A PROJECT REPORT ON COMPARITIVE FINANCIAL STUDY OF TOP THREE TWO WHEELER COMPANIES

FOR HEROHONDA, BAJAJAUTO, TVSMOTOR. SUBMITTED TO TILAK MAHARASHTRA UNIVERSITY IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE MASTER OF BUSINESS ADMINISTRATION (MBA)

Submitted By: IRFANHUSEN BHORANIA (Batch 2008-10)

Guided By: Prof.R.GANESHAN

MAHARASHTRA COSMOPOLITAN EDUCATION SOCIETYS PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE CAMP PUNE-411001

CERTIFICATE

This is certify that BHORANIA IRFANHUSEN student of PAI international centre for management excellence, Maharashtra Cosmopolitan Education society, Pune has completed his field work report on the topic of COMPARATIVE FINANCIAL STUDY OF TOP THREE TWO WHEELER COMPANIES and has submitted the field work report in partial fulfillment of MBA of the college for the academic year 2008-2010.

He has worked under our guidance and direction. The said report is based on bonafide information.

Project guide name

Prof. R Ganesan

Designation

Director

PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE Maharashtra Cosmopolitan Education Society

DECLARATION

I hereby declare that the project titled COMPARATIVE FINANCIAL STUDY OF TOP THREE TWO WHEELER COMPANIES is an original piece of research work carried out by me under the guidance and supervision of Prof.R.GANESHAN. The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfilment of the requirement of MASTER OF BUSINESS ADMINISTRATION (MBA).

Place: Date:

Signature: IRFAN HUSEN BHORANIA

ACKNOWLEDGEMENT

I am very grateful to my project-guide prof. Mr. R. Ganesan for encouraging me to take up a project on COMPARATIVE FINANCIAL STUDIES OF TOP THREE TWO WHEELER COMPANIES. It was a very enlightening project. It gave me a practical understanding about the subject. The guidance that was provided from time to time helped me to keep track record of the project in proper order

I am heartily thankful to Mr. Riesa for his kind and valuable support for providing me detailed information regarding my project and to extend his cooperation. And also thankful to all faculty members for their kind support.

My sincere thanks to somiya madam and all the other faculty members, (Internal guide-PICME, PUNE) for guiding me throughout the, project.

Last but not the least; I would like to express my sincere gratitude to all the faculty members who have taught me in my entire MBA curriculum and to our Director Prof. R. Ganesan who has always been a source of guidance, inspiration and motivation.

Irfanhusen Bhorania

EXECUTIVE SUMMARY

I had undertaken a project titled comparative financial study of top three two wheeler companies

This project work consists of the analytical and different financial study of two wheeler companies.

In my project, I have shown the comparative financial study of hero Honda motors limited, Bajaj auto limited, TVs motors limited. This project highlights on the comparative financial study, for which company is best for investment, which companys performance is good in a various business activity.

The project studied with help of investors and government, because comparative study shows historical performance and current financial condition of various companies.

In my project, I have use ratios, because ratio analysis is effective tool for comparative financial study of various companies.

CONTENTS

Sr no

CHAPTERS

PAGE NO

Introduction

Companies profile

(i)

hero Honda motors limited

(ii)

Bajaj auto limited

(iii)

TVs motors limited

Balansheets

17

Ratio analysis

18

Object

37

Important

39

Advantages &limitation

41

Conclusion

43

Bibliography

44

INTRODUCTION

India is the second largest manufacturer and producer of two-wheelers in the world. It stands next only to Japan and China in terms of the number of two-wheelers produced and domestic sales respectively. This distinction was achieved due to variety of reasons like restrictive policy followed by the Government of India towards the passenger car industry, rising demand for personal transport, inefficiency in the public transportation system etc. The Indian two-wheeler industry made a small beginning in the early 50s when Automobile Products of India (API) started manufacturing scooters in the country. Until 1958, API and Enfield were the sole producers. In 1948, Bajaj Auto began trading in imported Vespa scooters and three-wheelers. Finally, in 1960, it set up a shop to manufacture them in technical collaboration with Piaggio of Italy. The agreement expired in 1971. In the initial stages, the scooter segment was dominated by API; it was later overtaken by Bajaj Auto. Although various government and private enterprises entered the fray for scooters, the only new player that has lasted till today is LML. Under the regulated regime, foreign companies were not allowed to operate in India. It was a complete seller market with the waiting period for getting a scooter from Bajaj Auto being as high as 12 years. The motorcycles segment was no different, with only three manufacturers viz Enfield, Ideal Jawa and Escorts. While Enfield bullet was a four-stroke bike, Jawa and the Rajdoot were two-stroke bikes. 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 joint 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 two-stroke and four-stroke engine motorcycles respectively. These two players 7

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. The industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990.

THE TWO WHEELER IN INDIA:

The two-wheeler industry in India has grown rapidly in the country since the announcement of the process of liberalization in 1991 by the then finance minister Dr. Manmohan Singh, now Prime Minister of India. Previously, there were only a handful of two-wheeler models available in the country. Currently, India is the second largest producer of two-wheelers in the world. It stands next only to China and Japan in terms of the number of two-wheelers produced and the sales of two-wheelers respectively. In the year 2005-2006, the annual production of two-wheelers in India stood at around 7600801 units. 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. Bajaj auto began trading in imported Vespa Scooters in 1948. Meanwhile Automobile Products of India (API) commenced production of scooters in the country in the early 50s. Until 1958, API and Enfield were the only producers of two-wheelers in India. However, Bajaj signed a technical collaboration in 1960 with Piaggio of Italy to produce Bajaj Scooters. This deal expired in 1971. The condition of motorcycle manufacturers was no different. Until the mid 80s, there were only three major motorcycle manufacturers in India namely Rajdoot, Escorts, and Enfield. The twowheeler market was opened to foreign manufacturers in the mid 80s. The industry, which had seen a smooth ride before, faced fierce foreign competition. Motorcycle companies like the Yamaha, Honda, and Kawasaki, set up shop in India in collaboration with various Indian two-wheeler companies. Companies like Escorts, Rajdoot and faced immense competition from smaller 100 cc Japanese technology motorbikes. Bikes manufactured by Hero Honda, the only company manufacturing four-stroke bikes at that time, gained massive popularity. In the mid 80s, Kinetic introduced a variomatic gearless scooter in collaboration with Honda. This scooter became instantly popular with the younger generation, especially people who found it difficult to use geared scooters. The introduction of scooterettes created another segment for people such as women and teenagers who could not get used to driving either motorcycles or gearless scooters. Many companies such as Kinetc, TVS, and Hero also started manufacturing mopeds that proved immensely popular with people who wanted a simple riding machine. The change in the governments policy owning to pollution control norms and the Kyoto agreement saw the phasing out of two stroke two-wheelers from production. Currently there are around 10 9

two-wheeler manufacturers in the country, they being Bajaj, Hero, Hero Honda, Honda, Indus, Kinetic, Royal Enfield, Suzuki, TVS, and Yamaha. The latest trend in the two-wheeler market is the introduction of electrically operated vehicles from a range of manufacturers such as Indus and Hero. These can be recharged from convenient household electrical points. The only disadvantage is speed, which is restricted to around 25 miles per hour.

10

COMPANIES PROFLE:

Hero Honda

Hero Honda Motors Ltd.

Type

Public company BSE:HEROHONDA M

Founded

January 19, 1984 in Gurgaon, Haryana, India

Headquarters New Delhi, India

Brijmohan Lal Munjal (chair and founder) Toshiaki Nakagawa (joint managing director) Pawan Munjal (CEO) Industry Products Revenue Website Automotive Motorcycles, Scooters U$ 2.8 billion http://www.herohonda.com/

Key people

11

Hero Honda Motors Limited, based in Delhi, India, is the world's third largest manufacturer of motorcycles after Honda and Yamaha. Hero Honda is a joint venture that began in 1984 between the Hero Group of India and Honda of Japan. It has been the world's biggest manufacturer of 2wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year. Hero Honda's Splendor is the world's largest selling motorcycle. Its 2 plants are in Dharuhera and Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has also started production by April, 2008. It will have production facilities such as Lean Manufacturing concept, more flexible lines & stream line material flow, within & proximity (planning to set vendors in nearby locations constituting HHML Park) to achieve just-in-time manufacturing. It specializes in dual use motorcycles that are low powered but very fuel efficient. Hero is the brand name used by the Munjal brothers in the year 1956 with the flagship company Hero Cycles. The joint venture between India's Hero Group and Honda Motor Company, they are related to Jagdish Lal Munjal 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 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. Hero Honda bikes currently roll out from two globally benchmarked manufacturing facilities based at Dharuhera and Gurgaon in Haryana. These plants together are capable of churning out 3.9 million bikes per year. A third state of the art manufacturing facility at Hardwar in Uttranchal will soon be commissioned to cope with sustained customer demand. 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

12

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.

History
Hero Honda is worlds third largest two wheeler maker. India has the largest number of two wheelers in the world with 41.6 million vehicles. India has a mix of 30 percent automobiles and 70 percent two wheelers in the country. India was the second largest two wheeler manufacturer in the world starting in the 1950s with the birth of Automobile Products of India (API) that manufactured scooters. API manufactured the Lambrettas but, another company, Bajaj Auto Ltd. surpassed API and remained through the turn of the century from its association with Piaggio of Italy (manufacturer of Vespa scooters). The license raj that existed between the 1940s to 1980s in India did not allow foreign companies to enter the market and imports were tightly controlled. This regulatory maze, before the economic liberalization, made business easier for local players to have a sellers market. Customers in India were forced to wait 12 years to buy a scooter from Bajaj. The CEO of Bajaj commented that he did not need a marketing department, only a dispatch department. By the year 1990, Bajaj had a waiting list that was twenty-six times its annual output for scooters. The motorcycle segment had the same long wait times with three manufacturers: Royal Enfield, Ideal Jawa, and Escorts. Royal Enfield made a 350cc Bullet with the only four-stroke engine at that time and took the higher end of the market but there was little competition for their customers. Ideal Jawa and Escorts took the middle and lower end of the market respectively. In the mid-1980s, the Indian government regulations changed and permitted foreign companies to enter the Indian market through minority joint ventures. The two-wheeler market changed with four Indo-Japanese joint ventures: Hero Honda, TVS Suzuki, Bajaj Kawasaki and Kinetic Motor Company (Kinetic Honda). The entry of these foreign companies changed the Indian market dynamics from the supply side to the demand side. With a larger selection of two-wheelers on the Indian market, consumers started to gain influence over the products they bought and raised higher customer expectations. The industry produced more models, styling options, prices, and different fuel efficiencies. The foreign companies new technologies helped make the products more reliable and with better quality. Indian companies had to change to keep up with their global counterparts. The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108.

13

BOARD OF DIRECTORS

No. Name of the Directors 1 2 3 4 5 6 7 8 Mr. Brijmohan Lall Munjal Mr. Pawan Munjal Mr. Toshiaki Nakagawa Mr. Sumihisa Fukuda Mr. Om Prakash Munjal Mr. Sunil Kant Munjal Mr. Masahiro Takedagawa Mr. Satoshi Matsuzawa (Alternate Director to Mr. Takashi Nagai) 9 10 11 12 13 14 15. 16. Mr. Pradeep Dinodia Gen. (Retd.) Ved Prakash Malik Mr. Analjit Singh Dr. Pritam Singh Ms. Shobhana Bhartia Mr. Sunil Bharti Mittal Mr. Meleveetil Damodaran Mr. Arun Nath Maira

Designation Chairman & Whole-time Director Managing Director & CEO Joint Managing Director Technical Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director

Non-executive & Independent Director Non-executive & Independent Director Non-executive & Independent Director Non-executive & Independent Director Non-executive & Independent Director Non-executive & Independent Director Non-executive & Independent Director Non-executive & Independent Director

14

BAJAJ AUTO
Bajaj Auto is a major Indian automobile manufacturer. It is India's largest and the world's 4th largest two- and three-wheeler maker. It is based in Pune, Maharashtra, with plants in Akurdi and Chakan (near Pune),Waluj (near Aurangabad) and Pantnagar in Uttaranchal. Bajaj Auto makers and exports motor scooters, motorcycles and the auto rickshaw. The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1946 Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range encompasses Scooterettes, Scooters and Motorcycles. Its real growth in numbers has come in the last four years after successful introduction of a few models in the motorcycle segment

Bajaj Auto Ltd

Type

Public

Founded

1945

Headquarters Pune, India

Key people

Rahul Bajaj (Chairman), Rajiv Bajaj (Managing Director)

Revenue

Rs. 81.063 billion (2005) or USD 1.32

billion

Net income

Rs. 11.016 billion

10,250 (2006-07)

Employees

Website

http://www.bajajauto.com/

15

Company's history
Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading Corporation Private Limited. It started off by selling imported two- and three-wheelers in India. In 1959, it obtained license from the Government of India to manufacture two- and three-wheelers and it went public in 1960. In 1970, it rolled out its 100,000th vehicle. In 1977, it managed to produce and sell 100,000 vehicles in a single financial year. In 1985, it started producing at Waluj in Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicle and produced and sold 1 million vehicles in a year. According to the authors of Globality: Competing with Everyone from Everywhere for Everything
[3]

, Bajaj has grown operations in 50 countries by creating a line of value-for-money bikes targeted

to the different preferences of entry-level buyers with quality such that Kawasaki buys Bajaj products for some of its market

16

Board of Directors
No. Name of the Directors Designation

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

Rahul Bajaj Madhur Bajaj Rajiv Bajaj Sanjiv Bajaj D S Mehta Kantikumar R Podar Shekhar Bajaj D J Bajaj Rao J N Godrej S H Khan Naresh Chandra Ms Suman Kirloskar Nanoo Pamnani Manish Kejriwal P Murari Niraj Bajaj

Chairman Vice Chairman Managing Director Executive Director

17

TVS MOTOR COMPANY

"Inspiration in Motion" TVS Motor is the third largest two-wheeler manufacturer in India and ranks among the top ten globally. It is the first company in the world to be honored with The Deming Prize for Total Quality Management. The company was the first in India to launch 2-seater 50cc moped and 100cc Indo-Japanese motorcycles. At present TVS Apache, TVS Victor, TVS Scooty, TVS Centra and TVS Fiero are the popular bikes in Indian market.

Quick Facts Founder Country Year of Establishment Industry Business Group Listings & its codes T V Sundaram Iyengar India August 1980 (TVS Group in 1911) Manufacturing of two-wheelers and auto components TVS Group NSE TVS - Suzuki Ltd: TVSSUZUKI TVS Motor Company Limited: TVSMOTOR TVS Motor Company Limited: TVS-SUZUKI BSE TVS Motor Company Ltd.: 532343 Head Office TVS Motor Company Jayalakshmi Estates V Floor 8, Haddows Road, Chennai - 600006 Tel.: +(91)-(44)-28272233 Fax: +(91)-(44)-28257121 Factory Post Box No. 4 Harita, Hosur - 635 109 Tel.: +(91)-(4344)-276780 18

Fax: +(91)-(4344)-276878

Post Box No.1 Byathahalli Village, Kadakola Post Mysore - 571 311 Tel.: +(91)-(821)-2596561 Fax: +(91)-(821)-2596550/ 2596553 Website http://www.tvsmotor.in/

Company Flashback
TVS Motor Company Limited is the flagship company of TVS Group, the USD 2.2 billion group. The Group is the third largest two-wheeler manufacturer in India and globally among the top ten, with an annual turnover of over USD 650 million.

Currently, the group has more than 30 companies and employs over 40,000 people worldwide. With steady growth, expansion and diversification, it commands a strong presence in the manufacturing of two-wheelers, auto components and computer peripherals. They also have vibrant businesses in the distribution of heavy commercial vehicles (HCV) passenger cars, finance and insurance.

1980 is the red letter year for TVS when India's first two-seater moped rolled out. It ushered in an era of affordable personal transportation.

Globally, TVS Motor Company is the first two-wheeler manufacturer to be honoured with the hallmark of Japanese Quality - The Deming Prize for Total Quality Management.

19

Board of Directors

No. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Name of the Directors VENU SRINIVASAN GOPAL SRINIVASAN T. K. BALAJI H. LAKSHMANAN T. KANNAN N. GANGA RAM C. R. DUA K. S. BAJPAI T. R. PRASAD

Designation Chairman & Managing Director Director Director Director Director Director Director Director

20

Comparison of Balance sheet

In Rs crores Hero Honda Mar '08 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 1,938.78 782.52 1,156.26 408.49 2,566.82 317.10 297.44 130.58 745.12 196.37 0.51 942.00 0.00 1,455.57 499.76 1,955.33 -1,013.33 0.00 3,118.24 56.37 149.55 2,994.68 1,726.07 1,268.61 34.74 1,857.14 349.61 275.31 54.74 679.66 1,099.68 1.33 1,780.67 0.00 1,185.19 834.04 2,019.23 -238.56 0.00 2,921.93 1,129.29 109.73 1,790.97 774.49 1,016.48 26.57 338.96 405.38 87.86 3.44 496.68 342.87 0.29 839.84 0.00 725.71 60.99 786.70 53.14 52.77 1,487.92 135.65 34.59 39.94 39.94 0.00 0.00 2,946.30 0.00 2,986.24 0.00 132.00 132.00 3,118.24 144.68 144.68 0.00 0.00 1,442.91 0.00 1,587.59 6.95 1,327.39 1,334.34 2,921.93 23.75 23.75 0.00 0.00 797.83 0.00 821.58 452.68 213.66 666.34 1,487.92 Bajaj Auto Mar '08 TVS Motor Mar '08

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RATIO ANALYSIS
PROFITABILITY RATIO

A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. Some examples of profitability ratios are profit margin, return on assets and return on equity. It is important to note that a little bit of background knowledge is necessary in order to make relevant comparisons when analyzing these ratios.

For instances, some industries experience seasonality in their operations. The retail industry, for example, typically experiences higher revenues and earnings for the Christmas season. Therefore, it would not be too useful to compare a retailer's fourth-quarter profit margin with its first-quarter profit margin. On the other hand, comparing a retailer's fourth-quarter profit margin with the profit margin from the same period a year before would be far more informative.

22

 Operating margin

A ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. It Is Also known as "operating profit margin."

Calculated as:

Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors. If a company's margin is increasing, it is earning more per dollar of sales. For example, if a company has an operating margin of 12%, this means that it makes $0.12 (before interest and taxes) for every dollar of sales. Often, nonrecurring cash flows, such as cash paid out in a lawsuit settlement, are excluded from the operating margin calculation because they don't represent a company's true operating performance.

RATIO AT 31 -MARCH Sr

Name of companies

percentage

1. 2. 3.

HERO HONDA MOTORS LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

13.22 12.29 1.40

23

COMPARISION OF RATIO
14 13.22 12.29

12
10 8 6 4 1.4 2 0 HERO HONDA BAJAJ AUTO TVS MOTORS

EXPLAINATION It shows that operating efficiency of hero Honda motors limited is better than Bajaj auto and TVS motors. While operating efficiency of TVS motors limited is lower than hero Honda motors and Bajaj auto limited. So rank of operating efficiency of two wheelers companies can be given as hero Honda motors limited, Bajaj auto limited and TVS motors. GROSS PROFIT MARGIN

A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. It is also known as "gross margin".

Calculated as:

For example, suppose that ABC Corp. earned $20 million in revenue from producing widgets and incurred $10 million in COGS-related expense. ABC's gross profit margin would be 50%. This means that for every dollar that ABC earns on widgets, it really has only $0.50 at the end of the day.

This metric can be used to compare a company with its competitors. More efficient companies will usually see higher profit margins. 24

RATIO AT 31 -MARCH

Sr 1
2 3

NAME OF COMPANIES
HERO HONDA MOTORS LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

PERCENTASE
11.67 10.32 -1.53

14 12 10 8 6 4 2 0 HERO HONDA -2 -4 11.67

COMPARISON OF RATIO
10.32

BAJAJ AUTO

TVS MOTORS

-1.53

EXPLAINATION This ratio shows financial position of company. Here financial position of hero Honda motors limited is better than Bajaj auto and TVS motors. So hero Honda is first rank by its financial position then Bajaj auto limited and TVs motors limited NET PROFIT MARGIN

For a business to survive in the long term it must generate profit. Therefore the net profit margin ratio is one of the key performance indicators for your business. The net profit margin ratio indicates profit levels of a business after all costs have been taken into 25

account. It is worth analysing the ratio over time. A variation in the ratio from year to year may be due to abnormal conditions or expenses. Variations may also indicate cost blowouts which need to be addressed. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In some cases, the costs of such improvements may lead to a further drop in the ratio or even losses before increased profitability is achieved. The calculation used to obtain the ratio is: Net Profit Margin = Net Profit Sales
Sr NAME OF COMPANIES PERCENTAGE

x 100

1 2 3

Hero Honda motors limited Bajaj auto limited TVs motors limited

9.27% 8.32% 0.96%

RATIO AT 31 -MARCH

10 9 8 7 6 5 4 3 2 1 0

9.27

comparison of ratio
8.32

0.96

hero honda

bajaj auto

tvs motors

26

 EXPLAINATION This ratio is key performance indicators for business. Key performance means the profit level of company; from above graph we can say that performance of hero Honda motors limited is better than Bajaj auto limited and TVs motors limited. So profit level of hero Honda motors limited is at first rank than comes Bajaj auto limited and TVs motors limited.

RETURN ON NETWORTH Return on Net worth (RONW) is used in finance as a measure of a companys profitability. It reveals how much profit a company generates with the money that the equity shareholders have invested. Therefore, it is also called Return on Equity (ROE)

It is expressed as:-

Net Income RONW = ------------------------------------------Shareholders Equity The numerator is equal to a fiscal years net income (after payment of preference share dividends but before payment of equity share dividends).The denominator excludes preference shares and considers only the equity shareholding. So, RONW measures how much return the company management can generate for its equity shareholders. RONW is a measure for judging the returns that a shareholder gets on his investment As a shareholder, equity represents your money and so it makes good sense to know how well management is doing with it. X 100

27

RATIO AT 31-MARCH Sr NAME OF COMPANIES PERCENTAGE

1 2 3

HERO HONDA LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

32.41 47.16 4.13

Comparison of ratio
47.16 50 45 40 35 32.41

30
25 20 15 10 5 0 HERO HONDA BAJAJ AUTO TVS MOTORS 4.13

EXPLAINATION This ratio is useful for comparing the profitability of a company to that of other firm in the same industry. Here; profitability of Bajaj auto limited is more than hero Honda motors limited and TVs motors limited. So we can say that Bajaj auto is at first rank by its profitability than comes hero Honda motors limited and TVs motors limited

28

Profitability ratio related to investments: RETURN ON INVESTMENT:

As already observed, the profitability ratio can also be computed by relating the profit of a firm to its investment. Such ratio is popularly termed as return on investment. There are three different concept of investments vogue in financial literature: assets, capital employed and shereholdersequity.based on each of them, there are three broad cateragories of ROIs. There are (I) return on assets (ii) return on capital employed (iii) return on share holders equity.

RATIO AT 31-MARCH Sr
NAME OF COMPNIES PERCENTAGE

1 2 3

HERO HNDA MOTORS LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

32.41 47.16 4.13

50 45 40 35 30 25 20 15 32.41

Comparison of ratio 47.16

10
5 0 HERO HONDA BAJAJ AUTO

4.13

TVS MOTORS

29

 EXPLAINATION
This ratio shows return on investment. Here, Bajaj auto limiteds this ratio high comparison of hero Honda and TVs motors limited. And second number on hero Honda and third on TVs motors limited

DIVIDEND YIELD RATIO

A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follows:

To better explain the concept, refer to this dividend yield example: If two companies both pay annual dividends of $1 per share, but ABC Companys stock is trading at $20 while XYZ Companys stock is trading at $40, then ABC has a dividend yield of 5% while XYZ is only yielding 2.5%. Thus, assuming all other factors are equivalent, an investor looking to supplement his or her income would likely prefer ABC's stock over that of XYZ.

RATIO AT 31-MARCH

Sr

NAME OF COMPANIES

PERCENTAGE

1 2 3

HERO HONDA MOTORS LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

45.86 44.78 61.25

30

COMPARISON OF RATIO
70 60 50 40 30 20 10 0 HERO HONDA BAJAJ AUTO TVS MOTORS 45.86 44.78 61.25

EXPLAINATION
Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position here,tvs motors limited this ratio high compare hero Honda and Bajaj auto limited. Its means TVs motors limiteds shareholder receive more dividend from his company, compare hero Honda motors limited and Bajaj auto limitedsshareholders

LEVERAGE RATIO

Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.

A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output will affect operating income. Fixed and variable costs are the two types of operating costs; depending on the company and the industry, the mix will differ.

The most well known financial leverage ratio is the debt-to-equity ratio. For example, if a company has $10M in debt and $20M in equity, it has a debt-to-equity ratio of 0.5 ($10M/$20M).

Companies with high fixed costs, after reaching the breakeven point, see a greater increase in 31

operating revenue when output is increased compared to companies with high variable costs. The reason for this is that the costs have already been incurred, so every sale after the breakeven transfers to the operating income. On the other hand, a high variable cost company sees little increase in operating income with additional output, because costs continue to be imputed into the outputs. The degree of operating leverage is the ratio used to calculate this mix and its effects on operating income

DEBT-EQUITY RATIO

measure

of

company's

financial

leverage

calculated

by

dividing its

total

liabilities by stockholders' equity.

Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the calculation. It is also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as companies'.

A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0 32

RATIO AT 31-MARCH Sr

Name of Companies

percentage

1 2 3

Hero Honda motors limited Bajaj auto limited TVs motors limited

0.04 0.84 0.81

0.9

Comparison of ratio 0.84

0.81

0.8
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 hero honda bajaj auto tvs motors 0.04

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 EXPLAINATION This ratio indicates what proportion of equity and debt the company is using to finance its assets. From above diagram we can say that Bajaj auto limited has a high debt equity ratio means it is aggressive in financing its growth with debt. Than after TVs motors limited has a low debt equity ratio as comparison with Bajaj auto limited. And hero Honda motors limited comes at third rank in debt equity ratio. FIXED ASSETS TURNOVER RATIO

Measure of the productivity of a firm, it indicates the amount of sales generated by each dollar spent on fixed assets, and the amount of fixed assets required to generate a specific level of revenue. Changes in the ratio over time reflect whether or not the firm is becoming more efficient in the use of its fixed assets. Formula: Sales revenue average fixed assets.

RATIO AT 31-MARCH Sr NAME OF THE COMPANIES PERCENTAGE

1 2 3

HERO HONDA MOTORS LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

5.89 2.95 1.80

5.89 6 5

COMPARISON OF RATIO

4
2.85 3 1.8 2 1 0 HERO HONDA BAJAJ AUTO TVS MOTORS

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 EXPLAINATION This shows specific level of revenue by the amount of fixed assets. Hero Honda is a high level of revenue in comparison with Bajaj auto limited and TVS motors limited. After hero Honda motors limited, Bajaj auto limited has high level of revenue and then comes TVs motors limited at last.

INTEREST COVERING RATIO

The interest cover ratio tells us the safety margin that the business has in terms of being able to meet its interest obligations. That is, a high interest cover ratio means that the business is easily able to meet its interest obligations from profits. Similarly, a low value for the interest cover ratio means that the business is potentially in danger of not being able to meet its interest obligations.

Net profit before interest Interest Cover = Interest paid

RATIO AT 31-MARCH

Sr 1
2 3

NAME OF COMPANIES
HERO HONDA MOTORS LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

PERCENTAGE

101.54
210.31 3.95

COMPARISON OF RATIO
250 210.31 200

150 101.54 100

50 3.95 0 HERO HONDA BAJAJ AUTO TVS MOTORS

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 EXPLAINATION A high interest cover ratio means that the business is easily able to meet its interest obligations from profits. Here, Bajaj auto high interest cover ratio means that the Bajaj autos business is easily meet able to its interest obligations from profit LIQUIDITY RATIO

A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts.

Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency.

A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern. CURRENT RATIO

This ratio is a rough indication of a firm's ability to service its current obligations. Generally, the higher the current ratio, the greater the "cushion" between current obligations and your Company's ability to pay them. The composition and quality of current assets is a critical factor in the analysis of your Company's liquidity.

It is calculated as Total current assets divided by total current liabilities.

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RATIO AT 31-MARCH Sr NAME OF COMPNIES PERCENTAGE

1 2 3

HERO HONDA MTORS LIMITED BJAJ AUTO LIMITED TVS MOTORS LIMITED

0.48 0.88 1.07

COMPARISON OF RATIO
1.2 1 0.8 0.6 0.4 0.2 0 HERO HONDA BAJAJ AUTO TVS MOTORS 0.48 0.88 1.07

EXPLAINATION Current ratio of TVs motors is high than hero Honda and Bajaj auto limited. Means TVs motors has a high ability to pay for its liabilities, than secondly comes Bajaj auto and Herohonda has a low ability to pay for liabilities in comparison with Bajaj auto limited and TVs motors.

Inventory turnover ratio

Inventory turnover ratio is one of the accounting liquidity ratios, a financial ratio. This ratio measures the number of time, on average; the inventory is sold during the period. It purposes is measure the liquidity of the inventory. A popular variant of the inventory turnover ratio is converting it into average days to sell the inventory in term of days. Remember that the inventory turnover ratios figured as turn times and the average days to sell the inventory is in days. 37

INVENTORY TURN OVER RATIO = COST OF GOODS SOLD AVERAGE INVENTORY

Average days to sell the inventory = 365 / Inventory Turnover Ratio.

RATIO AT 31-MARCH

Sr

NAME OF COMPANIES

PERCENTAGE

1 2 3

HERO HONDA MOTORS LIMITED BAJAJ AUTO LIMITED TVS MOTORS LIMITED

42.82 29.33 9.61

42.82 45 40 35 30

COMPARISON OF RATIO

29.33

25
20 15 10 5 0 HERO HONDA BAJAJ AUTO TVS MOTORS 9.61

EXPLAINATION . This ratio measures the number of time, on average; the inventory is sold during the period. It purpose is measure the liquidity of the inventory.here,hero Honda motors limiteds this ratio high compare Bajaj auto limited and TVs motors limited.so,we can say that hero Honda motors limiteds liquidity of the inventory is high compare Bajaj auto limited and TVs motors limited 38

OBJECTIVE

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OBJECTIVES
Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise. For that there are some objectives which are described as under.

1. EARNING CAPACITY OR PROFITABILITY The overall objective of a business is to earn a satisfactory return on the funds invested in it. Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business or not. It also helps in knowing the capacity to pay the interest and dividend.

2. COMPARATIVE POSITION IN RELATION TO OTHER FIRMS The purpose of financial statements analysis is to help the management to make a comparative study of the profitability of various firms engaged in similar business. Such comparision also helps the management to study the position of their firm in respect of sales expenses, profitability and using capital.etc.

3. EFFICIENCY OF MANAGEMENT The purpose of financial statement analysis is to know that the financial policies adopted by the management are efficient or not. Analysis also helps the management in preparing budgets by forecasting next years profit on the basis of past earnings. It also helps the management to find out shortcomings of the business so that remedial measures can be taken to remove these shortcomings.

4. FINANCIAL STRENGTH The purpose of financial analysis is to assess the financial potential of business. Analysis also helps in taking decisions; (a) Whether funds required for the purchase of new machinery and equipments are provided from internal resources of business or not. (b) How much funds have been raised from external source

5.SOLVECNY OF THE FIRM The different tools of analysis tells us whether the firm has suffucient funds to meet its short-term and long-term liabilities or not.

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IMPORTANCE

41

IMPORTANCE
Ratio analysis is an important technique of financial analysis. It is a means for judging the financial health of a business enterprise. It determines and interprets the liquidity,solvency,profitability,etc. of a business enterprise.

It becomes simple to understand various figures in the financial statements through the use of different ratios. Financial ratios simplify, sumarise, and systemise the accounting figures presented in financial statements.

With the help of raito analysis, comparision of profitability and financial soundness can be made between one industry and another. Similarly comparision of current year figures can also be made with those of previous years with the help of ratio analysis and if some weak points are located, remidial masures are taken to correct them.

If accounting ratios are calculated for a number of years, they will reveal the trend of costs, sales, profits and other important facts. Such trends are useful for planning.

Financial ratios, based on a desired level of activities, can be set as standards for judging actual performance of a business. For example, if owners of a business aim at earning profit @ 25% on the capital which is the prevailing rate of return in the industry then this rate of 25% becomes the standard. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily.

Ratio analysis discloses the position of business with different viewpoint. It discloses the position of business with liquidity viewpoint, solvency view point, profitability viewpoint, etc. with the help of such a study, we can draw conclusion regardings the financial health of business enterprise.

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ADVANTAGES & LIMITATIONS

43

ADVANTAGES
Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages of ratio analysis: 1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business.

2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms.

3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and communications.

4. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future.

5. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc.

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LIMITATIONS
The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations. 1. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived, there from, are also subject to those limitations. For example, non-financial changes though important for the business are not relevant by the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements. 2. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations. 3. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios. 4. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult. 5. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. 6. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpret and different people may interpret the same ratio in different way. 7 Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading

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CONCLUSION
From above discussion, it is clear that financial compararative study is very important for every company, investors and govt. financial analysis plays very important role in every organisation

From the analysis it is found that Hero Honda motors Ltd.is good company as compare to Bajaj Auto ltd. and TVS motors Ltd.Because its most of ratios are higher than Bajaj Auto ltd. And TVS motors Ltd.and in addition to Hero Honda motors Ltds sales, net profit and market capture is also more compare to Bajaj Auto ltd. And TVS motors Ltd.

At the end of 2008, approximate comparisons between these companies are

Comparison between these companies

COMPANY NAME Hero Honda Bajaj Auto TVS Motor

MARKET CAP. (Rs. Cr.) 17,681.33 6,632.29 432.33

Sales Turn Over

Net Profit

Total Assets

10,331.80 3,219.50

967.88 31.77

3,118.24 2,921.93 1,487.92

Hero Honda motors Ltds profitability ratio and other most of financial ratios is higher than Bajaj Auto ltd.& TVS motors ltd so, Hero Honda motors Ltd.is best two wheeler company in India.

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BIBLIOGRAPHY
Www .herohonda.com. Www. bajajauto.com. Www .tvsmotors.in. BASIC FANANCIAL MANAGEMENT(M.Y.KHAN, P.K.JAIN) FANANCIAL MANAGEMENT(PRASANA CHANDRA)

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