Hero Motocorp

Hero Motocorp which was formerly known as Hero Honda, was founded in 1984. This company is the
largest two-wheeler manufacturer in the world. Hero Cycles of India and Honda of Japan started their
operation together with joint venture in 1984. In March 2011, they got separated. The technology in the
bikes of Hero Motocorp has come from the Honda of Japan.
Below are details of the supply chain matrices and Financial Matrices for Hero Motocorp.

Project_Ph1_Group
4.xlsx

Supply Chain Working Capital Productivity (SWC): It measures efficiency of supply chains of the firms. Its
higher value is desired. SWC of Hero Motocorp has been in negative from 2011-2018. As they mention in
their annual report that they always sought to efficiently use the various components of working capital
cycle. In the automotive industry, one of the key sources of competitive advantage is tracking inventory
cost effectively and efficiently.
From 2012 to 2013, it got changed from -19 to -46. This sudden increase is attributed to the net
receivables which got almost tripled in this financial year and effective control of inventories which
enable them to operate on negative working capital which is a part of their strategy which focuses on
increasing operational efficiency.

Total length of the supply chain: For Hero Motocorp, this value has varied from 11 to 13 with an average
around 12. They have tried to decrease its value over the year by employing different technologies in the
supply chain as performance of the firm improves as Total length of the supply chain of the firm
decreases.

Inefficiency of the Supply Chain (SCI): Value of this matrices for Hero Motocorp is very low which is
maintained at around 3.5%. This shows the relative efficiency of internal supply chain management of
Hero Motocorp. Value of this ratio is low for the firms who have good performance.

Return on Equity: ROE measure of financial performance calculated by dividing net

income by shareholders' equity. ROE measures of how effectively management is using a company’s
assets to create profits for the company. ROE value got decreased suddenly in FY 2012 as Hero and
Honda got separated on 22 March 2011. Though, Hero’s share in broader 2-wheeler market almost
doubled from 14.9% in FY 2012 to 28.6% in 2018, but its overall market share has declined from 45.1% to
36.6% in the same period.

Return on Financial Leverage: Value of this matrices also decreases in 2012 because of the sudden
decrement in the value of ROE as Hero and Honda ended their partnership in the March 2011.

Accounts Receivable Turnover: This ration is used to quantify a company's effectiveness in collecting its
receivables or money owed by clients. For Hero, Value of this matrices has been decreasing from 2011-
2018 as Net receivables are increasing during the same time.

PP&E Turnover: This ratio compares net sales to fixed assets and measures a company's ability to
generate net sales from its fixed-asset investments like Property, Plant and Equipment. It was increasing
from 2009 to 2014 but it got decreased suddenly in 2015 because Hero increased its Property, Plant and
Equipment (PP&E) cost by 44%. This cost got increased in 2015 because they opened their first overseas
plant in Bangladesh and started their operation in Turkey too. They also opened a plant in Rajasthan as
per their annual report.

Cash-to-Cash cycle: This matric is used to calculate how long cash is tied up in the main cash producing
and cash consuming areas: receivables, payables and inventory.

For Hero, value of this financial matrices got increased by almost 50% as account receivables almost got
tripled in this period.

Inventory Turnover: It is the number of times a company sells and replaces its stock of goods during a
certain period. Higher turnover is desired as it means company is selling goods very quickly and demand
for its products exist. It also shows whether a company’s sales and purchase department are in sync or
not.

For hero, value of this matric has been increasing and decreasing in the last decade i.e. 2009-2018.
 TVS Motors
TVS Motor is a motorcycle company founded in 1978. It is a third largest motorcycle company in India
with a revenue of over INR 20000 Crores. Sundaram Clayton Ltd and Suzuki Motor Corporation formed a
joint venture in 1982. Their production started in 1984. These 2 companies got separated in 2001.

Supply Chain Working Capital Productivity (SWC): Value of SWC in 2011 was very high and positive which
was rare. It was because of high trade receivable and low accounts payable.

Total length of the supply chain: The value of this matrices for TVS has been decreasing and increasing in
last 10 years i.e. 2009-2018. Its average value for the last 10 years is 33.15 which is very high compared
to the Hero Motocorp which has average of only 12 days.

Inefficiency of the Supply Chain (SCI): Value of this matrices for TVS motors keeps changing in last 10
years. Its average was 5.1% while it was 3.6% for Hero Motocorp during the same period.

Return on equity: ROE measure of financial performance calculated by dividing net

income by shareholders' equity. ROE measures of how effectively management is using a company’s
assets to create profits for the company. ROE for TVS has not been stable. It kept increasing and
decreasing. Its average value was 0.51 while for Hero, it was 0.70.

Accounts Receivable Turnover: Value of the matric for TVS increased by 33% in 2012 that was due to
24% decrement in the accountable receivable in corresponding year.

PP&E Turnover: This ratio compares net sales to fixed assets and measures a company's ability to
generate net sales from its fixed-asset investments like Property, Plant and Equipment. Value of this
matric got increased by 51% in 2011. This was due to increase in the sales by 44%.

Cash-to-Cash cycle (in weeks): This matric is used to calculate how long cash is tied up in the main cash
producing and cash consuming areas: receivables, payables and inventory. Average value of the matric
during 2009-2018 for TVS in -4.8% which is higher than that of Hero which has -6.1% in the corresponding
period.
The Comparison of the various financial and supply chain matrices of HERO and TVS shows how Hero
Motocorp is performing better than TVS in almost all matrices. This is why Hero is the market leader in 2-
wheeler motorcycle.