Hero MotoCorp Ltd

Hum Mein Hain Hero

RULES TO BE FOLLOWED DURING THE PRESENTATION Please turn your mobile off After the introduction, this presentation contains FINANCIAL aspects of Hero MotoCorp Ltd only. Please refrain from asking questions beyond them. Silence=Approval Critical remarks have no negative consequences Please WAIT until the presentation is done with, to ask questions. Have some fun- You may laugh! (with permission of-course)

CONTENTS

Introduction and Overview

Ratio Analysis

Summary and Questions

INTRODUCTION
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two - wheelers, based in India. 1983Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed and incorporated in 1984. Dr. Brijmohan Lall, Chairman, Mr. Pawan Munjal, Managing Director & Chief Executive Officer, Hero MotoCorp Ltd. Hero MotoCorp Ltd., company's new identity, reflects its commitment towards providing world class mobility solutions with renewed focus on expanding company's footprint in the global arena. It is a public company, listed on BSE and NSE

BRAND REALIGNMENT

In 2010, Indian Promoter Group Of Company

Re-aligned Shareholdings Of Company

HIPL and BCIPL

As a result of Hero Investment

private limited (HIPL) Bahadur Chand Investment Private Limited (BCIPL) Hero Cycle Ltd.

Hero Cycles

transferred all its shareholdings to HIPL on 28 May10

these transactions, IPG of Companies now comprises of HIPL and BCIPL owned and controlled by Munjall Family.

BUSINESS INDIA ON THE SEPARATION OF HERO AND HONDA

As divorce parties (Hero and Honda)go, this one too, was a bit over the top, brimming with optimism about the future. But no one badmouthed the erstwhile spouse(Honda). Instead, Honda was fondly remembered. That may be because Hero got a true sweetheart deal; it got to keep the house, the car and the kids.

THE SPLIT..
Hero Honda (1984 2010)

Hero MotoCorp Ltd

Honda

Paid `2,479.33 Crore for Assembly, Manufacture, Selling, Distribution and Exports Licenses, which have been Amortized over a period of 42 months upto 30 June14

Entered into a share transfer agreement on 22 Jan11 . Entire share holding of 26% transferred to Hero, bringing an end to the Joint Venture.

OVERVIEW
A Brief Overview of Hero MotoCorp Ltd, with respect to a few parameters

Fuelled by its landmark sales of over 62,35,205 units in this financial year compared to 54,02,444 units for the last financial.

Net Income from Operations of the Company grew from `19,398 crores to `23,579 crores in 2011-12. 21.55% increase in Operations The Companys Profit after Tax (PAT) increased from `1,928 crores in 2010-11 to `2,378 crores in 23.35% increase in PAT 2011-12.

15.41% growth in Sales

*Data from Annual Report 2011 - 12

YEAR (` Crores) Total Current Assets Total Current Liabilities Net Sales ( FROM P/L Account) Purchases (FROM P/L Account) Gross Profit ( FROM P/L Account) Net Profit (FROM P/L Account) Profit After Tax (PAT-FROM P/L Account) Number of Equity Shares Market Price Per Share(MPS) Average Inventory

Mar-10

Mar-11

Mar-12

2,882.58 4,831.41 15,758.18 10,730.41 3,023.20 2,081.80 2,231.83 199,687,500 2030.8 465.96 129.17 NIL

1,108.55 5,323.36 19,397.93 14,135.17 2,807.14 1,842.11 1,927.90 199,687,500 1586.55 567.31 119.49 768.64

1,540.66 3,622.00 23,579.03 17,365.41 3,962.05 2,163.42 2,378.10 199,687,500 1942.55 644.65 201.45 2183.24

Average Debtors Average Creditors

GROSS PROFIT RATIO

25.00%

20.00%

19.18% 16.80% 14.47%

Gross Profit Ratio : (Gross Profit/Net Sales)*100

15.00%

10.00%

5.00%

0.00%
Mar 10 Mar 11 Gross Profit Ratio Mar 12

The gross profit ratio shows the proportion of profits generated by the sale of products or services, before selling and administrative expenses.

There is a dip in the gross profit in the year 2010-11 due to increase in prices of raw materials, namely, Steel, Aluminium and Nickel.

NET PROFIT RATIO

14.00%

13.21%
12.00%

Net Profit Ratio : (Net Profit/Net Sales)*100

9.50% 9.18%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
Mar 10 Mar 11 Net Profit Ratio Mar 12

It reveals the remaining profit after all costs of production and administration have been deducted from sales, and income taxes recognized.

Even after steady increase in sales, the company saw a fall in net profit in 2011 and 2012 because of establishment of two new plants and introduction of 5 new bikes in the market. Also, new emission laws were implemented in that year, amounting to more indirect expenses.

CURRENT RATIO
0.70 0.60

0.60

0.50

Current Ratio: Current Assets/Current Liabilities

0.43

0.40

0.30

0.20

0.21

0.10

0.00
Mar 10 Mar 11 Current Ratio Mar 12

It signifies the liquidity of an organization. In layman terms, it tells us how much cash or cash equivalents a company has, in order to pay off its immediate Liabilities.

There is a steep fall in the current ratio in 2010-11, because of the drastic increase in the current liabilities incurred due to the infamous split with Honda.

ACID TEST RATIO(QUICK RATIO)

0.40

0.35
0.30 0.25 0.20 0.15 0.10 0.05

0.34

Acid Test Ratio: Quick Assets/Current Liabilities This ratio is similar to that of the Current Ratio. The only difference being, items which are highly liquid in nature are considered as a part of quick assets. Current ratio includes inventories while This does NOT include inventories.

0.03

0.07

0.00
Mar 10 Mar 11 Acid Test Ratio Mar 12

Acid Test ratio should ideally be 1:1. Since Hero Honda was always debt free, the quick ratio was lesser than the industry average to begin with. We see a steep dip in the ratio in 2010-11. This was because of the split of the company with Honda as seen in the current ratio.

INVENTORY TURNOVER RATIO- ITR( IN DAYS)

11.00 10.80 10.60 10.40 10.20 10.00 9.80 9.60

10.79 10.67

ITR: 365*(Average Inventory/ Sales) This Ratio indicates the number of times the inventory is rotated during the relevant accounting period(365 days). This gives the number of days it takes for the stock to exhaust. Also, the number of days it takes for sales to proceed.

9.98

9.40
Mar 10 Mar 11 Inventory Turnover Ratio(Days) Mar 12

After the split with Honda, Continual pressures on margins forced the company and its supply chain partners to find innovative and alternative ways to combat inflation. Attention was given to managing inventories in the system. This resulted in better ITRs.

CREDITORS TURNOVER RATIO- CTR(IN DAYS)

50.00

45.00
40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Mar 10

45.89

CTR: 365*(Average Creditors/ Purchases)

19.85

0.00
Mar 11 Creditors Turnover(Days) Mar 12

This ratio implicates the number of days it would take to pay off the creditors.

Due to the expenses incurred by Hero after separating from Honda, in the name of Assembly, Manufacture, Selling, Distribution and exports licenses, It went from being a debt-free enterprise to a leveraged one.

DEBTORS TURNOVER RATIO-DTR (IN DAYS)

3.50 3.00 2.50

2.99

3.12

DTR: 365*(Average Debtors/ Sales)

2.25
2.00 1.50 1.00 0.50

This ratio implicates the number of days it would take to collect the dues from debtors.
Mar 10 Mar 11 Debtors Turnover(Days) Mar 12

0.00

There is a positive DTR ranging from 2-3 days. This shows that the debtors are paying off and there by the working capital is rotating.

EARNINGS PER SHARE(EPS)- IN rs. `

140.00 120.00

111.77 96.55

119.09

EPS: Profit After Tax/ No. of Equity Shares EPS or earning per share measures the profit available to the equity sh. Holders on a per share basis i.e. how much net profit one share of the company is producing.

100.00

80.00

60.00

40.00

20.00

0.00
Mar 10 Mar 11 Earnings Per Share(EPS) Mar 12

. Here we can see a decrease in the EPS of the co. This was because of fall in profits of the co. Higher the value of this ratio, better will be the share value.

PRICE EARNING RATIO (P/E RATIO)

18.50

18.17
18.00

PE Ratio: Market price per share/ EPS

17.50

17.00

16.50

16.43 16.31

16.00

15.50

15.00
Mar 10 Mar 11 Price Earnings Ratio Mar 12

The P/E ratio looks at the relationship between the stock price and the companys earnings . This ratio measures the amount investor are willing to pay for each Rupee Of earnings.

Higher the P/E ratio, the larger the investors confidence in the firms future. Historically, the average P/E ratio in the market has been around 15-25.

BSE- 52 WEEKS- HIGH & LOW

HIGH

LOW

AS ON DATE BSE (IN rs. `)

2 MAY12
2,279

1 MAR13
1,616

NSE- 52 WEEKS- HIGH & LOW

HIGH

LOW

AS ON DATE NSE (IN rs. `)

2 MAY12
2,279

1 MAR13
1,615

IN A NUTSHELL..

HERO MOTOCORP IS FINANCIALLY STABLE!