standard.
8] Affiliation with
Government :
No record exists
to suggest that any director or indirect owners, controlling shareholders,
director, officer or employee of the company is a government official or a
family member or close business associate of a Government official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE
RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.44.07 |
|
UK Pound |
1 |
Rs.81.26 |
|
Euro |
1 |
Rs.64.71 |
SCORE & RATING
EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
8 |
|
PAID-UP CAPITAL |
1~10 |
8 |
|
OPERATING SCALE |
1~10 |
8 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
8 |
|
--PROFITABILIRY |
1~10 |
8 |
|
--LIQUIDITY |
1~10 |
8 |
|
--LEVERAGE |
1~10 |
8 |
|
--RESERVES |
1~10 |
8 |
|
--CREDIT LINES |
1~10 |
8 |
|
--MARGINS |
-5~5 |
-- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
72 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this report.
The assessed factors and their relative weights (as indicated through %) are as
follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Unfavourable & favourable factors carry similar weight in credit
consideration. Capability to overcome financial difficulties seems
comparatively below average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
|