TERM PAPER

ON “A COMPARATIVE ANALYSIS OF HERO HONDA MOTORS LTD. AND BAJAJ AUTO LTD.”

&

SUBMITTED TO: DR. BHAWNA JOHRI

SUBMITTED BY:AKASH KUMAR AKSHAY SRIVASTAVA ALOK MISHRA GOVIND KUMAR PIYUSH AGRAWAL

FACULTY OF COMMERCE DAYALBAGH EDUCATIONAL INSTITUTE (DEEMED UNIVERSITY) DAYALBAGH AGRA

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TABLE OF CONTENTS
SR. NO.
1.

PARTICULARS
INTRODUCTION OF TWO WHEELER INDUSTRY

PAGE NO.
1

2.

PROFILE OF HERO HONDA MOTORS LTD.

2

3.

PROFILE OF BAJAJ AUTO LTD.

6

4.

RATIO ANALYSIS

10

5.

BALANCE SHEET AND PROFIT & LOSS A/C OF HERO HONDA MOTORS LTD. BALANCE SHEET AND PROFIT & LOSS A/C OF BAJAJ AUTO LTD. ANALYSIS AND INTERPRETATION

14

6.

16

7.

18

8.

FINDINGS

30

9.

CONCLUSION

31

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Introduction to Indian Two-wheeler Industry
The Indian automotive industry consists of five segments: commercial vehicles, multi-utility vehicles & passenger cars, two-wheelers, three-wheelers, and tractors. With 78,22,963 units sold in the domestic market and 7,53,591 units exported, the industry (excluding tractors) marked a growth of 43% over the corresponding previous. The two-wheeler sales have witnessed a spectacular growth trend since the mid nineties. India is the second largest producer and manufacturer of two-wheelers in the world. Indian two-wheeler industry has got spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. The Automobile Products of India (API) started manufacturing scooters in the country. Bikes are a major segment of Indian two wheeler industry, the other two being scooters and mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. Hero Honda Motors Ltd. and Bajaj Auto Ltd. are two of the Indian companies that top the list of world companies manufacturing twowheelers. The two-wheeler market was opened to foreign companies in the mid 1980s. The openness of Indian market to foreign companies lead to the arrival of new models of two-wheelers into India. Easy availability of loans from the banks, relatively low rate of interest and the discount of prices offered by the dealers and manufacturers lead to the increasing demand for two-wheeler vehicles in India. This lead to the strong growth of Indian two-wheeler industry.

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Profile of Hero Honda Motors Ltd. (Hero Honda Motors Ltd.)
Hero Honda Motors Ltd. (Now Hero Motocorp Ltd.) is the world's largest manufacturer of two - wheelers, based in India. In 2001, the company achieved the coveted position of being the largest two-wheeler manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of unit volume sales in a calendar year. It continues to maintain this position till date.

Hero Honda Motors Ltd.

Type Traded as Industry Founded Founder(s)

Public company BSE: 500182 NSE: Hero Honda Motors Ltd. Automotive 19 January 1984 (Gurgaon) Brijmohan Lall Munjal Brijmohan Lall Munjal (Chairman), Pawan Munjal (MD & CEO) Motorcycles, scooters 19,669.290 crore (US$3.92 billion) 2,597.07 crore (US$518.12 million) (FY 2010-2011) 1,927.90 crore (US$384.62 million) (FY 2010-2011) Hero Group www.heromotocorp.com

Headquarters New Delhi, India Key people Products Revenue Operating income Net income Parent Website

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Vision
The story of Hero Honda began with a simple vision - the vision of a mobile and an empowered India, powered by its bikes. Hero Motocorp Ltd. is company's new identity which reflects its commitment towards providing world class mobility solutions with renewed focus on expanding company's footprint in the global area.

Mission
Its mission is to become a global enterprise fulfilling its customers' needs and aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts its customers into its brand advocates. The company will provide an engaging environment for its people to perform to their true potential. It will continue its focus on value creation and enduring relationship with its partners.

Strategy
Its key strategies are to build a robust product portfolio across categories, explore growth opportunities globally, continuously improve its operational efficiency, aggressively expand its reach to customers, continue to invest in brand building activities and ensure customer and shareholder delightment.

Manufacturing
Hero Honda Motors Ltd. two wheelers are manufactured across three globally benchmarked manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar, in the hill state of Uttrakhand.

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Technology
In the 1980's the Company pioneered the introduction of fuel-efficient, environment friendly four-stroke motorcycles in the country. It became the first company to launch the Fuel Injection (FI) technology in Indian motorcycles, with the launch of the Glamour FI in June 2006. Its plants use world class equipment and processes and have become a benchmark in leanness and productivity. The company, in its endeavor to remain a pioneer in technology, will continue to innovate and develop cutting edge products and processes.

Products
It offers wide range of two wheeler products that include motorcycles and scooters, and has set the industry standards across all the market segments.

Distribution
The Company's growth in the two wheeler market in India is the result of an intrinsic ability to increase reach in new geographies and growth markets. Its extensive sales and service network now spans over to 5000 customer touch points. These comprise a mix of authorized dealerships, service & spare parts outlets, and dealer-appointed outlets across the country.

2010-11 Performance
 Total unit sales of 54,02,444 two-wheelers, growth of 17.44 per cent.  Total net operating income of Rs. 19401.15 Crores, growth of 22.32 per cent  Net profit after tax at Rs. 2011.23 Crores

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 Total dividend of 5250% or Rs. 105 per share including Interin Dividend of Rs. 70 per share on face value of each share of Rs. 2 each  EBIDTA margin for the year 13.49%  EPS of Rs. 96.50

Achievements of the company in 2011
 Two-wheeler Manufacturer of the Year award by Bike India magazine  Adjudged the "Bike Manufacturer of the Year" at the Economic Times Zig Wheels Car and Bike Awards  "Most Recommended Two-Wheeler Brand of the Year" award by CNBC Awaaz Consumer Awards  Colloquy Loyalty Awards "Innovation in Loyalty Marketing International 2011" for Hero Good Life  "Best Activity Generating Short or Long-Term Brand Loyalty" by the Promotion Marketing Award of Asia Order of Merit for Hero Good Life  Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand Equity "Most Trusted Brand" 2011 survey

New Releases
Hero and Honda part company, thus forming Hero Honda Motors Ltd. and Honda moving out of the Hero Honda joint venture. November-- Hero launched its first ever Off Road Bike Named Hero "Impulse".

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Profile of Bajaj Auto Ltd.
Bajaj Auto Limited

Type Traded as Industry Key people Products Revenue Net income Employees Parent Website

Public BSE: 532977, NSE: BAJAJ-AUTO BSE SENSEX Constituent Automotive Rahul Bajaj (Chairman) Motorcycles, Scooters 16,974 crore (US$3.39 billion) (2011) 3,454 crore (US$689.07 million) (2011) 10,250 (2006-07) Bajaj Group www.bajajauto.com

Headquarters Pune, Maharashtra, India

Bajaj Auto Limited is an Indian motorized vehicle-producing company. Bajaj Auto is a part of Bajaj Group. It is founded by Jamnalal Bajaj at Rajasthan in the 1930s. It is based in Pune, Maharashtra, with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttaranchal. The oldest plant at Akurdi (Pune) now houses the R&D centre ahead. The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1,946. It features at 1639 in Forbes 2011 list. Over the last decade, the company has successfully changed its image from a scooter manufacturer to a twowheeler 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.
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The company is headed by Rahul Bajaj who is worth more than US$1.5 billion. Bajaj Auto came into existence on 29 November 1945 as M/s Bachraj Trading Corporation Private Limited. It started off by selling imported two- and threewheelers 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 near 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 one million vehicles in a year. According to the authors of Globality: Competing with Everyone from Everywhere for Everything, 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.

Mission
 Focus on value based manufacturing  Fostering team work & enhancing the capability of the team  Continual Improvement  Total elimination of wastes  Pollution free & safe environment

Vision
To attain World Class Excellency by demonstrating Value added products to customers

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Spin offs and acquisitions
The demerger of Bajaj Auto Ltd into three separate corporate entities—Bajaj Finserv Ltd (BFL), Bajaj Auto Ltd (BAL), and Bajaj Holdings and Investment Ltd (BHIL)— was completed with the shares listing on 26 May 2008. In November 2007, Bajaj Auto acquired 14.5% stake in KTM Power Sports AG (holding company of KTM Sportmotorcycles AG). The two companies have signed a cooperation deal, by which KTM will provide the know-how for joint development of the water-cooled four-stroke 125 and 250 cc engines, and Bajaj will take over the distribution of KTM products in India and some other Southeast Asian nations. Bajaj said it is open to taking a majority stake in KTM and is also looking at other takeover opportunities. On 8 January 2008, Managing Director Rajiv Bajaj confirmed the collaboration and announced his intention to gradually increase Bajaj's stake in KTM to 25%.

Products
Bajaj has made a number of motorcycles, scooters and cars. Motorcycles in current production are the XCD, Platina, Discover, Pulsar and Avenger. Bajaj also Distributes many motorcycles in India for other manufacturers, such as the Kawasaki Ninja 250R, the Ninja 650R and new for 2012, the KTM Duke 200. Cars include the Bajaj ULC ultra-low-cost car.

Achievements of the Company in 2010-11
 Bike of the Year 2010 by BBC - TopGear  Hall of Pride Awards by CNBC – Overdrive  Bike of the Year by Bike India
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 Bike India upto 150 cc by Bike India  2011 Mc of the year upto 250cc by NDTV Car & Bike Awards  "Golden Steering Wheel" for Executive Motorcycle by Auto Build  Best Value for Money Vehicle of the Year by ET Zig Wheels

New releases
  

2012 - Bajaj RE 60, mini car for intra-city urban transportation 2012 - KTM Duke 200, launch of 200cc bike from the KTM stable 2012 - Bajaj Pulsar 200 NS, launch of 200cc bike

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RATIOS
A relationship between various accounting figures, which are connected with each other, expressed in mathematical terms, is called accounting ratios. According to Kennedy and Macmillan, "The relationship of one item to another expressed in simple mathematical form is known as ratio." Analysis and interpretation of various accounting ratio gives a better understanding of the financial condition and performance of a business concern.

RATIO ANALYSIS
Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures. According to Myers, ―Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements." Advantages and Uses of Ratio Analysis  To workout the profitability  To workout the solvency  Helpful in analysis of financial statement.  Helpful in comparative analysis of the performance  To simplify the accounting information  To workout the operating efficiency  To workout short-term financial position
 Helpful for forecasting purposes

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Limitations of Ratio Analysis  Limited Comparability  False Results  Effect of Price Level Changes  Effect of window-dressing

 Absence of standard university accepted terminology

Main ratios Covered in this Project
For interpreting financial information, we include following underlined ratios Profitability Ratios These ratios tell us whether a business is making profits - and if so whether at an acceptable rate. The key ratios are: Ratio Gross Profit Margin Calculation [Gross Profit / Revenue] x 100 Interpretation This ratio tells us about the business's ability consistently to control its production costs or to manage the margins it makes on products it buys and sells. Net Profit Ratio shows the relationship between Net Profit of the concern and its Net Sales. This ratio is helpful to determine the operational ability of the concern. While comparing the ratio to previous years’ ratios, the increment shows the efficiency of the concern & vice versa. ROCE is sometimes referred to as the "primary ratio"; it tells us what returns management has made on the resources made available to them before making any distribution of those returns.

Net Profit [Net Profit/Net Sales] x 100 Ratio

Return on capital employed ("ROCE")

Net profit before interest & tax ("EBIT") / Capital Employed

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Liquidity Ratios Liquidity ratios indicate how capable a business is of meeting its short-term obligations as they fall due: Ratio Current Ratio Calculation Interpretation Current Assets / A simple measure that estimates whether the business Current Liabilities can pay debts due within one year from assets that it expects to turn into cash within that year. Quick Assets / Not all assets can be turned into cash quickly or Quick Ratio (or Current Liabilities easily. Some - notably raw materials and other stocks - must first be turned into final product, then sold and "Acid the cash collected from debtors. The Quick Ratio Test therefore adjusts the Current Ratio to eliminate all Ratio” assets that are not already in cash (or "near-cash") form.

Solvency Ratio These ratios indicate the capability of a business to pay its long term obligations. Ratio DebtEquity Ratio Calculation Interpretation

Long Term Debt equity ratio shows the relationship between Debt/Shareholders, long-term debts and shareholders funds’. It is also Funds known as ‘External-Internal’ equity ratio.

Turnover Ratio Ratio Calculation Interpretation Stock is a most important component of working capital. This ratio provides guidelines to the management while framing stock policy. It measures how fast the stock is moving through the firm and generating sales. It helps to maintain a proper amount
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Inventory COGS / Average Turnover Stock Ratio

of stock to fulfill the requirements of the concern. A proper inventory turnover makes the business to earn a reasonable margin of profit.

Market Ratio Ratio Calculation Comments A requirement of the London Stock Exchange - an important ratio. EPS measures the overall profit generated for each share in existence over a particular period.

Earnings Net Profit after per share Tax & Pref. Div. / ("EPS") No. of Equity Shares

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Balance Sheet of Hero Honda Motors Ltd. (in Rs. Crore)
Mar' 11 Sources of Funds
Shareholders' Funds Share Capital Reserves & Surplus Loan Funds Unsecured Deferred Payment Credits Deferred Tax Liabilities 39.94 2916.12 2956.06 32.71 1458.45 252.72 39.94 3425.08 3465.02 66.03 160.63 39.94 3760.81 3800.75 78.49 153.08 39.94 2946.3 2986.24 132 130.59 39.94 2430.12 2470.06 165.17 129.58

Mar' 10

Mar' 09

Mar' 08

Mar' 07

Total Application of Funds
Fixed Assets Gross Block Less : Depreciation Net Block Capital Work in Progress Investments Deferred Tax Assets Current Assets, Loans & Advances Inventory Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances Less : Current Liabilities & Provisions Current Liabilities Provisions Net Current Assets

4699.94

3691.68

4032.32

3248.83

2764.81

5538.46 1458.18 4080.28 125.14 4205.42 5128.75 5.95 524.93 130.59 71.52 48.87 728.66 1504.57

2750.98 1092.2 1658.78 48.14 1706.92 3925.71 7.88 436.4 108.39 1907.21 24.82 405.76 2882.58

2516.27 942.56 1573.71 120.54 1694.25 3368.75 8.65 326.83 149.94 219.57 5.89 311.26 1013.49

1938.78 782.52 1156.26 392.44 1548.7 2566.82 21.27 317.1 297.44 131.09 5.69 185.46 936.78

1800.63 635.1 1165.53 189.92 1355.45 1973.87 1.38 275.58 335.25 35.78 3.6 263.06 913.27

5063.68 1081.07 6144.75 (4640.18)

3805.06 1026.35 4831.41 (1948.83)

1525.85 526.97 2052.82 (1039.33)

1324.98 499.76 1824.74 (887.96)

1041.92 437.24 1479.16 (565.89)

Total

4699.94

3691.68

4032.32

3248.83

2764.81

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Profit & Loss A/c of Hero Honda Motors Ltd. (in Rs. Crore)
Particulars Income
Gross Sales Less : Excise Duty Net Sales Other Income

Mar' 11
20662.39 1417.36 19245.03 424.87 19669.90 16784.77 402.38 (1.85) 17185.3 2404.76 392.43 94.02 (92.92) 2011.23 2146.55 4157.78 1397.81 698.91 340.14 276.12 1444.80 4074.45

Mar' 10
16780.62 1022.44 15758.18 340.61 16098.79 13096.21 191.47 (20.62) 13267.06 2871.73 590.34 8.32 2233.07 2707.28 4940.35 1597.50 599.06 371.00 226.24 2146.55 4939.11

Mar' 09
13543.09 1223.97 12319.12 220.72 12539.84 10609.40 180.66 (31.68) 10758.38 1781.46 475.65 33.85 4.99 1266.97 2021.77 3288.74 399.38 67.87 114.21 2707.28 3303.53

Mar' 08
12038.53 1706.73 10331.80 185.42 10517.22 8982.43 160.32 (35.81) 9106.94 1410.28 417.49 1.20 4.39 987.20 1594.78 2581.98 379.41 64.48 116.32 2021.77 2562.66

Mar' 07
11542.04 1642.08 9899.96 189.95 10089.81 8726.92 139.78 (22.99) 8843.71 1246.10 375.81 23.41 2.98 843.90 1224.05 2067.95 339.47 57.69 76.01 1594.78 2081.94

Expenditure
Manufacturing & Other Expenses Depreciation Interest(Net) Profit for the Year before tax Provision for Taxation Current Deferred Fringe Benefit Profit after Tax Balance of Profit brought forward Balance available for Appropriation

Appropriations
Interim Dividend Proposed Dividend Tax on Dividend Transfer to General Reserve Balance carried to Balance Sheet

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Balance Sheet of Bajaj Auto Ltd. (in Rs. Crore)
Mar' 11 Sources of Funds
Shareholders' Funds Share Capital Reserves & Surplus Loan Funds Secured Unsecured Deferred Tax Liabilities Deferred Tax Assets 289.37 4620.85 4910.22 23.53 301.62 197.70
(167.99)

Mar' 10

Mar' 09

Mar' 08

Mar' 07

144.68 2783.66 2928.34 12.98 1325.60 191.81 (190.12)

144.68 1725.01 1869.69 1570 164.79 (160.60)

144.68 1442.91 1587.59 6.95 1327.39 141.94 (130.96)

101.18 5433.14 5534.32 22.46 1602.97 184.49 (110.32)

Total Application of Funds
Fixed Assets Gross Block Less : Depreciation Net Block Capital Work in Progress Technical know how Investments Current Assets, Loans & Advances Inventory Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances Less : Current Liabilities & Provisions Current Liabilities Provisions Net Current Assets Miscellaneous Expenditure

5265.08

4268.61

3443.88

2932.91

7233.92

3390.88 1912.45 1478.43 69.86 1548.29 4.28 4795.20 547.28 362.76 556.49 216.42 1189.64 2872.59

3379.25 1899.66 1479.59 41.52 1521.11 4021.52 446.21 239.45 101.41 139.36 657.40 1583.83

3333.94 1807.91 1526.03 22.06 1548.09 16.26 1808.52 338.84 358.65 136.87 125.68 1365.23 2325.27

2984.15 1726.07 1258.08 34.74 1292.82 10.53 1857.14 349.61 275.31 56.07 79.95 888.77 1649.71

3174.41 1922.44 1251.97 286.7 1296.39 4.13 6447.53 309.70 529.83 83.48 36.22 2859.40 3818.63

2426.65 1528.63 3955.28 (1082.69) -

2026.25 831.60 2857.85 (1274.02) -

1213.41 1224.15 2437.56 (112.29) 183.3

1043.25 834.04 1877.29 (227.58) -

1498.97 2833.79 4332.76 (514.13) -

Total

5265.08

4268.61

3443.88

2932.91

7233.92

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Profit & Loss A/c of Bajaj Auto Ltd. (in Rs. Crore)
Particulars Income
Gross Sales Less : Excise Duty Net Sales Other Income

Mar' 11
16931.53 933.41 15998.12 1701.17 17699.29 13224.01 122.84 1.69 13348.54 4350.75 983 28.02 3339.73 854.99 4194.72 1157.47 187.77 334 2515.48 4194.72

Mar' 10
12118.08 609.58 11508.50 534.98 12043.48 9328.42 136.45 5.98 9470.85 2411.13 716.14 (5.12) 1700.11 1700.11 578.73 96.12 170.27 854.99 1700.11

Mar' 09
9049.66 612.72 8436.94 495.32 8932.26 7837.79 129.79 21.01 7988.59 958.09 300.90 (6.79) 9.48 654.50 654.50 318.30 54.10 282.10 654.50

Mar' 08
9689.95 1026.66 8663.29 505.55 9168.84 7878.03 173.96 5.16 8057.15 1134.73 392.75 (17.32) 3.52 755.78 755.78 289.37 49.18 417.23 755.78

Mar' 07
10606.09 1313.86 9292.23 783.82 10076.05 8184.45 190.26 5.34 8348 1728.05 501.36 (13.41) 3.00 1237.10 1237.10 404.73 69.64 762.73 1237.10

Expenditure
Manufacturing & Other Expenses Depreciation Interest Profit for the Year before tax Provision for Taxation Current Deferred Fringe Benefit Profit after Tax Balance of Profit brought forward Balance available for Appropriation

Appropriations
Interim Dividend Proposed Dividend Tax on Dividend Transfer to General Reserve Balance carried to Balance Sheet

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Data Analysis & Interpretation
Gross Profit Ratio (GPR):Table Presentation
Selected companies Hero Honda Motors Ltd. YEARS (31st MARCH) 2006-07 2007-08 2008-09 2009-10 2010-11 Avg. GPR 1906.84 2059.34 2535.31 3783.25 3587.21 9899.96 10331.80 12319.12 15758.18 19245.03 20.48 Gross Profit Net Sales Gross Profit Ratio (%) 19.26 19.93 20.58 24.01 18.64 2391.22 2042.92 1973.47 3438.06 4199.31 9292.23 8663.29 8436.94 11508.50 15998.12 25.76 Gross Profit Bajaj Auto Ltd. Net Sales Gross Profit Ratio 25.73 23.58 23.39 29.87

26.25

Graphical Presentation & Interpretation
35 30 25 20 15 10 5 0 2006-07 2007-08 2008-09 Year 2009-10 2010-11

Gross Profit Ratio

Hero Honda Motors Ltd. Bajaj Auto Ltd.

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The GPR of Hero Honda increased till 2009-10. It indicates that the company has increased its sale as well as its rate of margin and on the other hand reduce its cost of production. But in 2010-11, GPR of the company declined because of % increase in production overheads comparatively more than the % increase in sales. While the GPR of Bajaj was decreasing consistently till 2008-09 due to the decrease in sales as well as the rate of margin and thereafter in 2009-10 & 2010-11, it increased and decreased respectively.

Net Profit Ratio (NPR):Table Presentation
Selected companies Hero Honda Motors Ltd. YEARS (31st MARCH) 2006-07 2007-08 2008-09 2009-10 2010-11 Avg. NPR 843.90 987.20 1266.97 2233.07 2011.23 9899.96 10331.80 12319.12 15758.18 19245.03 10.59 Net Profit Net Sales Net Profit Ratio (%) 8.52 9.55 10.28 14.17 10.45 1237.10 755.78 654.50 1700.11 3339.73 9292.23 8663.29 8436.94 11508.50 15998.12 13.09 Net Profit Bajaj Auto Ltd. Net Sales Net Profit Ratio (%) 13.31 8.72 7.76 14.77 20.88

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Graphical Presentation & Interpretation
25

20
Net Profit Ratio

15 Hero Honda Motors Ltd. 10 Bajaj Auto Ltd.

5

0 2006-07 2007-08 2008-09 2009-10 2010-11 Year

The NPR of Hero Honda was increasing continuously till 2009-10.It indicates that the company has reduced its operating as well as non operating expenses in these years but in 2010-11, it decreased due to increase in non operating expenses specially the burden of interest. On the other hand, NPR of Bajaj Auto Ltd. was decreasing continuously till 2008-09 as a result of increase in operating overheads of the company. Thereafter it was increasing which shows that the company focused upon reducing its cost of operations.

22

Return on Net Capital Employed (ROCE):Table Presentation
Selected companies Hero Honda Motors Ltd. YEARS (31st MARCH) Net Profit before Int. & Tax 2006-07 2007-08 2008-09 2009-10 2010-11 Avg. ROCE 938.14 1050.84 1423.68 2129.22 1452.54 2635.23 3118.24 3879.24 3531.05 2988.77 42.98 35.60 33.70 36.70 60.30 48.60 Net Capital Employed ROCE (%) Net Profit before Int. & Tax 1237.20 755.90 654.57 1700.11 3339.73 7159.75 2921.93 3439.69 4266.92 5235.37 33.16 17.28 25.87 19.03 39.84 63.79 Bajaj Auto Ltd. Net Capital Employed ROCE (%)

Graphical Presentation & Interpretation
70

Return on Capital Employed

60 50 40 30 20 10 0 2006-07 2007-08 2008-09 2009-10 2010-11 Year Hero Honda Motors Ltd. Bajaj Auto Ltd.

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The ROCE of Hero Honda was consistent till 2008-09 as the net profit increased in same proportion as capital employed and in 2009-10 it increased highly as the company made repayment of its long term loans. Thereafter it reduced in 2010-11 due to the decrease in net profit before interest & tax. On the other hand, the ROCE of Bajaj Auto Ltd. increased in 2007-08 as the result of decrease in long term loans and in 2008-09, it decreased as the total liabilities including reserves increased and finally 2009-10 onwards, it was increasing because of increase in net profit before interest & tax.

Current Ratio:Table Presentation
Selected companies Hero Honda Motors Ltd. YEARS (31st MARCH) 2006-07 2007-08 2008-09 2009-10 2010-11 Avg. CR 913.70 936.78 1013.49 2882.58 1504.57 1087.23 1377.62 1583.58 6405.73 3761.43 0.60 0.84 0.68 0.64 0.45 0.40 3818.63 1649.71 2325.70 1583.83 2872.59 4339.35 1874.67 2448.11 2879.69 3935.05 0.80 0.88 0.88 0.95 0.55 0.73 Current Assets Current Liabilities Current Ratio Assets Bajaj Auto Ltd. Current Current Liabilities Current Ratio

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Graphical Presentation & Interpretation
1 0.9 0.8 0.7
Current Ratio

0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 2008-09 Year 2009-10 2010-11 Hero Honda Motors Ltd. Bajaj Auto Ltd.

Current Ratio of Hero Honda was continuously decreasing till 2010-11 due to increase in current liabilities. On the other hand, Current Ratio of Bajaj Auto Ltd. is constant in first two years and in 2008-09 it increased due to increment in current assets. But thereafter, in 2009-10 it reduced due to decrease in current assets and increase in current liabilities and in 2010-11 it increased due to increase in current assets much more than increase in current liabilities.

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Liquid Ratio:Table Presentation
Selected companies Hero Honda Motors Ltd. YEARS (31st MARCH) 2006-07 2007-08 2008-09 2009-10 2010-11 Avg. LR 641.47 619.93 680.93 1665.49 977.97 1087.23 1377.62 1583.58 6405.73 3761.43 0.40 0.59 0.45 0.43 0.26 0.26 3514.87 1293.52 1982.97 1151.88 2321.68 4339.35 1874.67 2448.11 2879.69 3935.05 0.66 0.81 0.69 0.81 0.40 0.59 Liquid Assets Current Liabilities Liquid Ratio Liquid Assets Bajaj Auto Ltd. Current Liabilities Liquid Ratio

Graphical Presentation & Interpretation

0.9 0.8 0.7
Liquid Ratio

0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 2008-09 2009-10 2010-11 Year Hero Honda Motors Ltd. Bajaj Auto Ltd.

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Liquid Ratio of Hero Honda was continuously decreasing till 2010-11 due to high increase in current liabilities in comparison to increase in liquid assets. On the other hand, Liquid Ratio of Bajaj Auto Ltd. decreased in 2007-08 as the result of high degree of decrement in liquid assets and in 2008-09, it increased due to increase in liquid assets was more than the increase in current liabilities. In 2009-10, it again decreased because of increase in current liabilities & simultaneous decrease in liquid assets and thereafter in 2010-11, it increased due to high degree of increment in liquid assets in comparison to increase in current liabilities.

Debt Equity Ratio (DER):Table Presentation
Selected companies Hero Honda Motors Ltd. YEARS (31st MARCH) 2006-07 2007-08 2008-09 2009-10 2010-11 Avg. DER Long Term Loans 165.17 132.00 78.49 66.03 32.71 2470.06 2986.24 3800.75 3465.02 2956.06 0.03 Shareholders’ Funds Debt Equity Ratio 0.07 0.04 0.02 0.02 0.01 Long Term Loans 1625.43 1334.34 1570.00 1338.58 325.15 5534.32 1587.59 1869.69 2928.34 4910.22 0.50 Bajaj Auto Ltd. Shareholders’ Funds Debt Equity Ratio 0.29 0.84 0.84 0.46 0.07

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Graphical Presentation & Interpretation
0.9 0.8 0.7
Debt Equity Raio

0.6 0.5 0.4 0.3 0.2 0.1 0 2006-07 2007-08 2008-09 Year 2009-10 2010-11 Hero Honda Motors Ltd. Bajaj Auto Ltd.

The DER of Hero Honda was continuously decreasing as the amount of unsecured loans was decreasing and amount of reserves was increasing continuously. The DER of Bajaj Auto Ltd. was increasing till 2008-09 as there was decrease in shareholders’ funds and thereafter it started declining in connection with the increase in shareholders’ funds.

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Inventory Turnover Ratio (ITR):Table Presentation
Selected companies Hero Honda Motors Ltd. YEARS (31st MARCH) 2006-07 2007-08 2008-09 Cost of Goods Sold 7993.12 8272.46 9783.81 251.07 296.34 321.97 381.62 480.67 30.82 Average Stock Inventory turnover Ratio 31.84 27.92 30.39 31.38 32.57 Cost of Goods Sold 6901.01 6620.37 6463.47 8070.44 11798.81 291.32 329.66 344.23 392.53 496.75 21.37 Bajaj Auto Ltd. Average Stock Inventory turnover Ratio 23.69 20.08 18.78 20.56 23.75

2009-10 11974.93 2010-11 15657.82 Avg. ITR

Graphical Presentation & Interpretation
35 30

Inventory Turnover Ratio

25 20 15 10 5 0 2006-07 2007-08 2008-09 2009-10 2010-11 Year

Hero Honda Motors Ltd. Bajaj Auto Ltd.

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The ITR of Hero Honda was decreased in 2007-08 as the increase in average stock was much more than the increase in COGS and 2008-09 onwards, it was increasing. On the other hand, ITR of Bajaj Auto Ltd. was decreasing upto the year 2008-09 due to the increase in average stock & then it was increasing.

Earning Per Share (EPS):Table Presentation
Years (as on 31st March) 2006-07 2007-08 2008-09 2009-10 2010-11 Avg. EPS Selected companies Hero Honda Motors Ltd. Earning per share 43.00 48.50 64.20 111.80 96.50 72.80 Bajaj Auto Ltd. Earning per share 122.00 54.20 45.20 58.80 115.40 79.12

Graphical Presentation & Interpretation
140 120
Earning Per Share

100 80 60 40 20 0 2006-07 2007-08 2008-09 2009-10 2010-11 Year

Hero Honda Motors Ltd. Bajaj Auto Ltd.

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It is clear from the above graph that the EPS of Hero Honda Motors ltd. was increasing till 2009-10 as there was an increase in Profit after Tax (PAT) but in 2010-11, it declined as there was decrease in PAT. On the other hand, EPS of Bajaj Auto Ltd. was highest in 2006-07 and thereafter it started declining till 2008-09 as there was decrease in Net Profit & increase in Share Capital but 2009-10 onwards it was increasing as there was increase in Net Profit.

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Findings
From the comparison of various ratios between Hero Honda Motors Ltd. and Bajaj Auto Ltd., it can be concluded that Bajaj Auto Ltd. shows good performance during the last 5 years in comparative to Hero Honda Motors Ltd. The major findings are – GPR & NPR:The GPR as well as NPR of Bajaj Auto Ltd. is considerably more than that made by Hero Honda. This implies that the operations of Bajaj Auto Ltd. are more profitable. Return on Capital Employed:In recent Years the ROCE of Bajaj Auto Ltd. is higher than that of Hero Honda which shows that the company is providing better returns to its shareholders as well as to its long term loan providers. Turnover:The ITR of Hero Honda Motors Ltd. is more than that of Bajaj Auto Ltd. which indicates that the company is able to convert their inventory into sales quickly. Liquidity:The Bajaj Auto Ltd. has the higher current ratio as well as liquid ratio than that of Hero Honda which indicates that Bajaj is comparatively more able to meet out its short term liabilities. EPS:Bajaj Auto Ltd. is good from the point of view of investors as its EPS is comparatively more than that of Hero Honda Motors Ltd. Debt Equity Ratio:The DER of Hero Honda is significantly low as compared to Bajaj which implies that they are not much dependent on the outside debts and rely more on owner’s funds.
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Conclusion
On the basis of various ratios used, both the companies are doing fairly good but the performance of Bajaj Auto Ltd. is better than that of Hero Honda Motors Ltd. as its most of the ratios are higher than that of Hero Honda Motors Ltd. The shareholders of Bajaj Auto Ltd. are in much better position than those of Hero Honda Motors Ltd. On the basis of net profit ratio, debt equity ratio, return on capital employed etc., it can be said that Bajaj is able to provide better utilization of funds provided by the long term lenders. Similarly the short term lenders are more secure in Bajaj Auto Ltd. as it has high current ratio & liquid ratio than that of Hero Honda Motors Ltd.

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