A Comparative Analysis of Hero Honda Motors Ltd. and Bajaj Auto Ltd

TERM PAPER

ON

“A COMPARATIVE ANALYSIS OF HERO HONDA MOTORS LTD. AND

BAJAJ AUTO LTD.”

&

SUBMITTED TO: - SUBMITTED BY:-

DR. BHAWNA JOHRI AKASH KUMAR AKSHAY SRIVASTAVA

ALOK MISHRA GOVIND KUMAR

PIYUSH AGRAWAL

FACULTY OF COMMERCEDAYALBAGH EDUCATIONAL INSTITUTE

(DEEMED UNIVERSITY)DAYALBAGH AGRA

1

TABLE OF CONTENTS

SR. NO. PARTICULARS

PAGENO.

1. INTRODUCTION OF TWO WHEELER INDUSTRY 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.

14

6. BALANCE SHEET AND PROFIT & LOSS A/C OF BAJAJ AUTO LTD.

16

7. ANALYSIS AND INTERPRETATION 18

8. FINDINGS 30

9. CONCLUSION 31

Introduction to Indian Two-wheeler Industry2

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 two-

wheelers.

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.

Profile of Hero Honda Motors Ltd. (Hero Honda Motors Ltd.)

3

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 Public company

Traded as BSE: 500182 NSE: Hero Honda Motors Ltd.

Industry AutomotiveFounded 19 January 1984 (Gurgaon)Founder(s) Brijmohan Lall MunjalHeadquarters New Delhi, India

Key peopleBrijmohan Lall Munjal (Chairman), Pawan Munjal (MD & CEO)

Products Motorcycles, scootersRevenue 19,669.290 crore (US$3.92 billion)Operating income

2,597.07 crore (US$518.12 million) (FY 2010-2011)

Net income 1,927.90 crore (US$384.62 million) (FY 2010-2011)Parent Hero GroupWebsite www.heromotocorp.com

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

4

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.

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 5

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

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

6

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".

Profile of Bajaj Auto Ltd.

Bajaj Auto Limited

7

http://en.wikipedia.org/wiki/Honda

http://en.wikipedia.org/wiki/File:Bajaj_Auto_Logo.svg

Type Public

Traded asBSE: 532977, NSE: BAJAJ-AUTOBSE SENSEX Constituent

Industry AutomotiveHeadquarters Pune, Maharashtra, IndiaKey people Rahul Bajaj (Chairman)Products Motorcycles, ScootersRevenue 16,974 crore (US$3.39 billion) (2011)Net income 3,454 crore (US$689.07 million) (2011)Employees 10,250 (2006-07)Parent Bajaj GroupWebsite www.bajajauto.com

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 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.

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 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 near Aurangabad. In

8

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

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

9

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

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

10

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

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."

11

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

Limitations of Ratio Analysis

Limited Comparability

False Results

Effect of Price Level Changes

12

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 Calculation Interpretation

Gross Profit Margin

[Gross Profit / Revenue] x 100

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

[Net Profit/Net Sales] x 100

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.

Return on capital employed ("ROCE")

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

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.

Liquidity Ratios

Liquidity ratios indicate how capable a business is of meeting its short-term

obligations as they fall due:

13

Ratio Calculation InterpretationCurrent Ratio

Current Assets / Current Liabilities

A simple measure that estimates whether the business can pay debts due within one year from assets that it expects to turn into cash within that year.

Quick Ratio (or "Acid Test Ratio”

Quick Assets / Current Liabilities

Not all assets can be turned into cash quickly or easily. Some - notably raw materials and other stocks - must first be turned into final product, then sold and the cash collected from debtors. The Quick Ratio therefore adjusts the Current Ratio to eliminate all 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.


Debt-Equity Ratio

Long Term Debt/Shareholders, Funds

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

Turnover Ratio


Inventory Turnover Ratio

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

14

Market Ratio

Ratio Calculation Comments

Earnings per share ("EPS")

Net Profit after Tax & Pref. Div. / No. of Equity Shares

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.

Balance Sheet of Hero Honda Motors Ltd. (in Rs. Crore)

Mar' 11 Mar' 10 Mar' 09 Mar' 08 Mar' 07Sources of Funds

15

Shareholders' Funds Share Capital 39.94 39.94 39.94 39.94 39.94 Reserves & Surplus 2916.12 3425.08 3760.81 2946.3 2430.12

2956.06 3465.02 3800.75 2986.24 2470.06Loan Funds Unsecured 32.71 66.03 78.49 132 165.17 Deferred Payment Credits 1458.45 - - - - Deferred Tax Liabilities 252.72 160.63 153.08 130.59 129.58

Total 4699.94 3691.68 4032.32 3248.83 2764.81Application of FundsFixed Assets Gross Block 5538.46 2750.98 2516.27 1938.78 1800.63Less : Depreciation 1458.18 1092.2 942.56 782.52 635.1 Net Block 4080.28 1658.78 1573.71 1156.26 1165.53 Capital Work in Progress 125.14 48.14 120.54 392.44 189.92

4205.42 1706.92 1694.25 1548.7 1355.45Investments 5128.75 3925.71 3368.75 2566.82 1973.87Deferred Tax Assets 5.95 7.88 8.65 21.27 1.38Current Assets, Loans & Advances Inventory 524.93 436.4 326.83 317.1 275.58 Sundry Debtors 130.59 108.39 149.94 297.44 335.25 Cash & Bank Balances 71.52 1907.21 219.57 131.09 35.78 Other Current Assets 48.87 24.82 5.89 5.69 3.6 Loans & Advances 728.66 405.76 311.26 185.46 263.06

1504.57 2882.58 1013.49 936.78 913.27Less : Current Liabilities &

Provisions Current Liabilities 5063.68 3805.06 1525.85 1324.98 1041.92 Provisions 1081.07 1026.35 526.97 499.76 437.24

6144.75 4831.41 2052.82 1824.74 1479.16Net Current Assets (4640.18) (1948.83) (1039.33) (887.96) (565.89)

Total 4699.94 3691.68 4032.32 3248.83 2764.81

Profit & Loss A/c of Hero Honda Motors Ltd.

(in Rs. Crore)

Particulars Mar' 11 Mar' 10 Mar' 09 Mar' 08 Mar' 07

16

Income

Gross Sales 20662.39 16780.62 13543.09 12038.53 11542.04Less : Excise Duty 1417.36 1022.44 1223.97 1706.73 1642.08Net Sales 19245.03 15758.18 12319.12 10331.80 9899.96Other Income 424.87 340.61 220.72 185.42 189.95

19669.90 16098.79 12539.84 10517.22 10089.81

Expenditure

Manufacturing & Other Expenses 16784.77 13096.21 10609.40 8982.43 8726.92Depreciation 402.38 191.47 180.66 160.32 139.78Interest(Net) (1.85) (20.62) (31.68) (35.81) (22.99)

17185.3 13267.06 10758.38 9106.94 8843.71

Profit for the Year before tax 2404.76 2871.73 1781.46 1410.28 1246.10Provision for Taxation Current 392.43 590.34 475.65 417.49 375.81 Deferred 94.02 8.32 33.85 1.20 23.41 Fringe Benefit (92.92) - 4.99 4.39 2.98Profit after Tax 2011.23 2233.07 1266.97 987.20 843.90Balance of Profit brought forward 2146.55 2707.28 2021.77 1594.78 1224.05Balance available for Appropriation 4157.78 4940.35 3288.74 2581.98 2067.95

Appropriations

Interim Dividend 1397.81 1597.50 - - -Proposed Dividend 698.91 599.06 399.38 379.41 339.47Tax on Dividend 340.14 371.00 67.87 64.48 57.69Transfer to General Reserve 276.12 226.24 114.21 116.32 76.01Balance carried to Balance Sheet 1444.80 2146.55 2707.28 2021.77 1594.78

4074.45 4939.11 3303.53 2562.66 2081.94

Balance Sheet of Bajaj Auto Ltd. (in Rs. Crore)

Mar' 11 Mar' 10 Mar' 09 Mar' 08 Mar' 07Sources of FundsShareholders' Funds

17

Share Capital 289.37 144.68 144.68 144.68 101.18 Reserves & Surplus 4620.85 2783.66 1725.01 1442.91 5433.14

4910.22 2928.34 1869.69 1587.59 5534.32Loan Funds Secured 23.53 12.98 - 6.95 22.46 Unsecured 301.62 1325.60 1570 1327.39 1602.97 Deferred Tax Liabilities 197.70 191.81 164.79 141.94 184.49 Deferred Tax Assets (167.99) (190.12) (160.60) (130.96) (110.32)

Total 5265.08 4268.61 3443.88 2932.91 7233.92Application of FundsFixed Assets Gross Block 3390.88 3379.25 3333.94 2984.15 3174.41Less : Depreciation 1912.45 1899.66 1807.91 1726.07 1922.44 Net Block 1478.43 1479.59 1526.03 1258.08 1251.97 Capital Work in Progress 69.86 41.52 22.06 34.74 286.7

1548.29 1521.11 1548.09 1292.82 1296.39Technical know how 4.28 - 16.26 10.53 4.13Investments 4795.20 4021.52 1808.52 1857.14 6447.53Current Assets, Loans & Advances Inventory 547.28 446.21 338.84 349.61 309.70 Sundry Debtors 362.76 239.45 358.65 275.31 529.83 Cash & Bank Balances 556.49 101.41 136.87 56.07 83.48 Other Current Assets 216.42 139.36 125.68 79.95 36.22 Loans & Advances 1189.64 657.40 1365.23 888.77 2859.40

2872.59 1583.83 2325.27 1649.71 3818.63Less : Current Liabilities &

Provisions Current Liabilities 2426.65 2026.25 1213.41 1043.25 1498.97 Provisions 1528.63 831.60 1224.15 834.04 2833.79

3955.28 2857.85 2437.56 1877.29 4332.76Net Current Assets (1082.69) (1274.02) (112.29) (227.58) (514.13)Miscellaneous Expenditure - - 183.3 - -

Total 5265.08 4268.61 3443.88 2932.91 7233.92

Profit & Loss A/c of Bajaj Auto Ltd.

(in Rs. Crore)

Particulars Mar' 11 Mar' 10 Mar' 09 Mar' 08 Mar' 07

Income

18

Gross Sales 16931.53 12118.08 9049.66 9689.95 10606.09Less : Excise Duty 933.41 609.58 612.72 1026.66 1313.86Net Sales 15998.12 11508.50 8436.94 8663.29 9292.23Other Income 1701.17 534.98 495.32 505.55 783.82

17699.29 12043.48 8932.26 9168.84 10076.05

Expenditure

Manufacturing & Other Expenses 13224.01 9328.42 7837.79 7878.03 8184.45Depreciation 122.84 136.45 129.79 173.96 190.26Interest 1.69 5.98 21.01 5.16 5.34

13348.54 9470.85 7988.59 8057.15 8348

Profit for the Year before tax 4350.75 2411.13 958.09 1134.73 1728.05Provision for Taxation Current 983 716.14 300.90 392.75 501.36 Deferred 28.02 (5.12) (6.79) (17.32) (13.41) Fringe Benefit - - 9.48 3.52 3.00Profit after Tax 3339.73 1700.11 654.50 755.78 1237.10Balance of Profit brought forward 854.99 - - - -Balance available for Appropriation 4194.72 1700.11 654.50 755.78 1237.10

Appropriations

Interim Dividend - - - - -Proposed Dividend 1157.47 578.73 318.30 289.37 404.73Tax on Dividend 187.77 96.12 54.10 49.18 69.64Transfer to General Reserve 334 170.27 282.10 417.23 762.73Balance carried to Balance Sheet 2515.48 854.99 - - -

4194.72 1700.11 654.50 755.78 1237.10

Data Analysis & Interpretation

Gross Profit Ratio (GPR):-

19

Table Presentation

YEARS

(31st

MARCH)

Selected companies

Hero Honda Motors Ltd. Bajaj Auto Ltd.

Gross

Profit

Net

Sales

Gross

Profit

Ratio

(%)

Gross

Profit

Net

Sales

Gross

Profit

Ratio

2006-07 1906.84 9899.96 19.26 2391.22 9292.23 25.73

2007-08 2059.3410331.8

019.93 2042.92 8663.29 23.58

2008-09 2535.3112319.1

220.58 1973.47 8436.94 23.39

2009-10 3783.2515758.1

824.01 3438.06 11508.50 29.87

2010-11 3587.2119245.0

318.64 4199.31 15998.12 26.25

Avg. GPR20.48 25.76

Graphical Presentation & Interpretation

0

5

10

15

20

25

30

35

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

Year

Gro

ss

Pro

fit

Ra

tio


Bajaj Auto Ltd.

20

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

YEARS

(31st

MARCH)

Selected companies


Net

Profit

Net

Sales

Net

Profit

Ratio

(%)

Net

Profit

Net

Sales

Net

Profit

Ratio

(%)

2006-07 843.90 9899.96 8.52 1237.10 9292.23 13.31

2007-08 987.2010331.8

09.55 755.78 8663.29 8.72

2008-09 1266.9712319.1

210.28 654.50 8436.94 7.76

2009-10 2233.0715758.1

814.17 1700.11

11508.5

014.77

2010-11 2011.2319245.0

310.45 3339.73

15998.1

220.88

Avg. NPR10.59 13.09

21


0

5

10

15

20

25

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

Year

Net

Pro

fit

Rat

io


Bajaj Auto Ltd.

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

YEARS

(31st

MARCH)

Selected companies


Net

Profit

before

Int. &

Tax

Net

Capital

Employe

d

ROCE

(%)

Net

Profit

before

Int. &

Tax

Net

Capital

Employe

d

ROCE

(%)

2006-07 938.14 2635.23 35.60 1237.20 7159.75 17.28

2007-08 1050.84 3118.24 33.70 755.90 2921.93 25.87

2008-09 1423.68 3879.24 36.70 654.57 3439.69 19.03

2009-10 2129.22 3531.05 60.30 1700.11 4266.92 39.84

2010-11 1452.54 2988.77 48.60 3339.73 5235.37 63.79

Avg. ROCE42.98 33.16


23

0

10

20

30

40

50

60

70

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

Year

Re

turn

on

Ca

pit

al E

mp

loy

ed


Bajaj Auto Ltd.

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

YEARS

(31st

MARCH)

Selected companies


Current

Assets

Current

Liabilitie

s

Current

Ratio

Current

Assets

Current

Liabilitie

s

Current

Ratio

2006-07 913.70 1087.23 0.84 3818.63 4339.35 0.88

24

2007-08 936.78 1377.62 0.68 1649.71 1874.67 0.88

2008-09 1013.49 1583.58 0.64 2325.70 2448.11 0.95

2009-10 2882.58 6405.73 0.45 1583.83 2879.69 0.55

2010-11 1504.57 3761.43 0.40 2872.59 3935.05 0.73

Avg. CR0.60 0.80


0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

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

Year

Cu

rren

t R

atio


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.

25

Liquid Ratio:-

Table Presentation

YEARS

(31st

MARCH)

Selected companies


Liquid

Assets

Current

Liabilitie

s

Liquid

Ratio

Liquid

Assets

Current

Liabilitie

s

Liquid

Ratio

2006-07 641.47 1087.23 0.59 3514.87 4339.35 0.81

2007-08 619.93 1377.62 0.45 1293.52 1874.67 0.69

2008-09 680.93 1583.58 0.43 1982.97 2448.11 0.81

2009-10 1665.49 6405.73 0.26 1151.88 2879.69 0.40

2010-11 977.97 3761.43 0.26 2321.68 3935.05 0.59

Avg. LR0.40 0.66


26

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

YEARS

Selected companies


Long

Term

Shareholder

s’ Funds

Debt

Equity

Long

Term

Shareholder

s’ Funds

Debt

Equity

27

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

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

Year

Liq

uid

Ra

tio


Bajaj Auto Ltd.

(31st

MARCH

)

Loans Ratio Loans Ratio

2006-

07165.17 2470.06 0.07

1625.4

35534.32 0.29

2007-

08132.00 2986.24 0.04

1334.3

41587.59 0.84

2008-

0978.49 3800.75 0.02

1570.0

01869.69 0.84

2009-

1066.03 3465.02 0.02

1338.5

82928.34 0.46

2010-

1132.71 2956.06 0.01 325.15 4910.22 0.07

Avg. DER0.03 0.50


0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

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

Year

Deb

t E

qu

ity

Rai

o


Bajaj Auto Ltd.

28

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.

Inventory Turnover Ratio (ITR):-

Table Presentation

YEARS

(31st

MARCH

)

Selected companies


Cost of

Goods

Sold

Average

Stock

Inventor

y

turnover

Ratio

Cost of

Goods

Sold

Average

Stock

Inventor

y

turnover

Ratio

2006-

077993.12 251.07 31.84 6901.01 291.32 23.69

2007- 8272.46 296.34 27.92 6620.37 329.66 20.08

29

08

2008-

099783.81 321.97 30.39 6463.47 344.23 18.78

2009-

1011974.9

3381.62 31.38 8070.44 392.53 20.56

2010-

1115657.8

2480.67 32.57 11798.81 496.75 23.75

Avg. ITR30.82 21.37


0

5

10

15

20

25

30

35

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

Year

Inv

en

tory

Tu

rno

ve

r R

ati

o


Bajaj Auto Ltd.

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

30

Years (as

on 31st

March)

Selected companies


Earning per share Earning per share

2006-07 43.00 122.00

2007-08 48.50 54.20

2008-09 64.20 45.20

2009-10 111.80 58.80

2010-11 96.50 115.40

Avg. EPS 72.80 79.12


0

20

40

60

80

100

120

140

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

Year

Ea

rnin

g P

er

Sh

are


Bajaj Auto Ltd.

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.

31

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:-

32

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.

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.

33

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.

34

Documents

A Comparative Analysis of Hero Honda Motors Ltd. and Bajaj Auto Ltd