2 Board of Directors
4 Highlights
6 Chairman’s Letter
10 Managing Director’s Message
12 Joint Managing Director’s Message
14 Chronicle of 20 Years
22 Management Discussion & Analysis
37 Financial Highlights & Key Ratios
38 Economic Value Added Statement
40 Directors’ Report
48 Corporate Governance Report
64 Annexure II & III to Director’s Report
69 Auditors’ Report
70 Annexure to Auditors’ Report
72 Balance Sheet,Profit & Loss Account
and Cash Flow Statement
76 Schedules
CONTENTS
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HERO HONDA
Annual Report 2003–2004
2
BRIJMOHAN LALL MUNJAL CHAIRMAN
PAWAN MUNJAL MANAGING DIRECTOR
AKIO KAZUSA JOINT MANAGING DIRECTOR
SHINICHI NAKAYAMA WHOLE–TIME DIRECTOR With effect from May 9, 2003
SATYANAND MUNJAL NON EXECUTIVE DIRECTOR
OM PRAKASH MUNJAL NON EXECUTIVE DIRECTOR
SATYA PAUL VIRMANI NON EXECUTIVE & INDEPENDENT DIRECTOR
MAHENDRA PAL WADHAWAN NON EXECUTIVE & INDEPENDENT DIRECTOR
OM PRAKASH GUPTA NON EXECUTIVE & INDEPENDENT DIRECTOR
SATOSHI TOSHIDA NON EXECUTIVE & INDEPENDENT DIRECTOR
KOJI NAKAZONO NON EXECUTIVE & INDEPENDENT DIRECTOR with effect from April 1, 2004
NARENDRA NATH VOHRA NON EXECUTIVE & INDEPENDENT DIRECTOR
PRADEEP DINODIA NON EXECUTIVE & INDEPENDENT DIRECTOR
GEN. (RETD.) VED PRAKASH MALIK NON EXECUTIVE & INDEPENDENT DIRECTOR
YUKIHIRO AOSHIMA NON EXECUTIVE & INDEPENDENT DIRECTOR upto April 1, 2004
KAZUMI YANAGIDA EXECUTIVE DIRECTOR upto April 24, 2003
BOARD OF DIRECTORS
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3TECHNICAL AND FINANCIALCOLLABORATORSHONDA MOTOR CO., LTD.
1–1 MINAMI AOYAMA
2–CHOME, MINOTO–KU
TOKYO 101–8556, JAPAN
REGISTERED AND CORPORATE OFFICE 34, COMMUNITY CENTRE,
BASANT LOK, VASANT VIHAR,
NEW DELHI 110 057
TEL: 011-2614 2451, 2614 4121
FAX: 011-2615 3913
www.herohonda.com
DHARUHERA PLANT 69 K.M. STONE
DELHI–JAIPUR HIGHWAY
DHARUHERA, DISTT. REWARI
HARYANA 121 006
TEL: 01274-242 131–135
FAX: 01274-242 399
GURGAON PLANT 37 K.M. STONE
DELHI–JAIPUR HIGHWAY
SECTOR 33–34, INDUSTRIAL AREA
GURGAON
HARYANA 122 001
TEL: 0124-2372 123–130
FAX: 0124-2373 141–142
SR. VICE PRESIDENTSATUL SOBTI MARKETING & SALES
K. K. AGRAWAL OPERATIONS
VICE PRESIDENTSK. K. MALHOTRA MATERIALS
N. N. AKHOURI HRM
RAVI SUD FINANCE
S. R. BALASUBRAMANIAN INFORMATION SYSTEMS
COMPANY SECRETARYILAM C. KAMBOJ
AUDITORSA.F.FERGUSON & CO.CHARTERED ACCOUNTANTS
9, SCINDIA HOUSE, KASTURBA GANDHI MARG
NEW DELHI–110 001
PRINCIPAL BANKERSPUNJAB NATIONAL BANKCITIBANK N.A.THE BANK OF TOKYO—MITSUBISHI LIMITEDABN AMRO BANK N.V.HDFC BANK LIMITEDSTANDARD CHARTERED BANKICICI BANK LIMITEDHSBC LIMITED
COMMITTEE OF DIRECTORSAUDIT COMMITTEEM. P. WADHAWAN CHAIRMAN
O. P. GUPTA PRADEEP DINODIA
SHAREHOLDER'S GRIEVANCE COMMITTEEO. P. GUPTA CHAIRMAN
PRADEEP DINODIA KAZUMI YANAGIDA upto April 24, 2003
M. P. WADHAWAN with effect from September 30, 2003
REMUNERATION COMMITTEES. P. VIRMANI CHAIRMAN
N. N. VOHRA GEN. (RETD.) VED PRAKASH MALIK
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4 COMPLETION OF 20 GLORIOUS YEARS of Growth,Leadership and Value Creation.
2.07 MILLION Hero Honda motorcycles soldduring the year.
HERO HONDA SPLENDOR continues to be the largestselling two-wheeler model in the world for the fourthyear in a row.
THE NO.1 two wheeler company in the world for thethird year in a row.
OPBT GREW by 14.6 % from Rs.792 Crore to Rs.907Crore. Operating margin (OPBT as a percentage ofnet sales) increased from 15.5%in 2002-03 to15.6% in 2003-04.
MARKET SHARE INCREASEDTO 48% in motorcycles, 4%gain over the previous year.
OVER 1 MILLION UNITS OFSPLENDOR sold during FY2003 - 04
HIGHLIGHTS OF THE YEAR 2003-2004
TOTAL INCOME PROFIT AFTER TAX ROACESALES VOLUME
In Lacs In Rs. Crores In Rs. Crores In %
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RETURN ON AVERAGE EQUITY (ROAE) was at 72.9%in 2003-04.
OPBDIT GREW by 14.7% from Rs. 854Crore in 2002-03 to Rs. 979 Crore in2003-04. OPBDIT as a percentage ofnet sales increased from 16.7 per centto 16.8 per cent during the sameperiod.
NFO 2003 TOTAL CUSTOMERSATISFACTION (TCS) Awards forSplendor and CD100SS
POST TAX PROFIT (PAT) GREW by 25.4%from Rs. 581 Crore to Rs. 728 Crore in 2003-04.
RETURN ON AVERAGE CAPITAL EMPLOYED (ROACE) was at 92.8% in 2003-04.
ROAE EARNINGS PER SHARE(on face value of Rs. 2.00 per share)
EVA/CAPITAL EMPOYED NET CASH FLOW FROMOPERATIONS
5
In % In Rs. In % In Rs. Crores
5 MILLIONTH MOTORCYCLE rolledout at Dharuhera plant
RANKED NO. 3 among Indian Companies by Review200 for the third consecutive time by Far EasternEconomic Review; only Indian automobile companyto ever make it to the list.
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IHAVE BEEN USING the annual report
as an appropriate medium to
communicate the performance and
progress of your Company and also
unveil the future plans of the
Company.
Making sustained progress through
investments and improvements in
its functioning is the hallmark of a
company, which is well managed
and is committed to its vision and
purpose. In this regard, I am
pleased to inform you that Hero
Honda in the year 2003–2004
completed 20 years of its existence
and during the year added new
milestones to its already existing
long list of achievements so far.
In the year under review, Hero
Honda sold over 2 million
motorcycles and recorded a 23%
growth over last years' 1.68 million
sales. Not only that, your
Company's sales growth was higher
than the industry average of 14%.
Your company also improved its
market share to 48% and 37% in
motorcycles and two–wheelers
respectively. What is more important
to note is that for the third year in a
row, the Company retained its
number one position as the single
largest two–wheeler manufacturer in
the world. Splendor, the world's
largest selling brand, for the fourth
consecutive year not only retained
its position but also achieved the 1
million sales mark. With 5 new
launches during the year, the entire
product range gave a fresh and
contemporary image to the
customers.
It is equally satisfying to note that
the financial results, which are
considered to be the best in the
industry for the year, reflect both the
sides of the Company's
performance. That is, they reflect
the revenue earned through sales
and also the efficiency with which
resources were managed in the
process of creating wealth for
shareholders.
Hero Honda's sales increased by
CHAIRMAN’S LETTER
HERO HONDA
Annual Report 2003–2004
6
BRIJMOHAN LALL
CHAIRMAN
Dear Members,
ND_L18fontscorrected FIN.qxd 7/26/2004 5:30 PM Page 6
7
14.3 per cent from Rs.5,102
Crore in 2002–03 to Rs.5,832
Crore in 2003–04. Cost of raw
materials as a percentage of
total sales increased from 68.0
per cent in 2002–03 to 69.1
percent in 2003–04, owing to a
change in sales mix and higher
steel prices (during the latter
part of the fiscal year).
A continuous focus on cost
management and operating
efficiency has enabled the
company to marginally improve
its OPBDIT margin from 16.7
per cent in 2002–03 to 16.8 per
cent in 2003–04. Operating
profit (PBT before other income)
grew by 14.6 per cent from
Rs.792 Crore in 2002–03 to
Rs.907 Crore in 2003–04.
Operating profit margin
improved marginally from 15.5
per cent in 2002–03 to 15.6
percent in 2003–04. Profit after
tax (PAT) went up by 25.4 per
cent from Rs.581 Crore in
2002–03 to Rs.728 Crore in
2003–04. Other Income rose from
Rs.92.9 Crore in 2002–03 to
Rs.165.0 Crore in 2003–04.
Return on average capital
employed (ROACE) of the
Company was 92.8 percent in
2003–04, while return on average
equity (ROAE) was 72.9 per cent
in 2003–04. Above all, your
Company continues to be a debt
free company.
We feel quite happy at these
results. At the same time we are
making continuous efforts to
reduce costs further through
efficiency and productivity, so that
we are able to offer products at a
reasonable price and realize better
profits. We are not alone in this
endeavour. All the vendors,
suppliers and dealers and other
associates have been contributing
their bit to achieve the goals of the
Company and we acknowledge
their continuous co-operation in
sustaining our leadership position.
Most important of all is the support
20Y E A R S
We are proud of the fact that Hero Honda is one of the most
successful two-wheeler joint ventures of Honda world wide. Not
only will the 20 years of relationship be cemented further, Honda
is committed to providing full support to Hero Honda. Be it
advance engine technology, new product introductions or any
other related area of the partnership.
S. TOSHIDAMANAGING DIRECTOR, CEO REGIONAL OPERATIONS (ASIA OCEANIA)HONDA MOTORS CO. LTD, JAPANJune 2, 2004
FOR THE THIRD YEAR IN A ROW, THECOMPANY RETAINED ITS NUMBERONE POSITION AS THE SINGLELARGEST TWO–WHEELERMANUFACTURER IN THE WORLD.SPLENDOR, THE WORLD'S LARGESTSELLING BRAND, FOR THE FOURTHCONSECUTIVE YEAR NOT ONLYRETAINED ITS POSITION BUTACHIEVED THE 1 MILLION SALESMARK
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and co-operation we have been
recieving from our JV Partner,
Honda Motor Co., Japan and Hero
Cycles, Ludhiana, from time to
time. You will be pleased to know
that the technical collaboration
between Honda and Hero Honda
has been extended for another 10
years, that is, up to 2014, which
will ensure continuous flow of
world class technology and
technical assistance for our
products and processes. As in the
past, the combination of business
understanding of Hero Honda and
technology of Honda Motor
Company will certainly provide us
a competitive advantage.
Customer is the purpose of our
enterprise. In order to build a
lasting relationship with customers,
Hero Honda started what is now
popularly known as the “Hero
Honda Passport Program”. Under
this scheme, every customer of
Hero Honda, past or present is
eligible to enroll as a member.
Passport holders are in a way
special members of the Hero
Honda extended family; they will
have an opportunity to promote
Hero Honda products and in turn
reap the benefits of their
relationship with the company
under the scheme. They can send
referrals to purchase our products,
buy components at authorized
dealers and accumulate points.
Every transaction makes them
eligible for incentives and gifts
depending on aggregate scores. As
of date, there are about 1.5 million
passport holders, which is 50%
higher than last year's enrolment.
In order to serve the customer in
every nook and corner of the
country, the Company has been
expanding its network of
dealerships and service points.
Today a customer has over 1700
contact points for enquiry,
purchase, and service of Hero
Honda products that include 545
dealers and 385 SSPs. In the
coming years, we would like to
extend this facility at Taluq levels
also. For the last few years, spare
parts business has been
developed as a profit center, which
for the year under review
contributed a turnover of Rs.275
Crores. In order to establish on line
connection with the dealers and
communicate with them on real
time basis, network infrastructure
is being put in place.
Similarly your Company has 256
suppliers that include 36
ancillaries. They work with us in
tandem and have been delivering
supplies without hiccups for our
expanding capacities, which is
today rated at 2.8 million vehicles
per annum. The continuous
expansion in quick succession
HERO HONDA
Annual Report 2003–2004
Chairman’s Letter
THE COMBINATION OF BUSINESSUNDERSTANDING OF HEROHONDA AND TECHNOLOGY OFHONDA MOTOR COMPANY WILLCERTAINLY PROVIDE US ACOMPETITIVE ADVANTAGE
PASSPORT HOLDERS ARE IN AWAY SPECIAL MEMBERS OF THEHERO HONDA EXTENDED FAMILY;THEY WILL HAVE ANOPPORTUNITY TO PROMOTE HEROHONDA PRODUCTS AND IN TURNREAP THE BENEFITS OF THEIRRELATIONSHIP WITH THECOMPANY
8
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would not have been possible for
us without their solid support.
Hero Honda has been able to
achieve direct on line facility with
15 vendors to begin with and we
have plans to achieve 50%
coverage in the current fiscal itself.
In order to increase efficiency,
supply chain management,
supplier relationship management
modules of SAP ERP are extended
to our suppliers. Initially a few
suppliers (ten) have been chosen
for this purpose, and the scheme
will be extended to others in a
phased manner. We have also
been continuously extending
technical assistance to our
suppliers to enable better quality
compliance and for effecting cost
reduction.
We are very much aware of your
unstinted support all along for this
organization and its efforts, which
are directed at creating wealth and
profit. We do not believe in holding
the surplus beyond requirement
and thus have been distributing
them in the form of dividend. We
are happy that we have been able
to declare every year an increasing
rate of dividend for our
shareholders. For the fiscal year
2003–04, your Board of Directors
has recommended a total of
1000% dividend, including the
500% Special Interim Dividend
already paid to the Share holders.
It gives me great satisfaction to
share with you the fact that our
employees are quite committed to
organizational growth and the
organization treats them and their
families as stakeholders. Our
productivity has been showing
steady improvement from our
4000 plus member strong team. It
has been our endeavour to train
them for better productivity and
skill improvements.
Hero Honda as a corporate citizen
is engaged in community and
social development activities
around its plants. It has been a
satisfying experience to see the
marked changes in the quality of
people of the region due to these
programs.
Coming to the perspective, we feel
that Hero Honda has a great role
to play in the Indian two–wheeler
industry, the second largest in the
world. Current macro economic
trends and demographic factors
promise sustained growth in
demand. No doubt there are
challenges of increased
competition, rising prices of raw
materials and services and
discerning choice of customers,
which need continuous attention.
There is a need to think and act in
an innovative manner to discover
new avenues of growth and
efficiency. With our capabilities
built over the years and with the
assistance of Honda Motor
Company, we will be able to face
these challenges and create new
milestones as we march ahead.
Once again, thank you for your
continuous support, for which we
all at Hero Honda are truly
grateful.
Yours Sincerely
Brijmohan Lall
CHAIRMAN HERO HONDA MOTORS LTD.
9
20Y E A R S
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HERO HONDA
Annual Report 2003–2004
10
Dear Members,
IT HAS BEEN AN EVENTFUL TWENTY
YEARS since the day Honda Motor
Co. of Japan and Hero Group of
India entered into a Joint Venture
agreement. Hero Honda has
traversed many milestones to
become the World's No.1 Two-
Wheeler Company. Powered by
partnerships - between Honda and
Hero Group to begin with, the
Company has extended the
collaborative spirit to its ancillaries,
vendors, suppliers, distributors,
shareholders, employees and other
stakeholders.
Management of partnerships has
been our strength. This is borne out
by the fact that Hero Honda has
emerged as one of the best
performing companies in the
country. Honda considers Hero
Honda amongst its most thriving
ventures across the world. Our
relationship with our collaborator
has been excellent throughout. It is
appropriate to recount that this
partnership has been responsible
for the introduction of India's first
four-stroke motorcycle CD-100,
which even today is a legend. It is a
matter of great pleasure to inform
you that Honda has renewed its
technical collaboration with Hero
Honda for another 10 years, that is,
up to 2014.
From the very beginning, Hero
Honda created ancillaries to
manufacture critical components for
motorcycles to ensure overall
efficiency. In today's modern
manufacturing system, companies
are increasingly dependent on
outsourcing and thus partnerships
have become all the more
important. As a result of our good
supply chain policies, ancillaries are
now able to supply components
directly on-line for assembly.
Our customer interface highlights
another dimension of successful
partnership. Dealers as our partners
carry on the spirit of Hero Honda to
the customers. With many of them,
we enjoy a special relationship
because they have been associated
THE POWER OF PARTNERSHIP
PAWAN MUNJAL
MANAGING DIRECTOR
Managing Director’s Message
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11
20Y E A R S
Hero Honda is an example of an ideal partnership
where core competencies of two organizations have
come together to create a world leader. With our
combined strengths and the resolve for constant
improvement, Hero Honda will continue to dominate
the two-wheeler market.
BRIJMOHAN LALLCHAIRMAN, HERO HONDA MOTORS LTD
with us for generations. Through
them we extend the "Joy of Selling"
experience to the customer for our
products. In terms of customer
satisfaction and relationship
management, our Passport
Program has been unique in
creating a feeling of privilege as
well as loyalty among our valued
customers.
People working for the organization
are our creative assets. They are
the "lifeline" of the organization, as
they run our plants, and oversee
every aspect of the corporate
function. If our company is
efficient, it can be attributed to the
capability and dedication of our
people. We partner with them and
their families to make the
enterprise a happy work place.
The Customer is our valued
partner. In interacting with him
and in trying to provide products
and services to him we have learnt
a great deal about the market's
needs. His preference of our
products has been a continuous
inspiration for us to do even better
in terms of creating technologically
and performance-wise superior
products - one after another.
Our partnership with the
community around our
manufacturing facilities is in the
shape of projects covering rural
development, education and
health to raise the quality of life of
people. Under the aegis of Raman
Munjal Grameen Vikas Kendra
Hero Honda has established a
modern hospital and a senior
secondary school and vocational
training center in Dharuhera to
serve the community.
Finally our efforts have been
continuous in creating wealth for
investors. This, after all, is the
partnership that underwrites and
underlines all our corporate
relationships. Our record in this
regard is very noteworthy that the
company has almost always paid
dividends, which are increasing on
year-to-year basis. Our
performance and consistent
growth has resulted in a market
cap of over Rs.10000 Crores
during 2003-04 for your Company.
It is our firm belief that
partnerships are capable of
meeting challenges that may come
in the way of realizing the vision of
organization. They tend to pool the
skills, spread the ownership of the
task and reduce the risk.
Partnerships have achieved
unbelievable feats and won the
hearts of millions. The key to
success is being together as one
spirit. The two-decade track record
of your Company just proves that
point.
I take this opportunity to thank all
of you for reposing your
confidence in Hero Honda, which
has prospered through an array of
meaningful partnerships. Your
company would like to devote its
experience and energy to taking
the organization to new heights
and make Hero Honda a World-
Class Enterprise - a symbol of
great partnership.
Pawan Munjal
MANAGING DIRECTOR
HERO HONDA MOTORS LTD.
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IT IS A GREAT PLEASURE for me to
address all of you on the occasion
of successful completion of 20
years of Hero Honda.
Honda follows a time-tested
philosophy of being closer to the
customer. That is Honda wants to
take production to wherever there is
a market. Where customer exists -
markets exist. On this principle
Honda came to India and entered
into a Joint Venture with Hero
Group in 1984. It was conceived as
the best combination of Honda's
technology and manufacturing
processes and Hero Group's
exceptional work culture and
understanding of Indian market. It
is a matter of great satisfaction that
the JV today is considered to be a
great success story.
A major thrust of Honda in India is
to promote indigenization of not only
components and parts but also to
create managerial capabilities for it.
This process would create jobs in
the society and through training we
raise the skills. In this respect Hero
Honda has done quite well.
Following the indigenization of
parts, the effort now is to indigenise
the technology. In other words, we
need to create technologies
appropriate for Indian condition and
Indian customer. For this purpose
local Honda R&D and Hero Honda
facilities are strengthened. It has
enabled us to respond to the
market requirements quickly and
come up with the launch of models
in quick succession. We are also
able to continuously observe the
needs of Indian customer and
translate them into product
features.
For Hero Honda, a customer is not
just an end user but also includes
all other stakeholders such as
dealers, vendors, employees etc.
Our goal has always been to exceed
the customer expectation in terms
of performance, quality, service,
safety and welfare. Hero Honda
employees know who is the
customer for them. They are quite
CUSTOMER IS TRUE VALUE
HERO HONDA
Annual Report 2003–2004
12
AKIO KAZUSA
JOINT MANAGING DIRECTOR
Dear Members,
Joint Managing Director’s Message
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13
motivated. That is why the
company is able to become No.1
two wheeler company in India.
Our next step is to work for
recognition of Hero Honda in Asia
and Globally. Honda would like to
promote this objective of Hero
Honda and make it truly world-
class, not just in terms of volume
but also in terms of quality, cost
and management.
Corporate governance is a well-
recognized value in Hero Honda.
The code of transparency in
whatever we do will help build the
trust of all our associates. Another
area where our focus is high is
corporate social responsibility. It is
an obligation, which Hero Honda
has proactively taken up. For
example, we produce products,
which are environment friendly.
We promote safety education and
also social innovation. This is
Honda Motors global strategy as
well.
Completion of 20 years is a great
occasion to celebrate. It is also a
time-point to look back at our past
performance and reassess our
future goals. In the coming years
Honda and Hero Honda will work
together in the area of technology,
quality and cost in making the
enterprise a World No. 1 in all
respects. Honda's recent renewal
technical understanding is a
reassurance to our long-standing
cordial relationship with Hero
Honda in all its endeavors.
With best wishes,
Akio Kazusa
JOINT MANAGING DIRECTOR
HERO HONDA MOTORS LTD
20Y E A R S
Hero Honda has been accorded the
status of Superbrand in the Motorcycle
category in India.
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HERO HONDA
Annual Report 2003–2004
Hero Honda Motors Limited
It is a fulfilling experience to present a
portrayal of an outstanding performance,
especially so as it coincides with the 20th
founding anniversary of the Company.
Hero Honda is today one of the country's
“Most Trusted and Admired Automotive
Brands”.
There are three distinct areas where Hero
Honda's performance can be regarded as
a benchmark, namely technology, growth
and wealth creation. Since 1991 the
company has shared the wealth it created
with investors in a continuously increasing
manner. From 1999-2000, it has steadily
declared three-digit dividends, and in
2003-04, Hero Honda would be proposing
a total dividend of 1000%. Is any further
statement at all required, one may well
query. While the rankings, performance
indicators backed by figures and spate of
recognitions amply indicate our current
standing, it is the built-up brand strengths
and the sizeable base of loyal customers
that ensure us a strong foundation for our
future success.
20 Yearsof Growth, Leadership
and Value Creation1992HONORARY MEMBERSHIPINDIAN INSTITUTE OF INDUSTRIALENGINEERING
AWARDS &RECOGNITIONSTO MR. BRIJMOHAN LALL,CHAIRMAN
14
WHILE THE RANKINGS, PERFORMANCE
INDICATORS BACKED BY FIGURES AND SPATE
OF RECOGNITIONS AMPLY INDICATE OUR
CURRENT STANDING, IT IS THE BUILT-UP
BRAND STRENGTHS AND THE SIZEABLE BASE
OF LOYAL CUSTOMERS THAT ENSURE US A
STRONG FOUNDATION FOR OUR FUTURE
SUCCESS.
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15
On the occasion of completing two decades,
a nostalgic stroll down the memory lane
would help us to recall the zeal, respect the
values and reaffirm the policies that have
taken the organisation past many impressive
milestones.
A QUICK REWIND When a Company takes less than two
decades to become the World's Largest Two-
Wheeler Manufacturing Company ( on 1st
April, 2002), then it's a history that's worth
recounting. More so, when it has stayed as
World No. 1 for three consecutive years!
The first page of this history got written on
24th January, 1984 when a collaboration
agreement brought together two world
leaders: Honda, the international automotive
leader from Japan, and the Hero Group, an
established volume-manufacturing
conglomerate and the world's leading
bicycle makers. This partnership of two
decades, marked by cordial ties and mutual
understanding, has recently been renewed
up to the year 2014.
27th May ‘85
FIRST MOTORCYCLEROLLS OUT
1994BUSINESSMAN OF THE YEARBUSINESS INDIA GROUP OF PUBLICATIONS
1995NATIONAL AWARDOUT STANDING CONTRIBUTION TO THEDEVELOPMENT OF INDIAN SMALL SCALEINDUSTRY
9th June ‘87
100,000TH MOTORCYCLE24th August ‘88
200,000TH MOTORCYCLEMAJOR MILESTONES
On the Baisakhi day of 13th April, '84, the
Foundation Stone was solemnly placed
following a havan and prayers at the site.
Towards the end of November 1984, the
public issue of shares was oversubscribed by
over ten and half times. In February 1985,
there were over seven and a half lakh bookings
for India's first 100 cc 4-stroke motorcycles.
Commencement of commercial production
took place on 27th May, 1985, the day the first
motorcycle rolled out. It is a matter of pride
that within a year of starting work on the Plant,
the first delivery could take place on 14th
June. The CD 100 soon became the sought
after bike made famous by its
memorable campaign with its inimitable by-line
"Fill it. Shut it. Forget it." By the end of 1985,
the plant was producing well over 6000
motorcycles a month.
While it continues to be very much a concern
even today, spiralling petroleum costs had
caused an alarm in the 1980s. Only better fuel
economy could provide the much-sought
solution. The launch of the four-stroke, fuel
WHILE IT CONTINUES TO
BE VERY MUCH A
CONCERN EVEN TODAY,
SPIRALLING PETROLEUM
COSTS HAD CAUSED AN
ALARM IN THE 1980S.
ONLY BETTER FUEL
ECONOMY COULD
PROVIDE THE MUCH-
SOUGHT
SOLUTION. THE LAUNCH
OF THE FOUR-STROKE,
FUEL-EFFICIENT, 100CC
MOTORCYCLE MADE A
PERCEPTIBLE IMPACT IN
THE COUNTRY.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 15
HERO HONDA
Annual Report 2003–2004
Chronicle of 20 years
efficient, 100 cc motorcycle made a
perceptible impact in the country. Riding
strongly on its proven fuel economy and
performance, Hero Honda was expanding
distribution network and at the same time
rapidly adding to its plant infrastructure.
The brand was well on its way to the
position of market leadership.
ROLL CALL OF HONOURSAs a true industry leader, it has numerous
and diverse achievements in its portfolio.
Besides being the first 100 cc motorcycle
to enlist in the BSF ( on 27th October,
1988) and the Air Force (29th October,
1991), and to serve with numerous State
Police forces, Hero Honda holds records
among others, the World's Largest Selling
Model for four successive years for the
Splendor since 2000.
On 9th May, 1991, the Company bagged
the coveted Economic Times - Harvard
Business School award for Good Corporate
Performance coinciding with economic
liberalization initiative in the country.
WHILE ITS PRODUCTS
HAVE BEEN WINNING
ACCLAIM, THE
COMPANY HAS ALSO
WON EQUALLY
SIGNIFICANT
RECOGNITION IN MANY
SOFTER AREAS THAT
ARE ASSOCIATED WITH
ITS PEOPLE, THEIR
SAFETY AND WELFARE,
QUALITY AND
PRODUCTIVITY AND
ENVIRONMENT.
16
2000SIR JEHANGIR GHANDY MEDALINDUSTRIAL PEACEXLRI, JAMSHEDPUR
1998BUSINESS LEADER OF THEYEARBUSINESS BARON
1997DISTINGUISHEDENTREPRENEURPHD CHAMBERS OF COMMERCE & INDUSTRY
20th Aug ‘90
400,000TH MOTORCYCLE29th May ‘91
500,000TH MOTORCYCLE30th Sept ‘89
300,000TH MOTORCYCLE
ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 16
The Company's Chairman, Mr.Brijmohan Lall
has received dozens of prestigious awards,
and notable among the recent honours have
been Ernst & Young's Entrepreneur of the
Year (2001), MMA-Business Leadership
Award(2002) and the AIMA's Lifetime
Achievement Award for Management
(2003), all indicative of quality of
management and its leadership.
While its products have been winning
acclaim, the Company has also won equally
significant recognition in many softer areas
that are associated with its people, their
safety and welfare, quality and productivity
and environment. These awards include, for
Industrial Safety ( longest accident free
period - Haryana State Labour Dept.), Best
Working Conditions, Best First Aid
Arrangements, Best Maintenance of
Environment, Best Performance in
Automobile Sector ( National Safety
Council), National Productivity Award from
the Vice President of India (24th August,
2000)and the National Trophy on Quality
Circles ( Confederation of Indian Industry -
CII ). Quality Circles had been inaugurated
at the Plant in 1986 and the same year, the
Butterfly Circle of Paint Shop had bagged
the World Convention Trophy at Japan.
Other laurels such as the 3 Leaves Award of
the Centre for Science and Environment
(CSE) and Outlook Magazine's `Value Creator
of the Year Award 2003' speak for Hero
23rd Nov. ‘94
1 MILLIONTHMOTORCYCLE ROLLS OUT
17th April ‘98
2 MILLIONTHMOTORCYCLE
13th Dec. ‘99
3 MILLIONTHMOTORCYCLE
Honda's corporate sensitivity and responsible
citizenship.
WELL REMEMBEREDIn the course of this journey, there has also
been anguish, the poignant times. Mid-1991
was such a time when Mr.Raman Kant Munjal
departed and in early August, Mr.Soichiro
Honda passed away. Both of them had played
a pivotal role in the strengthening and success
of the partnership. Their zeal and belief
produced results and has been inspiration to
us all, over the years. Raman Kant Vidya
Mandir (school) opened on 2nd July '92,
Raman Munjal Charitable Hospital inaugurated
by Mr.Satyanand Munjal on the same date in
1999, the Raman Munjal Lecture Series
organised in August 2002, all cherish his
memory. And indeed all the Company's
milestones are but monuments in tribute to
their spirit.
WE SIMPLY MADE IT !The priority given and investments made in
safety, standards and environmental conditions
have been directly translating into productivity
accomplishment as well as production records.
17
L2001ENTREPRENEUR OF THE YEARERNST & YOUNG
2002ENTREPRENEUR OF THEYEARBUSINESS STANDARD
ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 17
HERO HONDA
Annual Report 2003–2004
18
Chronicle of 20 years
On 9th June, '87, the 1,00,000th motorcycle
was produced.
The 2,00,000th motorcycle was produced on
24th August, 1988, within fifteen months of
the first lakh, indeed a remarkable rise!
Bhoomi Poojan ceremony for the Second Plant
was performed on 13th April, 1995, and the
daily production fast progressed to touch a
thousand bikes daily within a year.
In the year 2003-04, Two Million Hero Honda
Motorcycles were rolled out in a single year, a
new production record.
Along the journey, the volumes have been
escalating steadily as the Hero Honda brand is
discerning towards changing customer trends
and offers contemporary features and
aesthetics in its every new offering. Today, it
can speak of a 54% motorcycle market share
(42% of the Two-wheeler market). Together,
Hero Honda and Honda's Indian subsidiary,
HMSI are targeting a share of over fifty percent
of the Indian two-wheeler market.
As the Company embarks on its third decade,
more interesting developments are on the
anvil. Two new bikes will be launched during
the current fiscal, heralding the entry of the
next generation motorcycles in the country.
CORPORATE EXCELLENCEWith the commissioning of the 2nd plant in
Gurgaon, in early 1997, Hero Honda now has
the capacity to manufacture more than Two
27th April ‘01
#1 IN INDIATWO WHEELER COMPANY
1ST APRIL ‘02
WORLD #1TWO WHEELER COMPANY
20th Dec. ‘2000
SPLENDOR SINGLE LARGEST
SELLING TWO WHEELER IN THE WORLD
AS THE COMPANY
EMBARKS ON ITS
THIRD DECADE, MORE
INTERESTING
DEVELOPMENTS ARE
ON THE ANVIL. TWO
NEW BIKES WILL BE
LAUNCHED DURING
THE CURRENT FISCAL,
HERALDING THE ENTRY
OF THE NEXT
GENERATION
MOTORCYCLES IN THE
COUNTRY.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 18
19
Million units. Keeping abreast of global
technological advancements, the Gurgaon
plant is among the most modern motorcycle
manufacturing facilities in the world. Hero
Honda has earned the ISO 9001 quality
management certification, the ISO 14001 for
environmental systems and OHSAS 18001 for
work safety ( Occupational Health and Safety
Assessment Series).
ERP-based decision making implemented
across HHML serves as an industry
benchmark. We are one of the Asian referrals
for ERP-SAP modules.
Small wonder then that these initiatives have
resulted in Hero Honda being voted as the
Most Respected Automobile Company in the
BusinessWorld magazine's poll, and also in
receiving the "Company of the Year" award for
Corporate Excellence from The Economic
Times! The customer's verdict reigns supreme.
Customers too have voted in the NFO Total
Customer Satisfaction Awards 2003, with
Splendor and CD 100 respectively winning in
the entry and executive segments.
While the Company gains wide recognition for
its product and service quality, a lesser known
facet is its community activities. Providing
hand-pumps to villages of the vicinity in water-
scarce southern Haryana, establishing of
schools and hospitals, conduct of specialised
health camps etc. have been some of them.
HERO HONDA'S COMMONWEALTHMany among our large and growing fraternity
of Dealers have had a long association with us,
and they equally cherish the Company's history
and share our values. Spanning across the
nation, they number over 1000, including
Sales and Service Points. With their respective
Service extensions also taken into account, the
service points would add up to over 1700.
Whether raising service standards or extending
the influence of Hero Honda's Customer
Relationship programmes (HH Passport) in
their region, they play a key role in retention of
market-share. It is a matter of pride to state
that the Passport Programme, which went
national in 2001, has crossed the One and half
million membership mark. This initiative offers
unique privileges to Hero Honda customers
WHETHER RAISING
SERVICE STANDARDS
OR EXTENDING THE
INFLUENCE OF HERO
HONDA'S CUSTOMER
RELATIONSHIP
PROGRAMMES IN THEIR
REGION, THEY PLAY A
KEY ROLE IN RETENTION
OF MARKET-SHARE.
2002BUSINESS LEADERSHIP AWARDMADRAS MANAGEMENT ASSOCIATION
2002GIANT’S INTERNATIONALAWARDBUSINESS & INDUSTRYGIANTS INTERNATIONAL
15TH JAN. ‘03
CROSSES OVER CUMULATIVE 7MILLION SALES MARK FIRST
INDIAN COMPANY
NOV. ‘03
SELLS OVER 2 LAC UNITS IN ASINGLE MONTH WORLD RECORD
ND_L18fontscorrected FIN.qxd 7/26/2004 5:31 PM Page 19
HERO HONDA
Annual Report 2003–2004
20
Chronicle of 20 years
and strives to maintain an enduring
relationship with them.
If customer is viewed as queen bee, the entire
value chain represents the beehive- a
collective effort of all the stakeholders with
uniform structure and uniform essence.
However it is worthwhile to mention that
maximum cell count is of our vendors and
suppliers who form the major portion of the
value chain and have been the foundation to
the size Hero Honda has grown in these 20
glorious years.
YOUTHFUL AND FUTURE-ORIENTEDIndia's first premium sports motorcycle,
Karizma launched on 15th May '03, has won
the BBC Wheels `Bike of the Year 2003'
Award. Two more motorcycles with the new
technology from Honda will be launched
during this fiscal. In addition, a scooter is to be
launched in the niche segment, again with
technology provided by Honda.
The brand's association with young charismatic
personalities such as India's most successful
cricket captain, Sourav Ganguly and the
dashing cine figure of Hrithik Roshan also
target the imagination of the youth. Team
Ambition comprising Saurav, Kaif, Yuvraj, and
Sehwag is in sync with young aspirations and
communicate the brand's values among this
audience.
Other ways to bond with the youth segment
2004
GVC LEVEL 1CORPORATE GOVERNANCECRISIL
2003
BIKE MAKER OF THE YEAROVERDRIVE MAGAZINE
March ‘04
WORLD #1 COMPANY FORTHE 3RD CONSECUTIVEYEAR
THE BRAND'S
ASSOCIATION WITH
YOUNG CHARISMATIC
PERSONALITIES SUCH
AS INDIA'S MOST
SUCCESSFUL CRICKET
CAPTAIN, SOURAV
GANGULY AND THE
DASHING CINE FIGURE
OF HRITHIK ROSHAN
ALSO TARGET THE
IMAGINATION OF THE
YOUTH.
HERO HONDA
MOTORCYCLES HAVE
MADE A SPECTACULAR
DEBUT IN MOTORSPORT.
KARIZMA SET NEW
NATIONAL RECORDS IN
SPEED, WHICH WERE
CERTIFIED BY THE
FEDERATION OF
MOTORSPORT CLUBS OF
INDIA. THESE
LANDMARKS WERE
ACHIEVED DURING A 24
HOUR NON-STOP TRACK
RUN PILOTED BY AN
INTREPID TEAM FROM
OVERDRIVE MAGAZINE,
WHICH INCLUDED ITS
EDITOR.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 20
21
have been to sponsor and be associated with
major cricketing events including ICC cricket
events as global partner. In Nov.'93, the five-
nation Hero Cup was to mark just the
beginning. Hero Honda is also extensively
involved in promoting golf, soccer, hockey and
other games in the country. In fact, the
domestic golfing circuit has been named the
Hero Honda Golf Tour and Hero Honda
Masters, a premium golf tournament is an
important event on the Asian PGA
Championship.
Hero Honda motorcycles have made a
spectacular debut in Motorsport. Karizma set
new national records in speed, which were
certified by the Federation of Motorsport Clubs
of India. These landmarks were achieved
during a 24 hour non-stop track run piloted by
an intrepid team from Overdrive magazine,
which included its Editor.
NEW CHAPTERS Thus, the pursuit of Excellence has taken us
towards new terrains on which Hero Honda
must script its further success in the coming
decades.
History will continue to be made by those who
share the spirit of enterprise and look forward
to the sheer excitement, novelty and challenge
that's ahead. The success in the marketplace,
in managing products and logistics, in
relationships with customers and associates,
has always reflected in gains made by various
stakeholders and in even better yields to Hero
Honda’s investors. Hero Honda thanks its
stakeholders for their continuous support and
faith, and for sharing in the dreams as well as
its effective realisation.
2004LIFETIME ACHIEVEMENTAWARD FOR MANAGEMENTAIMA
2004
BEST VALUE CREATOROUTLOOK MONEY
ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 21
HERO HONDA MOTORS LIMITED,
since its inception has
consistently created value and
maximized the returns to its share
holders. Table 1 gives the 5–year
trend in the Company's income,
profit after tax (PAT), and
profitability as measured by the
ratios of PAT to total income, return
on average equity [ROAE] and
return on average capital employed
[ROACE]. Such consistent
performance is rare in a market that
can be fluctuating and highly
competitive.
In the medium term, our business
focus will continue to be on growth
in sales and profitability thereby
ensuring gainful returns to the
shareholders' funds. For the year
2003–04, the company continued
its leadership stance by being the
world's largest two–wheeler
manufacturer for the third year in a
row. And with it, your Company's
income nearly reached Rs.6,000
Crore.
In the domestic arena, your
Company has further consolidated
its market share, which went up
from 33% and 44% in 2002–03 to
37% and 48% in 2003–04 in
two–wheelers and motorcycles
respectively. The gap between your
Company's sale of motorcycles and
that of the nearest competitor has
risen to over one million. The most
successful model, Splendor and its
HERO HONDA
Annual Report 2003–2004
22
MANAGEMENT DISCUSSION &ANALYSIS
TABLE 1 KEY FINANCIALS—INCOME, PROFIT, ROAE AND ROACE
In Rs. Crore
1999–00 2000–01 2001–02 2002–03 2003–04
Total income 2269 3191 4539 5195 5997
PAT 192 247 463 581 728
PAT as % of total income 8% 8% 10% 11% 12%
ROAE 52% 47% 72% 76% 73%
ROACE 66% 65% 95% 99% 93%
ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 22
new version, Splendor+ together
have sold over a million in the year
under review.
During the year 2003–04, the
Company's sales exceeded the 2
million mark and posted a sale of
2.07 million against 1.68 million
last year – as a consequence the
customer base has accumulated
up to nearly 10 million, which is a
record for the Indian industry. The
total population of two–wheelers in
the country is estimated to be
about 45 million.
All these salient achievements
resulted in robust financial
performance all across. We are
pleased to present some of the key
financial performance parameters
of 2003–04.
• Total sales grew by 14.3 per cent
from Rs.5,102 Crore in 2002–03 to
Rs.5,832 Crore in 2003–04.
• Ratio of operating profit before
depreciation, interest and tax
(OPBDIT) to net sales increased
from 16.7 per cent in 2002–03 to
16.8 percent in 2003–04.
• OPBDIT grew by 14.7 per cent from
Rs.854 Crore in 2002–03 to
Rs.979 Crore in 2003–04.
• Post–tax profit (PAT) grew by 25.4
per cent from Rs.581 Crore in
2002–03 to Rs.728 Crore in
2003–04.
• Return on average equity (ROAE),
measured as a ratio of PAT to
average equity during the year, was
at 72.9 per cent in 2003–04.
• Return on average capital
employed (ROACE), measured as a
ratio of PBIT to average capital
employed during the year, was at
92.8% in 2003–04.
This impressive performance has
been possible despite intense
competition in the market, and rise
in the prices of steel in latter part
of the financial year. Following is
the analysis of the two–wheeler
market in 2003–04 and the
performance of Hero Honda in
terms of marketing, operations and
financial administration and other
functions.
23
20Y E A R S
Indian two wheeler industry went through aquiet and almost an unnoticed change during1998-99. Motorcycles overtook scooters toemerge as the largest product segment
THE ECONOMIC TIMESJUNE 30, 1999
ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 23
MARKET CONDITION IN 2003–04
By way of volume (numbers), two
wheelers constitute nearly 80% of
the vehicles produced in the
country although by value it could
be just one–fourth according to an
estimate. Growth in disposable
income, particularly in
middle–income groups, ease of
availability of credit at competitive
rates, decline in public transport
services, and demographic
structure of income class are the
factors that are said to be
responsible for buoyancy in
two–wheeler demand – particularly
for motorcycles. Chart A shows that
while in 1999-2000 motorcycles
accounted for 48% of
two–wheelers sold, its share in
2003–04 has gone up to 77%. In
the same period, the share of
scooters and mopeds has declined
to 16% and 7% respectively (Chart
A).
During the five–year period, i.e.
1999–2000 and 2003–04, the
Y–O–Y growth in motorcycles
peaked from 28% to 35% but
declined to 14% in the terminal
year owing to volume effect in a
continuously growing market. Also,
the scope for subsititution of
scooters and mopeds by
motorcycles is reaching to
saturation point In contrast,
scooters and mopeds growth rate
have systematically declined from
33% and 19% to 9% and (–)4%
during the above period. The
secular slow down in sale of
scooters, decline in mopeds and
high growth rate in motorcycles
has made the motorcycle segment
dominant in two–wheelers. We
believe this lead position would
continue for quite some time.
Data for last few years show that,
annually an incremental market of
6–7 lakhs is created and
incremental sale of motorcycles far
exceed the additional demand
created in two–wheeler market. In
other words, customers
increasingly prefer motorcycles to
the other two products. Realizing
the growth potential in this
category of two wheelers, all the
major manufacturers have been
targeting at it to boost their sales.
This has led to many launches
during the year. The customer also
had the benefit of discounts and
sales promotions during the year.
The family of motorcycles is
divided into three categories
namely price segment, deluxe and
premium depending on price and
income class to which the product
caters to.
We at Hero–Honda believe that
there could be more intense
competition in coming years, in
HERO HONDA
Annual Report 2003–2004
Management Discussion & Analysis
GROWTH IN DISPOSABLEINCOME, PARTICULARLY INMIDDLE–INCOME GROUPS,EASE OF AVAILABILITY OFCREDIT AT COMPETITIVERATES, DECLINE IN PUBLICTRANSPORT SERVICES, ANDDEMOGRAPHIC STRUCTUREOF INCOME CLASS ARE THEFACTORS THAT ARE SAID TOBE RESPONSIBLE FORBUOYANCY IN TWO–WHEELERDEMAND – PARTICULARLYFOR MOTORCYCLES.
24
ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 24
deluxe segment with more
powered bikes [125cc]. Hero
Honda is keenly observing the
market and will take necessary
steps to protect its growth,
market share and leadership
position.
HERO HONDA’S PERFORMANCE
Hero Honda had a market share
of 48% in motorcycles and 37%
in two–wheelers for the year
2003–04. It has added another 4
percentage points to regain its
market share to 2001–02 levels
in motorcycles and has further
consolidated its position in
two–wheelers. Chart B shows the
market shares of Hero Honda in
two–wheelers and motorcycles in
the last 5 years.
In the year 2003–04, Hero
Honda recorded a sale of 2.07
million and registered a growth of
23% as compared to all India
sales growth of 14% in
motorcycles. The company for
the first time crossed the annual
sale of 2 million vehicles (Chart
C). At the same time, the gap
between nearest competitors and
Hero Honda is over 1 million
motorcycles and we believe that
our strategy of remaining closer
to the customers and providing
products of their choice has
provided this advantage.
We have continued our strategy of
broad–basing our product portfolio
based on a series of market
surveys. Accordingly in the year
2003–04, we have launched 5
models basically to provide
additional features and also cover
niche markets. Our largest selling
models i.e. Splendor and Passion
put together constitutes a major
portion of our total sales. The onus
of providing volume is taken over
by other models. The year also
saw a handsome volume of half a
million sale realized from our
newly launched CD Dawn. Spare
parts business, an initiative, which
we started to ensure genuine parts
supply, has yielded a revenue of
Rs 275 Crores for the financial
year 2003–04.
In the coming days, the
competition may adopt new
strategy of bringing bikes with
incremental power that is over
100cc to take on our successful
models. Your Company is very
conscious about the future
challenges of Indian market and
therefore, will continuously strive to
stay ahead with the introduction of
new products, technology, and
services.
PRODUCT LAUNCHES
As mentioned earlier, the Company
launched 5 new models covering
all the three segments namely
25
20Y E A R S
ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 25
price, deluxe and premium
segments.
• In April 2003, we launched
CD–Dawn, targeted for entry
segment and enabled customers to
have a very viable transport
alternative to public transport with
a byline "Public ka Naya
Transport". The model in the year
of launch itself has done nearly
half a million sales – which is a
record in itself.
• In May 2003, we launched a
futuristic, power+sport segment
bike, Karizma. The "Jet Set Go"
bike is a brilliant aspiration –
fulfilling bike – positioned as
India's first premium sports
motorcycle. The product has
created its own niche.
• In September 2003, Passion plus
was launched primarily to inspire
the customers with improved
styling. Originally the product was
introduced as a style product but to
differentiate from look–alikes that
came later, the styling has been
greatly modified to look
contemporary.
• In October 2003, the largest selling
and most trusted brand Splendor
was launched with new styling and
additional features. It was received
with lot of enthusiasm in the
market.
• And in January 2004, Ambition 135
was launched to strengthen the
premium segment, which is also
covered by CBZ* (launched later in
April 2004).
Together, these five models now
represent the entire range of Hero
Honda motorcycles with fresh look,
additional features and are
meeting the aspirations of the
customer class.
The result of our new launches
was quite rewarding. Your
Company now leads in price and
deluxe segments. Hero Honda has
14% market share in the premium
segment.
Hero Honda has already lined up
models for the next five years. In
2004–05 two new models will be
introduced in the market. At an
appropriate time, your Company
also has plans to enter the scooter
market as well.
CUSTOMER FOCUS
The philosophy of Hero Honda is
to delight the customer with
products and services. Every year
new set of initiatives is taken to
serve the customer even better
and be closer to him. Some of
these initiatives are proactive and
some are based on feedback from
the customers.
In 2001–02, we were the first one
to introduce two– year warranty
from six months. We continue with
that scheme.
HERO HONDA
Annual Report 2003–2004
Management Discussion & Analysis
26
HERO HONDA HAS ALREADYLINED UP MODELS FOR THENEXT FIVE YEARS. IN2004–05 TWO NEW MODELSWILL BE INTRODUCED IN THEMARKET. AT AN APPROPRIATETIME, YOUR COMPANY ALSOHAS PLANS TO ENTER THESCOOTER MARKET AS WELL.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:32 PM Page 26
The Hero Honda Passport
Programme, which is one of the
most successful customer
relationship programme
continues to be highly popular
and successful. Today over 1.5
million customers have enrolled
into this programme. Under this
programme, customers of Hero
Honda products are eligible to
enroll at a nominal fee against
which they get not only discounts
on purchase of spare parts,
accessories and services but also
get incentive (bonus) points.
Incentive points are given against
referrals as well. Hero Honda
passport holder is eligible for gifts
and special awards, depending
on total accumulated points.
The idea of this programme is to
create nation–wide customer
loyalty, make them members of
Hero Honda family, who in turn
will become brand ambassadors
to help build up sales and
service through referrals and
good will. Our experience with
the program has been that it has
more than met our objective and
is regarded as a reference case
study in customer relationship
management.
It is our endeavour to have Hero
Honda customer as the most
satisfied customer. Several steps
have been taken in the past to
enhance customer satisfaction,
which is reflected in the MTCS
2004 – a survey conducted by
TNS Automotive. According to the
survey, Hero Honda has recorded
a customer satisfaction level of 83.
CD Dawn has been rated as the
best bike in the Price segment. CD
Dawn, Splendor and Passion have
a satisfaction score of 84 out of
maximum 100 points.
Many more initiatives have been
planned for improving the
satisfaction level, which among
others include expansion of
current reach to small towns /
taluq level, legal action against
non–genuine parts dealers,
training of local mechanics for
better service. In order to spread
the awareness on safety and
environment we are planning
expansion of "Safety Riding" to
approximately 150 locations and
also are promoting sound
environmental practices through
'Green dealership' concept.
We plan to conduct a
comprehensive Customer
Satisfaction study again this year
in partnership with CSMM to
understand our delivery against
the customer expectations.
OPERATIONS
Hero Honda has an annual total
installed capacity of 2.8 million
27
20Y E A R S
It (Hero Honda) is a clear brand and
volume leader in motorcycle segment.
" WHEEL OF FORTUNE"ET AWARDS FOR COPORATE EXCELLENCE - COMPANY OF THE YEARTHE ECONOMIC TIMES AUGUST 21, 2002
THE HERO HONDA PASSPORTPROGRAMME, WHICH IS ONEOF THE MOST SUCCESSFULCUSTOMER RELATIONSHIPPROGRAMME CONTINUES TOBE HIGHLY POPULAR ANDSUCCESSFUL. TODAY OVER1.5 MILLION CUSTOMERSHAVE ENROLLED INTO THISPROGRAMME
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 27
from its two plants at Dharuhera
and Gurgaon. Both the plants are
advanced manufacturing units. By
making additional investments in
flexible CNC machines and
automation, the capacity at these
plants is now expanded to 2.8
million vehicles per annum. In the
last three years, the production
from these plants has doubled
from 1 million to 2 million
motorcycles per year, besides
providing for flexibility to
manufacture many models and
their variants.
The Company’s first plant at
Dharuhera is engaged in the
exclusive manufacture of models
like CD100, CD100 SS and
CD–Dawn, while the second plant
at Gurgaon produces more diverse
range of motorcycles that cater to
deluxe and premium segments.
The largest selling model Splendor
is produced at both the plants.
Dharuhera plant has the
distinction of producing its
5 millionth bike on June 17, 2004
and both the plants together
achieved a new milestone of
producing 10 million bikes. In view
of continuously increasing need for
capacity, your Company is
considering a third plant, which
when happens will be a realization
of our mandate of creating a
world–class manufacture. Location
and viability study are under
progress.
In the area of manufacturing, your
Company has been attempting
improvements and innovations on
a continuous basis to achieve
efficiencies and productivity gains.
Dual tone painting technology on
motorcycles was introduced for the
first time in India by Hero Honda
in 2003–04. In order to improve
upon our plant efficiencies, the
Company has taken a major
initiative to implement "Just in
Time concept (JIT)". For this
"Online vendor connectivity"
program was implemented. And
under this, in 2003–04, direct
online supplies to assembly lines
were established with 40 vendors.
A major learning from the
competitive market is the effort the
Company had to make in the area
of cost rationalization on a
continuous basis. Cost optimization
was achieved through various cost
improvement projects, use of
alternate fuels and by cutting down
on our overheads. A reduction of
8.24% was achieved in
manufacturing variable cost in
2003–04 over last year.
The Company is also a major
campaigner for safety in factories
and establishments. For its efforts
and event free records, Hero
Honda has won National Safety
HERO HONDA
Annual Report 2003–2004
Management Discussion & Analysis
IN THE AREA OFMANUFACTURING, YOURCOMPANY HAS BEENATTEMPTING IMPROVEMENTSAND INNOVATIONS ON ACONTINUOUS BASIS TOACHIEVE EFFICIENCIES ANDPRODUCTIVITY GAINS. DUALTONE PAINTING TECHNOLOGYON MOTORCYCLES WASINTRODUCED FOR THE FIRSTTIME IN INDIA BY HEROHONDA IN 2003–04.
28
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 28
Awards 2001 & 2002. Similarly
for clean environment practices
adopted by us, Tata Energy
Research Institute (TERI) had
awarded Corporate Environment
Award in June this year. Two
years ago, Hero Honda bagged
3–Leaves Award from Centre for
Science and Environment (CSE)
for our clean practices at the
plant level – the highest award
for any two–wheeler Company in
the country.
VENDOR MANAGEMENT
Vendor management is very
critical to Hero Honda as
68–70% of the cost of
production is accounted by
material cost. 256 vendors
including 36 ancillaries spread
across the country are the
backbone of our successful
operations at both the plants.
Our excellent long–term
relationship has been
responsible for trouble free
production and sustained
expansion for capacity,
increasing localization, efficient
outsourcing and cost and
inventory control.
In terms of efficiency, the
Company is able to access 70%
of the materials by value at
zero– inventory. For the balance
material, the average inventory
is about 3–4 days. As a
measure of rationalization of
vendors, the Company is resorting
to system purchases and is also
looking at the possibilities of going
global to procure materials. We
feel enterprises have to adopt
these techniques to become cost
effective and price competitive in
the market.
Our interaction with our suppliers
has been one of partnership. We
have been helping them with
systems so that, vital
communication with the supply
channel is in place. With the help
of the IT division, the Company
has implemented Supply Chain
Management (SCM) and Supplier
Relationship Manangement (SRM)
system. Secondly, we also provide
them with technical assistance at
various levels, including quality
audit visits to ensure even quality
and quality improvements in their
supplies.
Our supply management strategy
has enabled us to achieve cost
optimization and also contain
inflation to bare minimum of less
than one percent from the year
2003–04. This is one area which
management will increasingly have
focus to achieve cost and quality
competitiveness for the enterprise.
RESEARCH AND DEVELOPMENT
Your Company has access to
29
20Y E A R S
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 29
Honda R&D, which has worldwide
experience in automobiles and is
considered to be the best in
two–wheeler technology. Further,
Hero Honda has a huge database
from market feedback, hence
understands the Indian conditions
and the requirements of Indian
customers very well. Hero Honda
market intelligence combined with
Hero Honda and Honda R&D has
been greatly responsible for
bringing out best performing and
most acceptable products in the
markets.
At its own R&D center, Hero
Honda has put in place the
necessary infrastructure and
developed competencies for doing
important base–work, which helps
conceptualization of the product
and later material selection,
localization of components and
testing for various launches as per
Honda specifications. Another
major objective for investing in
local R&D is to cut down on
development and launch time for
this growing and highly competitive
market. You may be pleased to
know that your Company's R&D is
now connected to Honda (Japan)
online to help design data transfer
instantly. All these efforts have
enabled your Company to reduce
product development time. Thus,
the company was able to have
large number of launches in the
last fiscal year, namely, CD–Dawn,
Karizma, Splendor / Passion Disc
Version, Splendor+, Passion Plus,
Ambition 135, CBZ* and needless
to mention that many new
launches are in pipeline.
Regulations, is another area where
R&D support is increasingly
required. Environment and safety
issues require a lot of R&D inputs
to ensure that the products comply
with all the necessary norms laid
down by the government from time
to time. Your Company played a
constructive role in working with
the government (Mashelkar
Committee) to understand and
formulate regulations in the areas
of safety, emissions and fuel
quality for the automobile sector.
INFORMATION TECHNOLOGY
Hero Honda continues to adopt
and implement information
technology (IT) for enhancing the
overall efficiencies of the
organization. In keeping with the
plans, the Company is currently
implementing SAP's Supplier
Relationship Management (SRM)
module & Customer Relationship
Management (CRM) to connect
our dealers and vendors for
carrying on business electronically.
The Company is among the first
ones to implement these solutions
and continues to be a model
reference site for SAP. With this
HERO HONDA
Annual Report 2003–2004
Management Discussion & Analysis
30
THE COMPANY IS CURRENTLYIMPLEMENTING SAP'SSUPPLIER RELATIONSHIPMANAGEMENT (SRM)MODULE & CUSTOMERRELATIONSHIP MANAGEMENT(CRM) TO CONNECT OURDEALERS AND VENDORS FORCARRYING ON BUSINESSELECTRONICALLY. THECOMPANY IS AMONG THEFIRST ONES TO IMPLEMENTTHESE SOLUTIONS ANDCONTINUES TO BE A MODELREFERENCE SITE FOR SAP.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 30
implementation, our supply
chain solution moves from the
current mode of one way
sharing of information to a
collaborative framework, which
would enable dealers and
vendors to carry out on–line
transaction through a secure
Internet connection.
As a part of continuous
improvement, the SAP HR
module was extended to cover
'Employee Self Service System'
(ESS) where employees directly
access their personal
information related to their
salaries and other particulars.
The same facility has also been
extended to the workers through
kiosk–based systems (touch
screen). Bar coding was
introduced for automatic
recording of material receipt and
production data leading to
greater accuracy and efficiency.
Various other initiatives taken
during the year have gone
towards process improvements,
cost reductions and improving
efficiencies.
Yet another major initiative taken
during the year was to move
towards electronic storage of
documents. Frequently
accessed documents are stored
centrally using a document
management software and users
access them based on the roles
and rights assigned to them. Other
documents are being microfilmed
and stored separately. This has
made document storage simple,
saved considerable space, and has
made access very easy.
With the spread of information and
extension of connectivity even
outside the Company, various
steps have been taken to secure
its data and networks. The
Company has formulated an IT
security policy and put it into
action throughout the organization.
Security monitoring exists both at
the technical level (firewalls,
intrusion detection & other tools)
and at the user level (information
classification, access rights,
defining responsibilities etc).
Your Company is continuously
upgrading the IT infrastructure to
meet the business needs. The IT
infrastructure is state–of–the–art
and aims at high throughput, high
availability, and capable of scaling
up to accommodate the
Company's growth. New
technology solutions are evaluated
and put in place delivering high
value to business. Your Company
continues to be a pioneer in the
adoption of various technologies
and remains a reference site in the
Asia Pacific region for various
technology vendors who work with
31
20Y E A R S
It is not every two wheeler manufacturer
that is able to create the best-selling bike
in the world. Hero Honda with its 100 CC
Splendor holds that distinction. BUSINESS STANDARD
JANUARY 25, 2001
YOUR COMPANY ISCONTINUOUSLY UPGRADINGTHE IT INFRASTRUCTURE TOMEET THE BUSINESS NEEDS.THE IT INFRASTRUCTURE ISSTATE–OF–THE–ART ANDAIMS AT HIGH THROUGHPUT,HIGH AVAILABILITY, ANDCAPABLE OF SCALING UP TOACCOMMODATE THECOMPANY'S GROWTH. NEWTECHNOLOGY SOLUTIONSARE EVALUATED AND PUT INPLACE DELIVERING HIGHVALUE TO BUSINESS. YOURCOMPANY CONTINUES TO BEA PIONEER IN THE ADOPTIONOF VARIOUS TECHNOLOGIESAND REMAINS A REFERENCESITE IN THE ASIA PACIFICREGION FOR VARIOUSTECHNOLOGY VENDORS WHOWORK WITH THE COMPANY.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 31
the Company. Many technology
magazines carry the Hero Honda
case study at regular intervals.
This year our offices including the
two Plants have been connected
through Video conferencing. In the
coming year the Company plans to
set up an alternate IT site as a
disaster recovery site, to take care
of any eventuality that may cause
failure of the main data centre.
HUMAN RESOURCE MANAGEMENT
The Human Resources function
has concentrated all its efforts
under the broad banner of
"Organisation Capability Building";
through key initiatives such as
Development of Knowledge, Skills
& Attitudes (KSA), Knowledge
Management, Building a learning
culture within the organization and
several more – all aimed at
providing a more futuristic and
matured outlook to the key
resource in Hero Honda, it's
People. Parallel to developing
internal people capability, we are
also consciously trying to source
exceptional talent in core areas of
Sales & Marketing, Research &
Development and Supply Chain
Management. This effort has borne
fruit in terms of infusion of around
60 bright, young professionals into
the mainstream activity of the
organization.
There is a conscious effort on the
part of the management to
continuously develop the
Knowledge, Skills & Attitudes of its
people through a variety of Training
interventions specifically aimed at
an individual's need with a special
thrust on enhancing
functional/domain knowledge
across disciplines. In line with our
organizational mandate of
becoming a "World Class
Manufacturer", we have managed
to create awareness on its
concepts, tools and techniques
among workforce and employees.
We are also encouraging line
managers to play a lead role in
People Development.
In collaboration with IT, HR has
implemented the SAP Payroll and
"Employee Self–Service" (ESS)
modules. We are also in the
process of launching the People
Development (PD) & Training and
Development (T&D) modules in
the ensuing financial year.
There have been several initiatives
taken on the employee welfare
front through specific programmes
designed for the spouses and the
children of our employees viz:
Employee's Spouse programme
"Apka Shaandar Humsafar",
career–counseling sessions for the
children. These programmes have
enabled us to reach out to the
families of our employees and
HERO HONDA
Annual Report 2003–2004
Management Discussion & Analysis
IN LINE WITH OURORGANIZATIONAL MANDATE OFBECOMING A "WORLD CLASSMANUFACTURER", WE HAVEMANAGED TO CREATEAWARENESS ON ITSCONCEPTS, TOOLS ANDTECHNIQUES AMONGWORKFORCE ANDEMPLOYEES. WE ARE ALSOENCOURAGING LINEMANAGERS TO PLAY A LEADROLE IN PEOPLEDEVELOPMENT.
32
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 32
provide them with a unique
opportunity to know about the
company and its values. It has
also helped the children of our
employees in making certain
important decisions with regard
to their career.
The efforts of all these need–felt
resulted in "Employee
Engagement" of about 70 per
cent (considered to be fairly
high) for Hero Honda in the
Best Employers Study 2003
conducted by Hewitt Associates.
In the financial year 2004–05, we
aim to focus our efforts in the area
of fostering creativity & innovation
throughout the organization.
FINANCIALS
Table 2 gives a summary of Hero
Honda's financial performance for
2003–04.
Net sales of the Company
increased by 14.3 per cent from
Rs.5,102 Crore in 2002–03 to
Rs.5,832 Crore in 2003–04. Cost
of raw materials as a percentage of
total sales increased from 68.0 per
cent in 2002–03 to 69.1 percent
in 2003–04, owing to a change in
sales mix and higher steel prices
(during the latter part of the fiscal
year).
However, despite this, a
continuous focus on cost
management and operating
efficiency has enabled the
Company to marginally improve its
OPBDIT margin from 16.7 per
cent in 2002–03 to 16.8 per cent
in 2003–04. Operating profit (PBT
before other income) grew by 14.6
per cent from Rs.792 Crore in
2002–03 to Rs.907 Crore in
2003–04. Operating profit margin
improved marginaly from 15.5 per
cent in 2002–03 to 15.6 percent
33
20Y E A R S
TABLE 2 HERO HONDA’S ABRIDGED PROFIT AND LOSS STATEMENT
In Rs. Crore
03–04 02–03
Net Sales from Operations 5832.43 5101.71
Material Costs 4030.61 3470.77
Rates and Taxes 6.54 9.75
Manufacturing Expenses 119.35 108.66
Employee Costs 231.52 201.63
Selling & Distribution Expenses 338.38 314.84
Other expenses and provisions 125.93 132.47
Financial expenses –1.35 –1.02
Misc. expenditure written off 0.7 9.53
Depreciation 73.33 63.39
Total Expenditure 4925.01 4310.02
OPBDIT 979.40 854.06
OPBT 907.42 791.69
Other Income 165.04 92.87
PBIT 1071.11 883.54
PBT 1072.46 884.56
Current tax 331.07 298.19
Deferred Tax 13.07 5.61
PAT 728.32 580.76
Note: In order to get a more accurate picture of the Company’s operational performance, OPBDIT has beencalculated net of “other income’’
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 33
in 2003–04. Profit after tax (PAT)
went up by 25.4 per cent from
Rs.581 Crore in 2002–03 to
Rs.728 Crore in 2003–04. Other
Income rose from Rs.92.9 Crore in
2002–03 to Rs.165.0 Crore in
2003–04. Return on average
capital employed (ROACE) of the
Company was 92.8 percent in
2003–04, while return on average
equity (ROAE) was 72.9 per cent
in 2003–04.
Table–3 shows that the key
indicators of profitability improved
during the year under review.
Moreover, both fixed asset and
current asset turnover of the
Company improved during the
financial year 2003–04. Net fixed
assets turnover (sales/average net
fixed assets) increased from 10.1
in 2002–03 to 10.5 in 2003–04;
while current assets turnover
(sales/average current assets)
increased from 10.2 to 11.8.
ECONOMIC VALUE ADDED (EVA)
EVA, a measure of corporate value
creation, indicates whether the
management of a Company
generates returns that cover the
weighted average cost of capital.
By explicitly including the cost of
equity, EVA recognizes that capital
is scarce and investors, who claim
the residual share of a firm's
earnings, need to be compensated
adequately for assuming the risk of
investing. As Table 4 shows, the
EVA has increased from Rs.481
Crore in 2002–03 to Rs.569 Crore
in 2003–04.
DEBT STRUCTURE
Hero Honda continues to be a
debt free company. The unsecured
loan of Rs.175 Crore from the
state government of Haryana on
account of sales tax deferment, is
interest free, and has no holding
costs. Net interest payment by the
Company has been negative
during the last three years.
DIVIDEND POLICY
Maximising shareholders value
necessitates that the capital
employed by a company is used
efficiently and earns a return more
than its cost. Keeping this in mind,
your Company has an
unambiguous dividend policy –
funds in excess of what is needed
for capital investments and related
strategic expenses will be
distributed to the shareholders.
This is the philosophy that has led
to high dividend payouts for the
last several years. The Company
paid a total dividend of 900 per
cent in 2002–03 and the Board
has recommended a Total
Dividend of 1000 per cent in
2003–04, including a "Special
Interim Dividend" of 500 per cent
– already paid. It may be pertinent
to note that the % dividend has
HERO HONDA
Annual Report 2003–2004
Management Discussion & Analysis
TABLE 3 KEY INDICATORS OF PROFITABILITY
03–04 02–03
OPBDIT/Sales 16.8% 16.7%
OPBT/Sales 15.6% 15.5%
PBIT/Sales 18.4% 17.3%
PBT/Sales 18.4% 17.3%
PAT/Sales 12.5% 11.4%
ROACE 92.8% 98.9%
ROAE 72.9% 75.6%
34
TABLE 4 EVA & ROACE (POST–TAX)
03–04 02–03
EVA (Rs. Crores) 569 481
EVA/%of cap employed) 49.3% 53.8%
ROACE(post tax) 63.2% 65.1%
Note: Details of the above calculations have been given in theEVA Statement.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 34
always exceeded the previous
year’s % dividend, for any given
year since 1991.
WORKING CAPITAL MANAGEMENT
Hero Honda has aimed at
continuous improvement in its
working capital management. As
Table 5 shows, inventory period
for the Company has decreased
from 16.1 days in 2002–03 to
14.4 days in 2003–04. The
Company initiated a new
receivables policy during the
year, which has helped in
bringing down the level of
receivables. Receivables have
decreased from 7.2 days in
2002–03 to 4.8 days in
2003–04. Operating cycle of the
Company has decreased from
23.2 days in 2002–03 to 19.2
days in 2003–04, while Cash
cycle has decreased from
(–)16.3 days in 2002–03 to
(–)28.3 days in 2003–04. Thus,
Hero Honda continues to be
one of the most efficient
enterprises in terms of working
capital management.
CASH FLOWS
Efficient working capital
management, coupled with
profitable growth has translated
into healthy net cash flows from
operations for the Company.
Chart E plots the trend in net
cash flow from operations over
the last 5 years.
INTERNAL CONTROL & ADEQUACY
Hero Honda has a proper and
adequate system of internal control
to ensure that all assets are
safeguarded and protected against
loss from unauthorized use or
disposition and those transactions
are authorized, recorded and
reported correctly.
RISKS AND CONCERNS
As the market leader, a possible
slowdown in the two–wheeler, and
motorcycle market constitutes a
risk factor for Hero Honda.
Growing competition in the
industry, both in terms of new
models, and price undercutting,
too, is a matter of concern, as both
sales realizations and operating
margins may come under
pressure. At the higher end of the
market, imports could constitute a
threat, if import duties fall down in
the future. Rising steel prices and
other input costs pose a threat to
margins.
OUTLOOK
The medium term (three years)
outlook for the two–wheeler
industry is positive but volatile. We
anticipate double–digit growth in
the two wheeler and motorcycle
markets over the next three years.
Of course, we believe that GDP
and per capita incomes grow at
35
20Y E A R S
It is tough to break into top ranks of our
survey of corporate India. ...Maintaining
the third place is Hero Honda Motors,
India’s largest maker of Motorcycles.FAR EASTERN ECONIOMIC REVIEW DECEMBER 25, 2003
TABLE 5 WORKING CAPITAL MANAGEMENT & LIQUIDITY RATIOS
03–04 02–03
Inventory Period 14.4 16.1
Operating Cycle 19.2 23.2
Cash Cycle –28.3 –16.3
Current Ratio 0.51 0.70
Acid Test Ratio 0.32 0.40
Note: The average of inventory, receivables and payables have beentaken for the above calculations of inventory period,operating and cash cycle.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 35
over 7% and 5% respectively. The
estimated average percapita
income level ranging between
550–700 US$ during FY
2004–FY2006 is conducive to
adoption of two wheelers as
personal transport mode by
households. Once it reaches US$
1000+, then the preference could
begin to shift towards cars. Last
year's robust agricultural growth
supporting rural consumption,
prospect of good monsoon in the
current year, UPA Governments'
programme to prosper rural areas
and infrastructure, favourable
demographic trends are the factors
that are mutually reinforcing and
will influence a handsome growth
in two–wheelers. There will be
expansion in the consumer credit
by banks and financial institutions
but interest rates may have
upward pressure depending on
inflation, which is currently at
around 6%.
We expect the motorcycle market
to grow by about 12–15 per cent
during 2004–05. While this is less
than the growth experienced by
the industry in the last few years, it
is important to remember that the
volumes in the industry have
increased significantly. At present,
motorcycles account for over 77
per cent of the two–wheeler
market and the scope to grow
further in terms of its share in two
wheelers is limited. As the market
leader, Hero Honda too
endeavours to achieve a
double–digit growth in sales.
CAUTIONARY STATEMENT
Statements in this management
discussion and analysis describing
the Company's objectives,
projections, estimates and
expectations may be 'forward
looking statements' within the
meaning of applicable laws and
regulations. Actual results might
differ substantially or materially
from those expressed or implied.
Important developments that could
affect the Company's operations
include a both, significant changes
in political and economic
environment in India or key
markets abroad, tax laws, litigation,
labour relations and interest costs.
HERO HONDA
Annual Report 2003–2004
36
Management Discussion and Analysis
ROBUST AGRICULTURALGROWTH SUPPORTING RURALCONSUMPTION, PROSPECT OFGOOD MONSOON IN THECURRENT YEAR, UPAGOVERNMENTS' PROGRAMMETO PROSPER RURAL AREASAND INFRASTRUCTURE,FAVOURABLE DEMOGRAPHICTRENDS ARE THE FACTORSTHAT ARE MUTUALLYREINFORCING AND WILLINFLUENCE A HANDSOMEGROWTH IN TWO–WHEELERS.THERE WILL BE EXPANSION INTHE CONSUMER CREDIT BYBANKS AND FINANCIALINSTITUTIONS
ND_L18fontscorrected FIN.qxd 7/26/2004 5:33 PM Page 36
37
20Y E A R S
FINANCIAL HIGHLIGHTS
In Rs. Crore
1999–00 2000–01 2001–02 2002–03 2003–04
Sales (Nos.) 761623 1029510 1425302 1677537 2070147
Growth in sales (nos.) – % 43.6 35.2 38.4 17.7 23.4
Total income 2269 3191 4539 5195 5997
Growth in Total income – % 50.7 40.7 42.3 14.4 15.5
Profit before tax 285 377 694 885 1072
Profit after tax 192 247 463 581 728
Share capital 39.94 39.94 39.94 39.94 39.94
Reserves and Surplus 408 589 646 821 1099
Total debt 51 66 116 134 175
Net fixed assets 374 454 491 517 589
Total assets 499 696 802 995 1314
Market capitalisation 3874 2816 6670 3758 9797
EVA 119 155 374 481 569
KEY RATIOS
1999–00 2000–01 2001–02 2002–03 2003–04
Long term debt/Equity 0.04 0.0 0.0 0.0 0
OPBDIT*/Net Sales 13.5 13.2 15.0 16.7 16.8
OPBT**/Net Sales–% 11.8 11.7 13.9 15.5 15.6
Profit after tax/Tot. income–% 8.5 7.7 10.2 11.2 12.1
Return on avg. equity–% 52.2 46.9 72.1 75.6 72.9
Return on avg. capital employed–% 66.1 64.9 94.5 98.9 92.8
EVA/Capital employed–% 27.6 26.6 51.0 53.8 49.3
Dividend per share (Rs.)*** 2.0 3.0 17.0 18.0 20.0
Dividend Payout–% 23.1 26.7 75.5 69.8 61.9
Earnings per share (Rs.)*** 9.6 12.4 23.2 29.1 36.5
Market value/Book value 8.8 4.8 10.0 4.4 8.6
Notes:*OPBDIT: Operating Profit before Depreciation, Interest and Tax**OPBT: PBT before Other Income***DPS & EPS: Figures for ‘99-’00 adjusted for shares split in the ratio of 5:1 in March ‘01
ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 37
ECONOMIC VALUE ADDEDSTATEMENT
HERO HONDA
Annual Report 2003–2004
38
WHAT IS EVA?
Economic Value Added (EVA ) measures the difference between the return on a
Company's capital and the cost of that capital. In business, the revenue earned
from customers is distributed amongst various stakeholders – suppliers for their
goods and services provided, creditors for their capital lent and employees for
their services rendered. Depreciation is charged to the revenue account since it
signifies the use of assets, whereas taxes are paid to the government. The
residual is accounting profit, which belongs to the shareholders. However, the
equity capital provided by the shareholders also carries a cost since there is a
risk involved in putting money into a business. Thus value is created only when
a business earns returns over the cost of all capital, i.e. including the cost of risk
capital. This is precisely what EVA attempts to measure. A positive EVA indicates
that value has been created for shareholders, whereas a negative EVA signifies
value destruction.
HOW IS EVA CALCULATED ?
EVA = Net Operating Profit after Taxes ( NOPAT) – Cost of Capital Employed (COCE)
NOPAT = Profit after taxes but before interest cost. It signifies returns available to the
lenders and shareholders
COCE = Weighted Average Cost of Capital (WACC) (*) Average Capital Employed where
WACC = Post tax cost of debt capital plus cost of equity capital
Weights have been taken at market value for equity capital and at book value for
other capital. Cost of debt capital has been taken at actual basis , whereas the cost
of equity capital has been calculated in the following manner:
Cost of equity capital = Cost of risk free capital plus Beta*(Market risk Premium)
where Beta measures the sensitivity of the return on a security to the return on a market
portfolio.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 38
EVA TREND
All figures in Rs. Crores
99-00 00-01 01-02 02-03 03-04
Avg Cap Employed 432 585 734 893 1154
Avg Debt/Avg Capital (%) 1.7 1.7 1.9 2.3 2.2
Avg Equity/Avg Capital (%) 98.3 98.3 98.1 97.7 97.8
Cost of Debt (% post-tax ) 4.5 2.6 1.1 0.9 0.7
COST OF EQUITY
Beta 0.69 0.58 0.51 0.53 0.90
Cost of Risk Free Debt (%) 10.80 10.33 7.38 6.24 5.13
Market Premium (%) 10.0 10.0 10.0 10.0 10.0
Cost Of Equity (%) 17.7 16.1 12.5 11.5 14.2
EVA
Profit after Tax 192 247 463 581 728
Add: Interest*(1-tax rate) 3 2 1 1 1
NOPAT=PAT + Interest*(1-t) 195 248 464 582 729
Cost of Capital 76 93 90 101 160
EVA 119 155 374 481 569
Return on Capital Employed (%) 45.1 42.5 63.2 65.1 63.2
Weighted Average Cost of Capital (%) 17.5 15.9 12.3 11.3 13.9
EVA/Capital employed (%) 27.6 26.6 51.0 53.8 49.3
ENTERPRISE VALUE
Market Capitalisation 3874 2816 6670 3758 9797
Add: Debt 51 67 116 134 175
Less: Financial Assets 177 333 835 1217 1708
EV (Enterprise Value) 3748 2550 5951 2675 8263
EV/Yr. End Capital Employed (Times) 7.6 3.8 7.5 2.7 6.3
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YOUR DIRECTORS are pleased to present their Report together with the
Audited Statement of Accounts for the financial year ended March 31,
2004.
DIRECTORS’ REPORT
HERO HONDA
Annual Report 2003–2004
40
FINANCIAL RESULTS
Rs. in Crore
For the year For the year
ended March 31, ended March 31,
2004 2003
Sales and other Income 5, 997.47 5,194.58
Profit before depreciation and finance charges 1, 144.44 946.43
Less: Finance charges (1.35) (1.02)
Depreciation 73.33 63.39
Profit before tax 1,072.46 884.56
Less: Provision for tax
—Current 331.07 298.19
—Deferred 13.07 5.61
Profit after tax 728.32 580.76
Add: Balance of profit brought forward 335.75 220.48
Balance available for appropriation 1,064.07 801.24
Appropriations
Dividend
—Interim 199.69 —
—Proposed Final 199.69 359.44
Tax on Dividend 51.16 46.05
Transfer to General Reserve 75.00 60.00
Balance carried to Balance Sheet 538.53 335.75
Dividend % 1000 900
Basic and Diluted EPS (Rs.) 36.47 29.08
ND_L18fontscorrected FIN.qxd 7/26/2004 5:34 PM Page 40
BUSINESS PERFORMANCE
The motorcycle market during
2003-04 breached the 4 million
mark even though the competition
intensified both in terms of
product launch as also the pricing.
The rate of growth of motorcycles
has slowed from 30 per cent in
2002-03 to 14 per cent in the
current year. The market share of
your Company in this moderate
growth motorcycle market has
risen to 48% and as a result it
posted impressive financial results.
Total income of the Company grew
by 15 per cent from Rs. 5,194.58
Crores in 2002-03 to Rs. 5,997.47
Crores in 2003-04. Pre-tax profit
(PBT) increased by 21 per cent
from Rs. 884.56 Crores in 2002-
03 to Rs.1,072.46 Crores in 2003-
04 and post-tax profit (PAT) grew
by 25 percent from Rs.580.76
Crores in 2002-03 to Rs.728.32
Crores in 2003-04.
The Company’s motorcycle sales
grew by a healthy 23 per cent
from 1.68 million motorcycles in
2002-03 to 2.07 million
motorcycles in 2003-04. During
the year, over a million units of
Splendor were sold and it
continues to be the largest selling
motorcycle model in the world for
the fourth year in a row. Your
Company launched five new
models targeting the basic/entry
segment as well as the premium
segment of the market, namely,
CD Dawn; Karizma; Splendor+;
Passion plus and Ambition 135.
Good sales growth was
accompanied by improvement in
cost rationalization, better working
capital management, efficiency in
manufacturing and higher
productivity.
We have reasons to be satisfied
with the performance of the
Company. For three years in a row,
Hero Honda continues to be the
world’s single largest two-wheeler
Company. It also continues to be
the leader in the domestic two-
wheeler market. The business
performance of the Company has
been discussed in detail in the
chapter on management
discussion & analysis.
DIVIDEND
At Hero Honda, it is our strong
belief that the profits earned
should be shared with all
stakeholders and also be utilized
in creating “shareholders value”.
Further, the Company has also set
a benchmark with respect to
dividend payments and believes
that surplus funds over and above
requirements for capital
investments should be distributed
to shareholders. The year under
review will go down in the Indian
Corporate history as the highest
dividend paid by any
manufacturing Company in a year
amounting to a Dividend of 1000%
consisting of Special Interim
Dividend of 500% (Rs.10) already
paid. A Final Dividend of 500%
(Rs.10) per equity share of Rs.2
each aggregating to Rs. 225.27
Crores (inclusive of corporate
dividend tax of Rs. 25.58 Crores)
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has been recommended for your
approval for the financial year
ended March 31, 2004.
MATERIAL CHANGES AND COMMITMENTS
Your Directors wish to inform with
great pleasure that the Company
has renewed its License and
Technical Assistance (LTA)
Agreement with its Joint Venture
Partner Honda Motor Co., Ltd.,
Japan on June 2, 2004 for a
further period of ten years with
effect from June 21, 2004. Apart
from this, there were no material
changes and commitments
affecting the financial position of
the Company that have occurred
between the end of the financial
year of the Company and the date
of signing of this report.
BOARD OF DIRECTORS
Mr. Koji Nakazono was appointed
as the Director of the Company in
the casual vacancy caused by the
resignation of Mr. Yukihiro
Aoshima, with effect from April 1,
2004.
The Directors place on record their
gratitude for the services rendered
and guidance received from Mr.
Aoshima during his tenure as
member of the Board.
The Directors heartily welcome Mr.
Nakazono to the Board and wish
him success for a fruitful
association in the future.
Mr. Satoshi Toshida, Mr. Satyanand
Munjal, Mr. Om Prakash Gupta,
Mr. Mahendra Pal Wadhawan,
Directors of the Company, retire by
rotation at the ensuing Annual
General Meeting. Mr. Satoshi
Toshida and Mr. Satyanand Munjal
being eligible have offered
themselves for re-appointment.
Your Directors recommend their
re-appointment at the ensuing
Annual General Meeting.
However Mr. O.P. Gupta and Mr.
M.P. Wadhawan though eligible for
re-appointment, have requested to
be relieved from this responsibility.
Both of them have been
associated with the Company since
inception. We take this opportunity
to record our deep appreciation for
the immense contribution made by
them, especially in the formative
years. Their knowledge and rich
experience was very useful in
laying strong foundation for the
Company.
We wish them good health and
happiness.
DIRECTORS’ RESPONSIBILITY STATEMENT
To the best of their knowledge and
belief and according to the
information and explanations
obtained by them, your Directors
HERO HONDA
Annual Report 2003–2004
Directors’ Report
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make the following statement in
terms of Section 217(2AA) of the
Companies Act, 1956:
1. that in the preparation of the
annual accounts for the year ended
March 31, 2004, the applicable
accounting standards have been
followed;
2. that appropriate accounting
policies have been selected and
applied consistently and
judgements and estimates that are
reasonable and prudent have been
made so as to give a true and fair
view of the state of affairs as at
March 31, 2004 and of the profit
of the Company for the financial
year ended March 31, 2004;
3. that proper and sufficient care has
been taken for the maintenance of
adequate accounting records in
accordance with the provisions of
the Companies Act, 1956 for
safeguarding the assets of the
Company, and for preventing and
detecting fraud and other
irregularities;
4. that the annual accounts for the
year ended March 31, 2004 have
been prepared on a going concern
basis.
MANAGEMENT DISCUSSION AND
ANALYSIS REPORT
A detailed chapter on,
‘Management Discussion and
Analysis’, pursuant to Clause 49 of
the Listing Agreement is given in
the Annual Report.
CORPORATE GOVERNANCE
Hero Honda believes that the
essence of Corporate Governance
lies in the phrase ‘Your Company’.
It is ‘Your’ Company because it
belongs to you – the shareholders.
The Chairman and Directors are
‘Your’ fiduciaries and trustees.
Their objective is to take the
business forward in such a way
that it maximises ‘Your’ long-term
value. Your Company is committed
to benchmark itself with global
standards in all areas including
appropriate standards for Good
Corporate Governance. Towards
this end, an effective ‘Corporate
Governance System’ has been put
in place in the Company, which
also ensures that the provisions of
Clause 49 of the Listing Agreement
are duly complied with. A report
on Corporate Governance along
with the Auditors’ Certificate on its
compliance is annexed hereto as
Annexure — I.
INTERNAL CONTROL SYSTEMS
Hero Honda has a proper and
adequate system of internal
controls to ensure that all assets
are safeguarded and protected
against loss from unauthorised use
or disposition and that the
transactions are authorised,
recorded and reported correctly.
An extensive programme of
internal audit and management
reviews supplement the internal
control. Properly documented
policies, guidelines and
procedures are laid down for this
purpose. The internal control
system has been designed to
ensure that the financial and other
records are reliable for preparing
financial and other statements and
for maintaining accountability of
assets.
The Company has an Audit
Committee, comprising three
Independent, Non-Executive and
professionally qualified Directors,
which interacts with the Statutory
Auditors, Internal Auditors, Cost
Auditors and the Auditee in
dealing with matters within its
terms of reference. It also, deals
with accounting matters, financial
reporting and internal controls.
The Committee held six meeting
during the year 2003-04 in this
regard.
AWARDS AND RECOGNITION
During the year under review, your
Company was the winner of
‘Review 200 – 3rd Rank’ amongst
the top 10 Indian Companies - by
the Far Eastern Economic Review.
The Company also won the ‘Best
Value Creator among large
Companies for 2003’ award from
the ‘Outlook Money’ magazine. In
addition, the ‘All India
Management Association’
conferred the “Lifetime
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Achievement Award for
Management (2003)” on your
Company’s Chairman Mr.
Brijmohan Lall Munjal.
RATINGS
The rating agency CRISIL has
reaffirmed their rating granted to
various programme / instruments
of the Company. The ‘AAA’ (‘triple
A’) rating to Non-Convertible
Debenture programme, ‘P1+’ (‘P
one plus’) rating for the Company’s
Commercial Paper programme, as
well as the ‘FAAA’ (‘F-Triple A’)
rating for its Fixed Deposit
programme. The ratings indicate
that the degree of safety with
regard to timely payment of
interest and principal on the
instruments is very strong.
Further ICRA has also granted
‘LAAA’ (‘L triple A’) rating to Non-
Convertible Debenture programme.
FIXED DEPOSITS
During the year under review, the
Company has not accepted any
deposit under Section 58A and
Section 58AA of the Companies
Act, 1956 read with Companies
(Acceptance of Deposits) Rules,
1975.
AUDITORS
M/s. A. F. Ferguson & Co.,
Chartered Accountants, New Delhi,
Auditors of the Company will retire
at the conclusion of the ensuing
Annual General Meeting and being
eligible, offer themselves for re-
appointment. The Company has
received a certificate from the
auditors to the effect that their
reappointment, if made, would be
in accordance with Section
224(1B) of the Companies Act,
1956. The Board recommends
their reappointment.
AUDITORS’ REPORT
As regards the Auditors’ Report,
the respective notes to the
accounts are self explanatory and
therefore, do not call for any
comments.
COST AUDITORS
The Board has re-appointed M/s.
Ramanathan Iyer & Co., Cost
Accountants, New Delhi, as the
Cost Auditors of the Company
under Section 233B of the
Companies Act, 1956 for the
financial year 2004-05 and
necessary approval from the
Government regarding the said
appointment has been received by
the Company. The Cost Auditors'
Report for 2003-04 will be
forwarded to the Central
Government in pursuance of the
provisions of the Companies Act,
1956.
HERO HONDA
Annual Report 2003–2004
Directors’ Report
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CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION, FOREIGN EXCHANGE EARNINGS
AND OUTGO
Information required under Section
217(1)(e) of the Companies Act,
1956, read with Companies
(Disclosure of Particulars in the
Report of the Board of Directors)
Rules, 1988 is given as per
Annexure II and forms an integral
part of this Report.
LISTING
The shares of your Company are
presently listed on The Stock
Exchange, Mumbai (BSE); The
National Stock Exchange of India
Ltd. (NSE) and the Calcutta Stock
Exchange Association Ltd.
(delisting application pending).
Given the abysmally low trading
volumes on all other stock
exchanges, barring the BSE and
NSE, the Company proposed to
delist its shares from the stock
exchanges at Delhi, Calcutta,
Ahmedabad and Ludhiana and
accordingly necessary approval
was accorded by the shareholders
in their 20th Annual General
Meeting held on August 1, 2003.
During the year, The Delhi Stock
Exchange Association Ltd. (DSE)
and The Stock Exchange,
Ahmedabad (ASE) approved
delisting of securities w.e.f.
December 10, 2003 and March
18, 2004 respectively. Further,
delisting approval from The
Ludhiana Stock Exchange
Association Limited (LSE) has also
been received. The approval from
The Calcutta Stock Exchange
Association Limited (CSE) is in
process and is expected to be
received shortly.
ENVIRONMENT AND RESOURCE MANAGEMENT
Hero Honda is an ISO:
14001:1996 Company since 1999,
and is committed to maintain high
environmental standards. Its water
and effluent treatment plants are
one of the best in India. The
Company also has an in-house
laboratory for testing water
effluents for ensuring that all
regulatory requirements are
complied with. The treated water
from these plants is mostly used
for manufacturing processes and
horticulture. The Dharuhera plant
has a hazardous waste clearance
site to dump such wastes so that
nothing is discharged outside the
factory premises.
A) ENVIRONMENTAL MANAGEMENT
The Company has been certified
for its environmental management
systems as per ISO: 14001:1996.
The integration of environment
friendly measures and cleaner
production practices in the
business processes has resulted in
better efficiency of operations and
also improved the environmental
performance.
B) ENVIRONMENTAL COMPLIANCE
The applicable Environmental
regulations are complied with. The
Company has defined its own
environmental standards, which
are more stringent than the
prescribed norms. A state-of-the
art Environmental Laboratory has
been set up to monitor pollution
control strictly as per standards.
C) POLLUTION PREVENTION AND
RESOURCE MANAGEMENT
The Company is committed to
conserve resources particularly the
pollution causing resources i.e.
oils, water, energy, paints and
chemicals. A number of
environmental management
programs have been implemented
and new practices introduced to
ensure the optimal consumption of
these resources. The consumption
of such resources have
consistently been reduced over the
past years. The carbon emission
on account of motorcycle
production is calculated and
monitored vigorously to ensure
better energy performance.
We have introduced a state-of-the
art technology for setting up of
Aluminium Machining Shop, which
has resulted in low energy
consumption and better
environment controls.
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D) POLLUTION CONTROL MANAGEMENT
The Company is a zero effluent
discharge Company; the inevitable
effluent generated from industrial
activities is treated at the facilities
and treated effluent is recycled in
the plant. In order to control the
noise pollution, D.G. House has
also been treated acoustically.
E) D ISPOSAL OF HAZARDOUS WASTE
At our Dharuhera Plant, an
engineered landfill facility has
been constructed & incinerators
installed for disposal of wastes
which have been classified as
hazardous.
F) OTHER IN IT IATIVES
Suppliers and Dealers are integral
part of our supply chain and
distribution system; therefore we
constantly influence them to
incorporate environment protection
guidelines in their activities.
Your Company greatly values
conservation of natural resources.
We have implemented rain water
harvesting programme at both the
plants. The scheme has 10
injection wells covering
approximately 31540 sq. m. of
rooftop area. A leading
environmental NGO, Centre for
Science and Environment (CSE),
New Delhi, has selected our
rainwater-harvesting project at the
Dharuhera plant as one of the
model project for enhancing public
awareness.
The Company is actively involved
in the development of a common
integrated facility for Disposal of
Hazardous Waste in the state of
Haryana.
The Company’s Managing Director
has been the Chairman of National
Environment Committee of
Confederation of Indian Industry
(CII) for the year 2003-04 and
spearheaded the environmental
initiatives at the national level.
PERSONNEL
As on March 31, 2004, the total
number of employees on the
records of the Company was
4,017. Hero Honda conducts
several training programmes to
upgrade the skills of its workforce.
These programmes have a strong
practical approach, and the
objective is to derive tangible
improvements. Your Directors place
on record their appreciation for the
significant contribution made by all
the employees, who through their
competence, hard work, solidarity,
co-operation and support, have
enabled the Company to cross new
milestones on a continual basis.
Industrial relations, as always, have
remained cordial throughout the
year.
HERO HONDA
Annual Report 2003–2004
Directors’ Report
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PARTICULARS OF EMPLOYEES
A Statement showing Particulars of
Employees as required under
Section 217(2A) of the Companies
Act, 1956 read with the
Companies (Particulars of
Employees) Rules, 1975 is
annexed as Annexure III and
forms an integral part of the report.
ACKNOWLEDGEMENTS
It is our strong belief that caring
for our business constituents has
and will go a long way in the
progress of the Company. Your
Directors acknowledge with
sincere gratitude the co-operation
and assistance extended by the
Central Government, State
Government(s), Financial
Institution(s), Bank(s), Customers,
Dealers, Vendors and Ancillary
Undertakings. The Directors also
place on record their appreciation
for the valuable assistance and
guidance extended to the
Company by Hero Cycles Ltd. and
Honda Motor Co., Ltd., Japan and
for the encouragement and
assurance, which our collaborator
has given for the growth and
development of the Company. The
Board, also, takes this opportunity
to express its deep gratitude for
the continued co-operation and
support received from its valued
shareholders.
For and on behalf of the Board
Brijmohan Lall Munjal
CHAIRMAN HERO HONDA MOTORS LTD.
New Delhi
July 14, 2004
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ANNEXURE I TO DIRECTORS’ REPORT
INTRODUCTION
Hero Honda’s philosophy of
Corporate Governance stems from
its belief that the Company’s
business strategy and plans should
be consistent with the welfare of all
its stakeholders, including
shareholders. Good Corporate
Governance practices enable a
company to attract financial and
human capital and leverage these
resources to maximize long-term
shareholder value, while preserving
the interests of multiple
stakeholders, including society at
large.
Corporate Governance rests upon
the four pillars of: transparency, full
disclosure, independent monitoring and
fairness to all, especially to minority
shareholders. Hero Honda has
always strived to promote good
governance practices, which ensure
that:
• A competent management team is at
the helm of affairs;
• The Board is strong with an optimum
combination of Executive and Non-
Executive (including Independent)
Directors, who represent the interest
of all stakeholders;
• The Board effectively monitors the
management’s progress, takes all
key corporate decisions and is
effectively in control of the
Company’s affairs;
• The Board is concerned about the
Company’s shareholders; and
• The Management and Employees
have a stable environment.
We believe that the essence of
Corporate Governance lies in the
phrase “Your Company”. It is “Your”
Company because it belongs to you
– the shareholders. The Chairman
and Directors are “Your” fiduciaries
and trustees. Their objective is to
take the business forward to
maximise “Your” long-term value.
The Securities and Exchange Board
of India (SEBI) has specified certain
mandatory governance practices,
which are incorporated in Clause 49
of the Listing Agreement of stock
CORPORATE GOVERNANCEREPORT
HERO HONDA
Annual Report 2003–2004
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TABLE 1 DETAILS ABOUT COMPANY’S BOARD OF DIRECTORS / ATTENDANCE RECORD
Director Number of Attendance Number of Number of Number of
Board at Last AGM Committee Committee outside
meetings memberships Chairmanships Directorships
held # held held
(excluding Private Companies, Foreign
Companies, Section 25 Companies)
Held Attended
Executive Directors
Mr. Brijmohan Lall Munjal 6 6 Yes None None 7
Mr. Pawan Munjal 6 6 Yes None None 1
Mr. Akio Kazusa 6 4 Yes None None 1
Mr. Shinichi Nakayama* 6 4 Yes None None 1
Mr. Kazumi Yanagida * 6 1 Yes None None 1
Non-Executive Directors
Mr. Satyanand Munjal 6 None No 1 None 4
Mr. Om Prakash Munjal 6 4 No None None 9
Non-Executive and Independent Directors
Mr. M.P.Wadhawan 6 6 Yes 7 3 3
Mr. O.P.Gupta 6 6 Yes 8 4 5
Mr. S.P.Virmani 6 6 Yes 2 1 2
Mr. N.N.Vohra 6 5 No 1 None None
Mr. Pradeep Dinodia 6 5 Yes 8 3 7
Gen. (Retd.) V.P.Malik 6 4 Yes 1 None 1
Mr. Satoshi Toshida 6 None No None None None
Mr. Yukihiro Aoshima ** 6 None No None None 1
Notes:# Membership includes Chairmanship also. * Mr. Shinichi Nakayama has been appointed as a Director on the Board with effect from May 9, 2003, in the casual vacancy caused due to the resignation of Mr. Kazumi Yanagida with effect from April 24, 2003; ** Mr. Yukihiro Aoshima resigned from the Board on April 1, 2004 and Mr. Koji Nakazono has been appointed as a Director on the Board with effect from April 1, 2004 in
the casual vacancy caused due to resignation of Mr. Yukihiro Aoshima.
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exchanges. Hero Honda is
committed to benchmark itself
with the best standards of
Corporate Governance, not only in
form but also in spirit. This
section, along with the section on
‘Management Discussion and
Analysis’ and ‘General
Shareholder’s Information’
constitute Hero Honda’s
compliance with Clause 49.
BOARD OF DIRECTORS
COMPOSIT ION OF THE BOARD
As on March 31, 2004, the
Company’s Board of Directors
consists of fourteen Directors.
Four Directors, including the
Chairman, are Executive, two are
Non-Executive and eight are Non-
Executive and Independent. As
more than 50 per cent of the
Board consists of Independent
Directors, the composition of the
Board is in consonance with
Clause 49. Details of the
composition of the Board are given
in Table 1.
Four Directors— Mr. Brijmohan
Lall Munjal (Executive Chairman in
the whole-time employment of the
Company), Mr. Pawan Munjal
(Managing Director), Mr.
Satyanand Munjal (Non-Executive
Director) and Mr. Om Prakash
Munjal (Non-Executive Director)—
belong to the promoter family of
the Hero Group, which owns 26
per cent equity in the Company.
Two Directors— Mr. Akio Kazusa
(Executive Director) and
Mr. Shinichi Nakayama (Executive
Director)— are nominees of Honda
Motor Co., Ltd, Japan, which too,
owns 26 per cent equity in the
Company. Subsequent to the year
end, Mr. Yukihiro Aoshima has
resigned and in his place Mr. Koji
Nakazono has been appointed on
the Board, with effect from April 1,
2004.
Apart from formulating business
strategies, The Board regularly
reviews the performance of the
Company and ensures that
targeted objectives are met on a
consistent basis.
BOARD MEETINGS
During 2003-04, the Board of
Directors met 6 times on April 10,
2003; June 4, 2003; July 11,
2003; September 30, 2003;
October 14, 2003 and January 14,
2004 respectively.
The longest gap between any two
Board Meetings did not exceed the
period of 3 months.
DIRECTORS’ATTENDANCE RECORD AND
DIRECTORSHIPS
Details are given in Table 1
As per Clause 49 of the Listing
Agreement entered into with the
Stock Exchange(s), an
Independent Director means a
Director who apart from receiving
director’s remuneration, does not
have any other material pecuniary
relationship or transactions with
the Company, its promoters, its
management or its subsidiaries,
which in the judgement of the
Board may affect the
independence of judgement of the
director.
None of the Directors on the Board
holds the office of Director in more
than 15 companies, nor are they
members in Committees of the
Board in more than 10
Committees or Chairman of more
than 5 Committees. There are no
pecuniary relationships or
transactions between the Non-
Executive Directors and the
Company, except for the sitting
fees drawn by the Non-Executive /
Non-Executive and Independent
Directors for attending the
meetings of the Board and its
Committee(s).
INFORMATION SUPPLIED TO THE BOARD
Board members are given agenda
papers along with necessary
documents and information in
advance of each meeting of the
Board and Committee(s). In
addition to regular business items,
the following are regularly placed
HERO HONDA
Annual Report 2003–2004
Corporate Governance Report
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before the Board to the extent
applicable :
• Annual Operating plans and
budgets, Capital Budgets, updates;
• Purchase and disposal of major
fixed assets;
• Quarterly and half yearly results of
the Company;
• Minutes of the Audit Committee and
other Committee meetings;
• Information on recruitment and
remuneration of senior officers just
below the Board level including
appointment or removal of CFO and
Company Secretary;
• Any material defaults in financial
obligations to and by the Company
for substantial non-payments;
• Fatal or serious accidents,
dangerous occurrences, any
material effluent or pollution
problems;
• Transactions that involve
substantial payment towards
goodwill, brand equity or
intellectual property;
• Materially important show cause,
demand, prosecution and penalty
notices;
• Details of Quarterly foreign
exchange exposures and steps
taken by the management to limit
the risks of adverse exchange rate
movement;
• Sale of material nature, of
investments and assets, which are
not in the normal course of
business;
• Details of Joint Ventures and
Agreements or variations thereof;
• Quarterly Statutory Compliance
Report;
• Directors’ Overseas Travelling
expenses;
• Non-compliance of any regulatory,
statutory nature or listing
requirements and shareholder’s
service such as non-payment of
dividend, delay in share transfer
etc.;
• Investments strategy/plan;
• Any issue which involves possible
public or product liability claims of
substantial nature, including any
judgement or order which may
have passed strictures on the
conduct of the Company or taken
an adverse view regarding another
enterprise that can have negative
implications on the Company; and
• Significant labour problems and
their proposed solutions. Also, any
significant development in Human
Resources/Industrial Relations front
like signing of Wage Agreement,
implementation of Voluntary
Retirement Schemes etc.
BOARD LEVEL COMMITTEES
AUDIT COMMITTEE
The genesis of Hero Honda’s Audit
Committee can be traced back to
the Audit Sub-Committee,
constituted in 1987. Since then it
has been dealing with matters
prescribed by the Board of
Directors on a case-by-case basis.
The nomenclature, constitution
and terms of reference of the
Committee were revised on
January 16, 2001 and an Audit
Committee was set up as per the
provisions of the Section 292A of
the Companies Act, 1956 and
Clause 49 of the Listing Agreement
of the Stock Exchange(s). As on
March 31, 2004, the Committee
had three Non-Executive &
Independent Directors in
accordance with the prescribed
guidelines. All the members have
sound knowledge in the field of
finance, accounting and law. The
“terms of reference” of the Audit
Committee included the following:
• Overseeing the Company’s financial
reporting process and disclosure of
its financial information to ensure
that the financial statements are
correct, sufficient and credible.
• Recommending the appointment
and removal of the external auditor,
fixation of audit fees and approving
payments for any other services.
• Reviewing with the management
the annual financial statements
with primary focus on accounting
policies and practices, compliance
with accounting standards and
guidelines of stock exchange(s)
etc.
• Compliance with Stock Exchange
and legal requirements concerning
financial statements.
• Reviewing the adequacy of internal
control systems and the internal
audit function and reviewing the
51
20Y E A R S
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company’s financial and risk
management policies.
• Reviewing the findings of any
internal investigations by the
internal auditors into matters
where there is suspected fraud or
irregularity or a failure of internal
control system of a material nature
and reporting the matter to the
Board.
• Reviewing reports furnished by the
internal auditors, discussion with
Internal Auditors on any significant
findings and ensuring suitable
follow up thereon.
• Discussing with external auditors
before the audit commences, of the
nature and scope of audit. Also
post – audit discussion to ascertain
any area of concern.
• Directors’ Overseas Travelling
expenses.
• Review of Foreign Exchange
exposure.
• Reviewing the Company’s financial
and risk management policies.
• To look into the reasons for
substantial defaults in the
payments to the depositors,
debentureholders, shareholders (in
the case of non-payment of
declared dividends) and creditors.
The Vice President – Finance,
internal auditors, statutory auditors
and cost auditor attend the
meetings of the Committee on the
invitation of the Chairman. The
Company Secretary acts as the
Secretary of the Committee.
During the year, six meetings of
the Audit Committee were held on
April 10, 2003; June 25, 2003;
July 11, 2003; September 30,
2003; October 14, 2003 and
January 14, 2004 respectively in
due compliance with the stipulated
provisions. The attendance record
of members of the Audit
Committee is given in Table 2.
REMUNERATION COMMITTEE
The Company had set up a
Remuneration Committee on
January 16, 2001 to review and
recommend the payment of
annual salaries, commission;
service agreements and other
employment conditions of
Executive Directors. The
Committee takes into consideration
the best remuneration practices
being followed in the industry
while fixing appropriate
remuneration packages. As on
March 31, 2004, Mr. S.P.Virmani
is the Chairman of the Committee.
The other members are Mr.
N.N.Vohra and Gen. (Retd.)
V.P.Malik. All the members are
Non-Executive and Independent
Directors.
During 2003-04, the Committee
met twice on April 10, 2003 and
June 4, 2003. The objective of the
meetings was to review the terms
of appointment and remuneration
of Mr. Shinichi Nakayama, the
Whole-time Director of the
Company and revision in Basic
Salary of Executive Directors
respectively. All the members
attended the meetings and the
attendance record of members of
the Committee is given in Table 3.
REMUNERATION POLICY
The remuneration paid to
Executive Directors is
recommended by the
Remuneration Committee and
approved by the Board of
Directors, in the Board meeting,
subject to the subsequent approval
by the shareholders at the General
Meeting and such other
authorities, as the case may be.
HERO HONDA
Annual Report 2003–2004
Corporate Governance Report
52
TABLE 2 DETAILS OF THE AUDIT COMMITTEE
Director Category No. of No. of
meetings held meetings attended
Mr. M.P Wadhawan Chairman 6 6
Mr. O.P. Gupta Member 6 6
Mr. Pradeep Dinodia Member 6 4
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53
At the Board meeting, only the
Non-Executive and Independent
Directors participate in this
exercise. The remuneration is fixed
considering various factors such as
qualification, experience, expertise,
prevailing remuneration in the
corporate world and the financial
position of the Company. The
remuneration structure comprises
of Basic Salary, Perquisites and
allowances, Contribution to
provident fund and other funds.
Besides these, a fixed commission
@ 1 per cent of net profit
computed in accordance with
Section 198 of the Companies Act,
1956 is paid as per the terms of
appointment. The Non-Executive
Directors do not draw any
remuneration from the Company
except sitting fees of Rs. 5,000 for
each meeting of the Board, Audit
Committee, Remuneration
Committee and Shareholders’
Grievance Committee attended by
them. The amount of sitting fees
has also been enhanced to
Rs. 15, 000 for each such meeting
being attended with effect from
October 14, 2003 and thereafter in
the Board meeting held on
January 14, 2004, the amount of
incidental expenses i.e. Rs. 1,500
was clubbed with the sitting fee
making the sitting fee payable to
Rs. 16,500 for each meeting.
REMUNERATION PAID TO DIRECTORS
Table 4 and 5 gives details of
remuneration paid to Directors.
During 2003-04, the Company did
not advance any loans to any of its
Directors. As of now, the Company
does not have any Employee Stock
Option Plan (ESOP). Further, no
notice period and severance fee is
applicable for the above-
mentioned Executive Directors.
SHAREHOLDERS’ GRIEVANCE COMMITTEE
This Committee, constituted on
January 16, 2001, specifically
looks into redressal of
shareholders’ and investors’
grievances arising out of issues
regarding share transfers,
dividends, dematerialisation and
related matters. As on March 31,
2004, Mr. O.P.Gupta is the
Chairman of the Committee. The
other members are Mr. Pradeep
Dinodia and Mr. M.P.Wadhawan.
All the members are Non-
Executive and Independent
Directors. Mr. Kazumi Yanagida
relinquished his office with effect
from April 24, 2003 and thereafter
the Board of Directors in their
meeting held on September 30,
2003 co-opted Mr. M.P.Wadhawan
as the member of the Committee.
Mr. Ilam C. Kamboj, Company
20Y E A R S
TABLE 3 DETAILS OF THE REMUNERATION COMMITTEE
Director Category No. of meetings No. of meetings
Held Attended
Mr. S.P. Virmani Chairman 2 2
Mr. N.N. Vohra Member 2 2
Gen. (Retd.) V.P. Malik Member 2 2
TABLE 4 REMUNERATION TO EXECUTIVE DIRECTORS
Executive Directors Salary$ Commission** Total Service
Rs.) Fixed (Rs.) (Rs.) Contracts
Mr. Brijmohan Lall Munjal 62,24,258 11,09,00,000 11,71,24,258 5 years
Mr. Pawan Munjal 44,47,574 11,09,00,000 11,53,47,574 5 years
Mr. Akio Kazusa 27,05,006 11,09,00,000 11,36,05,006 5 years
Mr. Shinichi Nakayama * 18,64,769 9,94,00,000 10,12,64,769 5 years
Mr. Kazumi Yanagida * 4,30,142 73,00,000 77,30,142 5 years
* Mr. Shinichi Nakayama was appointed as a Director on the Board with effect from May 9, 2003 in the casualvacancy caused due to the resignation of Mr. Kazumi Yanagida on April 24, 2003.
$ Salary includes Basic Salary, Perquisites and Allowances, Contribution to provident and other funds.
**Total Commission is calculated @ 1% of the net profit calculated in accordance with Section 198 of theCompanies Act, 1956.
ND_L18fontscorrected FIN.qxd 7/26/2004 5:35 PM Page 53
Secretary being the Compliance
Officer is the Secretary of the
Committee.
The Company has an efficient
system of dealing with Investors’
Grievances. The Chairman and the
Managing Director of the Company
take personal interest in all matters
of concern of investors, as and
when necessary. The Company
Secretary being the Compliance
Officer carefully looks into each
issue and reports the same to the
Shareholders’ Grievance
Committee. The Committee met
three times during the year under
review. In these meetings, the
status of shareholders’ complaints,
requests etc. and also letters
received from different authorities
were reviewed.
During the year, three meetings of
the Shareholders’ Grievance
Committee were held on July 11,
2003; September 30, 2003 and
January 14, 2004 respectively in
due compliance with the stipulated
provisions. The attendance record
of members of the Shareholders’
Grievance Committee is given in
Table 6.
Details of Shareholders’ complaints
and their status are given in the
section on “General Shareholder’s
Information”.
COMMITTEE OF DIRECTORS
Apart from these Committees, the
Company also has a Committee of
Directors. As on March 31, 2004,
the Committee comprised of Mr.
Brijmohan Lall Munjal—Chairman,
Mr. Pawan Munjal—Managing
Director, Mr. Akio Kazusa—Joint
Managing Director, Mr. Shinichi
Nakayama—Director, Mr. Ravi
Sud—Vice President-Finance and
Mr. Ilam C. Kamboj—Company
Secretary.
Constituted in 1985, the
Committee deals with matters
relating to transfer, transmission
and transposition of shares, issue
of new share certificates, review of
dematerialisation of shares, all
matters relating to shares and all
other matters as prescribed and
delegated to the Committee by the
Board from time to time.
This Committee generally meets
four times in a month. During the
year under review, 50 meetings
were held.
HERO HONDA
Annual Report 2003–2004
Corporate Governance Report
54
TABLE 5 REMUNERATION TO NON-EXECUTIVE DIRECTORS
Non-Executive Directors Sitting fees Commission Total
(Rs.) (Rs.) Rs.)
Mr. Om Prakash Munjal 41,500 Nil 41,500
Mr. M.P. Wadhawan 1,24,500 Nil 1,24,500
Mr. O.P. Gupta 1,29,500 Nil 1,29,500
Mr. Pradeep Dinodia 1,09,500 Nil 1,09,500
Mr. S.P. Virmani 61,500 Nil 61,500
Mr. N.N. Vohra 56, 500 Nil 56,500
Gen.(Retd.) V.P. Malik 41, 500 Nil 41,500
No sitting fee was payable to Mr. Satyanand Munjal, Mr. Yukihiro Aoshima and Mr. Satoshi Toshida, as they have not attended any of the meetings of the Board during the Financial Year
TABLE 6 DETAILS OF THE SHAREHOLDERS’ GRIEVANCE COMMITTEE
Director Category No. of meetings No. of meetings
Held Attended
Mr. O.P. Gupta Chairman 3 3
Mr. Pradeep Dinodia Member 3 2
Mr. M.P Wadhawan * Member 3 2
* inducted as member with effect from September 30, 2003
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55
DISCLOSURES
RELATED PARTY TRANSACTIONS
Related Parties and transactions
with them as required under
Accounting Standard 18 (AS- 18)
are furnished under paragraph no.
7 of the Notes to the Accounts
attached with the financial
statements for the year ended
March 31, 2004.
The transactions with the related
parties are neither materially
significant nor they have potential
conflict with the interests of the
Company at large.
DETAILS OF NON-COMPLIANCE
There has neither been any non-
compliance of any legal provision
of applicable law, nor any penalty,
stricture imposed by the stock
exchanges or SEBI or any other
authorities, on any matters related
to capital market during the last
three years.
INSIDER TRADING
In compliance with the recently
amended SEBI regulation on
prevention of insider trading, the
Company has instituted a
comprehensive code of conduct
for its management, staff and
relevant business associates. The
code lays down guidelines, which
advises them on procedures to be
followed and disclosures to be
made, while dealing with shares of
the Company and cautioning them
on consequences of non-
compliances.
SHAREHOLDERS
APPOINTMENT / RE-APPOINTMENT OF
DIRECTORS
Mr. Satoshi Toshida, Mr.
Satyanand Munjal, Mr. Om
Prakash Gupta and Mr. Mahendra
Pal Wadhawan, Directors of the
Company, retire by rotation at the
ensuing Annual General Meeting.
Mr. Satoshi Toshida and Mr.
Satyanand Munjal being eligible
have offered themselves for re-
appointment. However Mr.
O.P.Gupta and Mr. M.P.Wadhawan
though eligible for re-appointment,
have requested to be relieved from
this responsiblity.
Mr. Koji Nakazono has been
appointed as Director in the casual
vacancy caused due to the
resignation of Mr. Yukihiro
Aoshima with effect from April 1,
2004.
The abbreviated resume of the
said Directors being re-appointed,
is given in the Notice of the
Annual General Meeting.
MEANS OF COMMUNICATION
The Company’s half yearly results
(period ended September 30,
2003) and annual results (year
ended March 31, 2004) have
been published in English, Hindi
and other regional language
newspapers ( viz. The Economic
Times, The Financial Express,
Business Standard, Nav Bharat
Times etc). Results for the quarter
ended June 30, 2003 and
December 31, 2003 have been
published in English and Hindi
newspapers (viz. The Economic
Times, The Financial Express, Nav
Bharat Times and Jansatta).
Further, the Company’s quarterly,
half yearly and annual results have
also been sent to the individual
shareholders of the Company.
Results for each quarter and
annual results for the year ended
March 31, 2004 have been
displayed on the Company’s
website at www.herohonda.com.
The website also displays official
news releases and distribution
schedule as required by Clause 35
of the Listing Agreement.
Moreover, pursuant to clause 51 of
the Listing Agreement, financial
information like annual and
quarterly financial statements,
shareholding pattern etc. are
available on the SEBI web-site,
www.sebiedifar.nic.in. The
Company Secretary being the
Compliance Officer ensures the
correctness and authenticity of the
information filed in the said web
site.
20Y E A R S
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During the year ended March 31,
2004, various presentations were
made to Analysts and Institutional
Investors.
Further, the Management
Discussion and Analysis (MDA)
report, throwing light on the
Operations, Business
Performance, Financials and other
important aspects of the
Company’s functioning, forms a
part of the Annual Report.
GENERAL BODY MEETINGS
DETAILS OF EXTRA-ORDINARY GENERAL
MEETING (EGM) AND ANNUAL GENERAL
MEETING (AGM)
Location, date and time of General
Meetings held during the last three
years and Special resolutions
passed there at are given in Table
7. Pursuant to the provisions of
Section 192A of the Companies
Act, 1956, there was no matter
required to be dealt by the
Company to be passed through
postal ballot.
HERO HONDA
Annual Report 2003–2004
Corporate Governance Report
56
TABLE 7 DETAILS OF EGM’S & AGM’S
Year Location Date Time Special resolution passed
EGM
2000-01 Dharuhera Plant February 23, 2001 10:30 a.m. • Amendment in Articles of Association, Article 3 and 6(1) modified
• Amendment in Object clause of Memorandum of Association
• Variation in terms of appointment of Mr. Rahul Munjal
AGM
2002-03 Air Force August 1, 2003 10:00 a.m. • Delisting of Securities of the Company.
Auditorium • Variation in terms of remuneration of Executive Directors
New Delhi
2001-02 Air Force August 12, 2002 10:00 a.m. • Amendment in Articles of Association. New Article Nos.
Auditorium 84 and 113 inserted in place of existing Article Nos. 84 and 113.
New Delhi • Increase in the investment limit of F.I.I’s.
• Variation in terms of appointment of Mr. Brijmohan Lall Munjal,
Chairman and Managing Director.
2000-01 Air Force August 10, 2001 10:30 a.m. • Amendment in Articles of Association: Article 1
Auditorium and 84 modified and Article 74A inserted
New Delhi • Re-appointment of Mr. Brijmohan Lall Munjal as Chairman
and Managing Director
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57
GENERAL SHAREHOLDERS’ INFORMATION
ANNUAL GENERAL MEETING
Date August 17, 2004
Day Tuesday
Time 11:00 A.M.
Venue: Airforce Auditorium, Subroto Park, Dhaula Kuan, New Delhi 110 010
FINANCIAL CALENDAR
Financial year April 1 to March 31
FOR THE YEAR ENDED MARCH 31, 2004, RESULTS WERE ANNOUNCED ON:
First quarter ended June 30, 2003 July 11, 2003
Half year ended September 30, 2003 October 14, 2003
Third quarter ended December 31, 2003 January 14, 2004
Fourth quarter and year ended March 31, 2004 April 12, 2004
FOR THE YEAR ENDED MARCH 31, 2005, RESULTS WILL BE ANNOUNCED ON: (TENTATIVE AND SUBJECT TO CHANGE)
First quarter ending June 30, 2004 July, 2004 (2nd week)
Half year ending September 30, 2004 October, 2004 (2nd week)
Third quarter ending December 31, 2004 January, 2005 (2nd week)
Fourth quarter and year ending March 31, 2005 April, 2005 (2nd week)
BOOK CLOSURE
The dates of book closure are from Saturday, July 31, 2004 to Tuesday, August 3, 2004 (both days inclusive).
DIVIDEND PAYMENT
The Company has declared 1000 per cent dividend for 2003-04, which includes an interim dividend of 500
per cent already paid in the month of February 2004. This is one of the highest dividends by any Company of
this proportion in India, engaged in manufacturing activity. The final dividend of 500 per cent shall be paid to
those shareholders whose names appear in the Register of members as on Tuesday, August 3, 2004.
LISTING ON STOCK EXCHANGES
Due to lack of significant trading volumes, the members of the Company on the proposal of the Board
approved the delisting of its equity shares from all the regional Stock Exchanges except The Stock Exchange,
Mumbai and National Stock Exchange of India Limited, Mumbai, in the previous Annual General Meeting held
on August 1, 2003.
Subsequent to the approval of the members, the Company’s equity shares have been delisted by the following
20Y E A R S
ND_L18fontscorrected FIN.qxd 7/26/2004 5:36 PM Page 57
Stock Exchanges from their respective Exchanges:
SL. NO. NAME OF THE STOCK EXCHANGE DATE OF DE-LISTING
1. The Delhi Stock Exchange Association Limited (DSE) December 10, 2003
2. The Stock Exchange, Ahmedabad (ASE) March 18, 2004
3. The Ludhiana Stock Exchange Association Limited (LSE) March 26, 2004
The Delisting approval from The Calcutta Stock Exchange Association Limited (CSE) is expected in due course
of time while the procedural formalities for the same have been complied with.
As on March 31, 2004 the shares of the Company are listed on the following exchanges:
SL. NO. NAME OF THE STOCK EXCHANGE
1. The Stock Exchange, Mumbai, Phiroze Jeejeebhoy Towers, 25th Floor, Dalal Street, Mumbai-400 001.
2. National Stock Exchange of India Limited, Exchange Plaza, Plot No. C/1,G Block, Bandra-Kurla
Complex, Bandra East, Mumbai - 400 051
LISTING FEES
Listing fees for the year 2004-05 has been paid to the stock exchanges wherein the equity shares are listed by
the first week of April 2004 i.e within the stipulated time.
STOCK CODES
The Company’s stock codes at the primary exchanges are:
Stock Code Reuters Code Bloomberg
Bombay Stock Exchange 500182 HROH.BO HH IN
National Stock Exchange HEROHONDA HROH.NS NHH IN
STOCK MARKET DATA
The Company’s market capitalisation is included in the computation of the BSE Sensex, BSE -100, BSE-200,
BSE -500, S & P CNX Nifty and S&P CNX 500. Monthly high and low quotations as well as the volume of
shares traded at the National Stock Exchange of India Ltd. (NSE) and The Stock Exchange, Mumbai (BSE) is
given in Table 1.
HERO HONDA
Annual Report 2003–2004
Corporate Governance Report
58
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59
20Y E A R S
TABLE 1 SHARE PRICE DATA FOR 2003-04 (IN RS.) (SHARE OF RS. 2 PAID UP VALUE)
National Stock Exchange The Stock Exchange, Mumbai
Month High Low Volume High Low Volume
(In Rs.) (In Rs.) (Nos.) (In Rs.) (In Rs.) (Nos.)
APRIL 03 208.00 180.05 19167729 207.60 180.10 7521931
MAY 03 239.50 199.25 11889093 239.00 199.60 4445566
JUNE 03 257.80 216.00 9958408 256.90 216.00 3179724
JULY 03 270.00 234.55 17028625 270.00 234.75 4716376
AUG 03 308.00 245.00 11253185 308.00 261.50 4117783
SEPT 03 310.25 260.00 9432417 310.90 266.00 3748272
OCT 03 355.90 298.10 15132638 356.00 298.05 6155094
NOV 03 399.95 338.00 12361151 400.00 354.90 5443769
DEC 03 472.00 377.00 18276489 490.00 377.00 6748673
JAN 04 499.50 424.15 25386848 500.00 425.00 9839214
FEB 04 521.70 425.55 18536116 521.80 423.35 8679893
MAR 04 544.40 438.00 26006595 543.70 439.35 12290683
CHART A PLOTS COMPANY’S SHARE PRICE MOVEMENT VIS A VIS SENSEX
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HERO HONDA
Annual Report 2003–2004
60
Corporate Governance Report
DISTRIBUTION OF SHAREHOLDING/ SHAREHOLDING PATTERN
Table 2 lists the Distribution of Shareholding by number of shares held and Shareholding Pattern in
percentage, as on March 31, 2004
TABLE 2
No. of shares held Folios Shares of Rs. 2 paid up
(Rs. 2/- paid up) Numbers % Numbers %
Upto 500 37925 72.55 5164490 2.57
500-1000 10892 20.84 8328748 4.18
1001-5000 2832 5.42 5753246 2.88
5001-10000 232 0.44 1639275 0.82
10001-50000 218 0.41 5205568 2.61
50001 and above 177 0.34 173596173 86.94
TOTAL 52276 100.00 199687500 100.00
DISTRIBUTION OF SHAREHOLDING AS ON MARCH 31, 2004 (PURSUANT TO CLAUSE 35 OF THE LISTING AGREEMENT )
Categories No. of shares Held (Rs. 2 paid up) Percentage of shareholding
A Promoters’ holding
1. Promoters
—Indian Promoters 51918710 26.00
—Foreign Promoters 51918750 26.00
2 Persons acting in concert 5904470 2.96
A Sub-total 109741930 54.96
B. Non-promoters Holding
3 Institutional Investors
a. Mutual Funds and UTI 11154579 5.59
b. Banks, Financial Institutions, Insurance Companies
(Central/ State Government Institutions/ non-governments) 5117518 2.56
c. FIIs 48067923 24.07
B Sub-total 64340020 32.22
C Others
a. Pvt. Corporate Bodies 1970847 0.99
b. Indian Public 23113670 11.57
c. NRIs /OCBs 189243 0.09
d. Foreign Banks 331790 0.17
e. Any other
C Sub-total 25605550 12.82
B+C Sub-total 89945570 45.04
GRAND TOTAL 199687500 100.00
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61
DEMATERIALISATION OF SHARES AND LIQUIDITY
As on March 31, 2004, 40 per
cent of total share capital, which
forms 83 per cent of the non-
promoters’ holding, is held in
dematerialised form with NSDL
and CDSL. During the year under
review, 2951 share certificates,
involving 29,88,859 shares of Rs.
2 each, were dematerialised by the
shareholders. These represent
1.50 percent of the total share
capital of the Company. The joint
venture partners hold 52 per cent
of the total share capital, which is
in physical form.
OUTSTANDING GDR’S/ADR’S/WARRANTS OR
ANY CONVERTIBLE INSTRUMENTS CONVERSION
DATE AND LIKELY IMPACT ON EQUITY
Not Applicable
DETAILS OF PUBLIC FUNDING OBTAINED IN THE
LAST THREE YEARS
The Company has not obtained
any public funding in the last three
years.
REGISTRAR & TRANSFER AGENTS
All work related to Share Registry,
both in physical form and
electronic form, is handled by the
Company’s Registrar and Transfer
Agents, whose details are given
below:
MCS Limited, Sri Venkatesh
Bhawan, W 40, Okhla Industrial
Area, Phase II, New Delhi 110 020
Phones: 2638 4909-911,
Fax: 2638 4907
e-mail: [email protected]
SHARE TRANSFER SYSTEM
The Share transfers are approved
by the Committee of Directors
which meets regularly on a
weekly/fortnightly basis. The total
number of shares transferred
during the year 2003-04 was
416734, which was completed in
the prescribed period. Shares
under objection were returned
within two weeks time.
The shares of the Company are
traded in the ‘compulsory demat
mode’ for all investors. Regarding
shares sent for transfer in physical
form, the transfer is registered
within a week (if in order and
complete in all respects) and a
demat option form is simultaneously
sent to the shareholder for
exercising the option to receive the
shares in demat form within 30
days. On exercise of a valid option
by the shareholder through his
Depository Participant(DP), the
shares are confirmed to the
respective accounts with
depositories of National Securities
Depository Limited (NSDL) and
Central Depository Services
Limited (CDSL).
INVESTORS’ SERVICES
The Company has Board Level
Committees dealing with investor
Table 3 Complaints/requests/reminders received and redressed during 2003-04
SL. NO. NATURE OF COMPLAINTS/REQUESTS RECEIVED CLEARED
1. Non receipt of shares sent for transfer 98 98
2. Request for issue of duplicate shares 186 186
3. Non receipt of dividend warrant 156 156
4. Change of address 538 538
5. Mandate cases/bank description 165 165
6. No. of cases received for sub division 2028 2016 #
7. Miscellaneous (Shares) 820 806 #
# 24 requests and 2 complaints were pending as on March 31, 2004, regarding sub-division and other miscellaneous matters and the samewere cleared within the next 15 days.
20Y E A R S
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issues, which have been discussed
in detail earlier. Table 3 lists the
complaints/request/reminders
received and redressed during
2003-04. During the financial year,
the Company has attended to most
of the investors’ grievances/
correspondence within a period of
10-15 days from the date of
receipt of the same.
COMPANY’S REGISTERED OFFICE ADDRESS
34, Community Centre,
Basant Lok, Vasant Vihar,
New Delhi 110 057
Tel: 2614 2451, 2614 4121
Fax: 2615 3913.
Website: www.herohonda.com
PLANT LOCATIONS
GURGAON PLANT
37 K.M. Stone
Delhi-Jaipur Highway,
Sector 33-34, Industrial Area,
Gurgaon, Haryana 122 001
Tel: 0124 2372 123–130
Fax: 0124 2373 141–142
DHARUHERA PLANT
69 K.M. Stone
Delhi-Jaipur Highway
Dharuhera, Distt. Rewari,
Haryana 121 006
Tel: 01274 242 131–135,
Fax: 01274 242 399
NON-MANDATORY REQUIREMENTS
The Company has not adopted the
Non-Mandatory Requirements as
specified in Annexure–3 of the
Listing Agreement except Clause
(b) relating to Remuneration
Committee.
INVESTORS’ CORRESPONDENCE MAY BE
ADDRESSED TO
Mr. Ilam C. Kamboj
Company Secretary and
Compliance Officer
e-mail: [email protected]
or
at the Registrars’ office.
QUERIES RELATING TO THE FINANCIAL
STATEMENTS OF THE COMPANY MAY BE
ADDRESSED TO
Mr. Ravi Sud, Vice President —
Finance,
e-mail: [email protected]
For and on behalf of the Board
Brijmohan Lall Munjal
CHAIRMAN HERO HONDA MOTORS LTD.
New Delhi
July 14,2004
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Corporate Governance Report
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CERTIFICATE
TO THE MEMBERS OF HERO HONDA MOTORS LIMITEDWe have examined the compliance of conditions of Corporate Governance by Hero Honda Motors Limited for
the year ended March 31, 2004, as stipulated in clause 49 of the Listing Agreement of the said Company with
Stock Exchanges.
The compliance of conditions of Corporate Governance is the responsibility of the management. Our
examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the
compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on
the financial statements of the Company.
In our opinion and to the best of our information and according to the explanations given to us, we certify that
the Company has complied with the conditions of the Corporate Governance as stipulated in the above
mentioned Listing Agreement.
We state that in respect of investor grievances received during the year ended March 31, 2004, no investor
grievances are pending for a period exceeding one month against the Company as per the records maintained
by the Company.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the
efficiency or effectiveness with which the management has conducted the affairs of the Company.
For A. F. FERGUSON & CO.
CHARTERED ACCOUNTANTS
A. K. MAHINDRA
Place : New Delhi PARTNER
Date : July 14,2004 (Membership no. 10296)
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ANNEXURE II TO DIRECTORS’ REPORT
Information Under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report ofBoard of Directors) Rules, 1988 and forming part of the Directors’ Report for the year ended March 31, 2004 ;
I. CONSERVATION OF ENERGYa) Techno-economic viability of few energy saving proposals are being carried out and few proposals have been already
implemented
a) Energy conservation measures taken during the financial year 2003-04 and their impact
Measures taken Impact
Installation of HPS DG Sets Reduction in power generation cost
Replacement of metal Halide lights with HPMV Lights Reduction in power consumption
Installation of RTCS for air conditioners Reduction in power consumption
Installation of “Power Boss” on machines Reduction in power consumption
Conversion of existing HWG from LDO to HPS/ FO Reduction in power consumption
Interlocking of inlet solenoid valve of machines withpower saving circuits Reduction in power consumption & air conservation
Natural ventilators on roof at selected areas Reduction in power consumption
Use of Boiler Blowdowns to heat boiler feed water Reduction in power consumption
b) Additional Investments and Proposals being implemented for reduction of consumption of energy
Measures taken Impact
Additional installation of HPS DG Sets Reduction in power generation cost
Additional natural ventilators on roof Reduction in power consumption
Energy efficient lighting & motors Reduction in power consumption
VFD installation for high powered motors & compressors Reduction in power consumption
Prevention of air leakages to reduce air compressor running Reduction in power consumption
Installation of temperature controller in cooling towers Reduction in power consumption
Optimum loading of genset with respect to daily load Reduction in power generation cost
Installation of Waste heat recovery system to generatehot water for paint shop Reduction in power consumption
Use of waste heat boiler on existing DG set exhauststo generate steam Reduction in power consumption
Note: The additional investment cannot be precisely ascertained, and is part of the Repairs and Maintainence; consumables expenditureand investments in fixed assets.
c) Impact of measures at a) and b) for reduction of energy consumption and consequent impact on the cost of production ofgoods.
It is difficult to quantify the impact of individual projects on the cost of production of goods. The impact of abovementioned initiatives (and also of initiatives taken in past) is clearly visible as decreasing trends of “Energy consumptionand generation cost” over the last couple of years. The power & fuel cost of the Company per vehicle has reduced from Rs.199.28 in 2001-02 to Rs. 143.72 in 2003-04. Similarly, the Company’s electricity consumption (in KWH/Vehicle) forboth the plants taken together has reduced from 81.98 KWH/Vehicle to 62.08 KWH/Vehicle.
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FORM-AForm for Disclosure of Particulars with respect to Conservation of Energy
FOR DHARUHERA PLANT FY 2003-04 FY 2002-03A. Power and fuel consumption per unit of productionProduct Unit (Motorcycle) 1013835 8236131. Electricity
a) Purchased Unit (KWH) 7420905 5858418Amount (Rs.) 2,91,69,290 2,28,58,070Rate/unit (Rs.) 3.93 3.90
b) Own generationThrough diesel generator unit
Self (KWH) 22497760 22376204Hired (KWH) Nil NilUnit per-ltr.of Diesel Oil (Cost/unit)Self (KWH/Ltr.) 3.93 3.91Hired (KWH/Ltr.) Nil Nil
2. *Furnace Oil, LDO, HPS etc.Quantity (K.Ltrs) 1155.217 1191.051Total amount (Rs.) 1,41,28,205 1,45,73,718Average Rate/Ltr. (Rs.) 12.23 12.24
B. Consumption per unit of productionStandards (if any)1) Electricity (KWH/Motorcycle) 29.51 34.282) Furnace Oil, LDO, HPS etc. (Ltr./Motorcycle) 1.14 1.45*being used for the purpose of Boiler used for production of motorcycle.
FOR GURGAON PLANTA. Power and fuel consumption per unit of productionProduct Unit (Motorcycle) 1050863 8566641. Electricity
a) Purchased Unit (KWH) Nil NilAmount (Rs.) Nil NilRate/unit (Rs.) Nil Nil
b) Own generationThrough diesel generator unit
Self (KWH) 34230188 31786197Hired (KWH) Nil NilUnit per-ltr.of Diesel Oil Cost/unitSelf (KWH/Ltr.) 3.89 3.76Hired (KWH/Ltr.) Nil Nil
2. **Furnace Oil, LDO, HPS etc.Quantity (K.Ltrs) 783.364 628.681Total amount (Rs.) 1,24,58,210 89,43,533Average Rate/Ltr. (Rs.) 15.90 14.23
B. Consumption per unit of production1) Electricity (KWH/Motorcycle) 32.57 37.102) Furnace Oil, LDO, HPS etc. (Ltr./Motorcycle) 0.75 0.73**being used for the purpose of Hot water generatorused for production of motorcycle.
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II. PARTICULARS AS PER FORM B
(A) RESEARCH & DEVELOPMENT (R&D)
1 Specific areas in which R & D carried out by the Company1.1 New Model Technology Absorption1.2 Indigenisation of CKD Parts1.3 Multi Source Approval1.4 Meeting Legislative Norms1.5 Active Participation in deciding the needs of future Automobile Norms in India
2 Benefits derived as a result of the above R & D activities2.1 Launching of CD-Dawn (100 cc - 4 Stroke)
Launching of KARIZMA (223 cc - 4 Stroke)Launching of Splendor/ Passion Disc VersionLaunching of Splendor+/ Passion PlusLaunching of Ambition 135Launching of CBZ*
2.2 Multi source Components2.3 Major new sources added for existing models2.4 Indigenisation (2003-04) – 3 more items have been localized2.5 Compliance to Regulations: -
1. New EMI as per AIS 0042. Tele Tale Symbols & Controls as per IS 14413: 19963. Rear View Mirror as per AIS 0014. Bulbs as per IS 1606 (revision 3)5. Installation of lighting and Signalling Devices as per AIS:0096. Pillion Hand Hold as per IS:144957. Fuel Tank as per IS:146818. Horn Installation as per AIS:0149. Brake Hose as per IS:7079
3 Future plan of action3.1 New model launch3.2 Indigenisation plan of various other parts3.3 Compliance Plan for Future Regulations:-
• Mass Emission 2005 norms• Pass Bye Noise (2005 Noise norms)• Deterioration Factor• Idle CO (Standard under finalisation)• New COP Regulation (Procedure & Frequency)• Lighting and Signalling Devices as per AIS 010.• Component Marking (Standard under finalisation)• Anti Theft Device• Reflex Reflector as per AIS:057• Tyres as per AIS:044• High Security Number Plate• Brakes as per IS:14664• Engine Power Management as per IS:14559
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4. Expenditure on R & D
(Rupees in crores) Year Ended Year Ended
March 31, 2004 March 31, 2003
i) Capital 7.43 1.56
ii) Recurring 9.33 6.97
iii) Total R & D expenditure as a percentage of sales (as per P & L A/c) 0.29% 0.17%
B) TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATIONCertain more parts which were till date being imported have been developed in India. With the Multiple source development,supply capacities of bought out parts have been increased to meet the increased volume of production. The Company’s R&Dhas developed requisite infrastructure and expertise to develop, test and approve products in-house as per Honda specificationsand acceptance criteria. These facilities are upgrading from time to time ahead of new technology adoptions.
The said efforts have led to new model development to increase market share, reduction in devolvement time etc. Further, inthe last five years the Company’s ancillaries have imported technologies regarding Rotary gear, Cold Forging, Pistonmanufacturing, RR & CDI unit, Piston rings etc.
III. FOREIGN EXCHANGE EARNINGS AND OUTGOA) EXPORT ACTIVITIES / INITIATIVES TO INCREASE EXPORTS / DEVELOPMENT OF NEW EXPORT MARKETS / EXPORT PLANS
During the financial year 2003-04 motorcycle exports by the Company grew at an impressive rate of 72% as compared to2002-03. New Models CD Dawn, Splendor+ & Passion Plus introduced successfully in the Exports markets also, which led toincrease in sales by 87%. New Markets like Sierra Leone was developed for Motorcycles & Philippines for Components. Specialsupports in service and sales was extended to Srilanka, Bangladesh & Columbia.
Export Plans:The Company plans to further increase export sales; explore new markets; provide world class products; highest level ofconsumer satisfaction in service; and to be competitive globally. With the support from Honda Motor Co., Ltd., Japan, to furtherincrease the export volumes in the coming financial year. Further, the introduction of new models shall certainly help in thisendeavour to tap new markets and potential.
B) EARNINGS & OUTGOForeign exchange earnings during the period under report was Rs. 118.21 Crore as compared to Rs. 94.91 Crore in theprevious year.
On account of Royalty, Technical Guidance Fee, Technical Know-how fee, Export Commission, Travel and other accounts,Advertisement and Publicity, Foreign Exchange Outgo was Rs. 126.74 Crore, as compared to Rs. 104.79 Crore in the previousyear. Besides outgo on account of Dividend was Rs. 145.37 Crore as compared to Rs. 52.96 Crore in the previous year.
On account of import of components, spare parts, raw materials and capital goods, the foreign exchange outgo was Rs. 381.50Crore as compared to Rs. 328.79 Crore in the previous year, representing an increase of 16%.
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ANNEXURE III TO THE DIRECTORS’ REPORT
INFORMATION AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES(PARTICULARS OF EMPLOYEES) RULES, 1975 FORMING PART OF THE DIRECTORS’ REPORT FOR THE PERIOD ENDED MARCH 31, 2004
Sl. Name of Employee Age Designation Gross Rem. Qualification Experience Shareholding Date of Last employmentNo. (Yrs.) (Nature of Duties) Received (Rs.) (Years) % Employment
1. Munjal, Brijmohan Lall 81 Chairman 9,85,06,599 Privately educated 60 — 03.08.1991 Chairman - Hero Cycles Ltd.[Overall management of the affairs ofthe Company]
2. Munjal, Pawan 50 Managing Director [Day to day 9,68,85,747 B.E. ( Mech. ) 28 0.04% 01.04.1986 Works Executive -management of the affairs Majestic Auto Ltd.of the Company]
3. Kazusa, Akio 52 Joint Managing Director [Day to day 9,49,40,542 Engineering 25 — - 01.06.2002 Manager - Hondamanagement of the affairs (Master Course) Motor Co. Ltd., Japanof the Company]
4. Yanagida, Kazumi* 47 Director [Day to day management 9,26,34,342 Law, Meiji University 33 — - 03.12.1999 Manager - Hondaof the affairs of the Company] Motor Co. Ltd., Japan
5. Sobti, Atul 50 Sr. Vice President - Marketing & 57,64,307 B.A.(Hons.) 28 — - 16.04.1998 Chief Executive Officer -Sales (Responsible for overall Eco., M.B.A. (IIMA) Elbee Services Ltd.marketing & sales functions)
6. Agrawal, K.K. 56 Sr. Vice President - Operations 36,51,938 B.E. (Mech.) 33 — - 30.09.1993 Chief of Operations -[Responsible for overall operations Vespa Car Co. Ltd.functions]
7. Malhotra, K.K. 57 Vice President - Materials 26,33,480 B.Sc. ( Engg. ) 35 — - 16.08.1985 Manager (Purchase) - BST Ltd.[Responsible for overallmaterial functions]
8. Sud, Ravi 49 Vice President- Finance [Responsible 28,86,017 B.Com (Hons.), 28 — - 25.04.1998 General Managerfor overall finance functions] PGDM (IIMA), (Corporate Finance) -
FCS, AICWA Eicher Goodearth Ltd.
9. Akhouri N.N. 54 Vice President -HRM [Responsiblefor overall Human resourcemanagement functions] 25,05,497 PGDIP(Hons)- PM & 32 — - 15.12.1999 V.P.-Organisational Capability -
IR (XLRI), LLB Seagram Manufacturing Ltd.
* employed for part of the year
Notes :
1. Information has been furnished on the basis of employees employed throughout the financial year, who were in receipt of remuneration for that year which, in the aggregate, was not less thanRs. 24,00,000 (Rupees twenty four lacs) per annum and those employed for the part of the financial year, were in receipt of remuneration for any part of that year at a rate which, in the aggregate,was not less than Rs. 2,00,000 (Rupees two lac) per month. There was no person employed either throughout the financial year or part thereof, who was holding either by himself or alongwith thespouse and dependent children 2% or more of the shares of the Company and drawing remuneration in excess of the remuneration drawn by the Managing Director / Jt. Managing Director / Whole-timeDirector.
2. Remuneration includes Basic Salary, Commission paid during the year, Perquisites and other allowances, payments and expenditures incurred on perquisites and Company’s contribution to Provident,Superannuation and Gratuity Funds.
3. All appointments are / were on contractual basis.
4. Mr. Pawan Munjal is the son of Mr. Brijmohan Lall Munjal. Mr. Om Prakash Munjal and Mr. Satyanand Munjal, Directors of the Company are related as brothers to Mr. Brijmohan Lall Munjal. None ofthe other employees is a relative of any Director of the Company.
5. The terms and conditions of employees at Sl. No.1, 2, 3 & 4 are as approved by the Board of Directors and shareholders. The employees at Sl. No.5, 6, 7, 8 & 9 are paid remuneration as per thepolicy / rules of the Company.
6. Mr. Kazumi Yanagida who ceased to be the Whole-time Director on 24.04.2003, was paid Rs.9,26,34,342 mainly consisting of commission for the year 2002-03 and return travel expenses during2003-04 after the accounts for the year 2002-03 were audited and approved by the shareholders in the Annual General Meeting.
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TO THE MEMBERS OFHERO HONDA MOTORS LIMITED
1. We have audited the attached balance sheet of Hero HondaMotors Limited, as at March 31, 2004 and also the profitand loss account for the year ended on that date annexedthereto and the cash flow statement for the year ended onthat date. These financial statements are the responsibilityof the Company’s management. Our responsibility is toexpress an opinion on these financial statements based onour audit.
2. We conducted our audit in accordance with auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles usedand significant estimates made by management, as well asevaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for ouropinion.
3. As required by the Companies (Auditor’s Report) Order,2003 issued by the Central Government of India in terms ofsub-section (4A) of section 227 of the Companies Act,1956, we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above,we report that:
i) we have obtained all the information and explanations,which to the best of our knowledge and belief werenecessary for the purposes of our audit;
ii) in our opinion, proper books of account as required bylaw have been kept by the Company so far as appearsfrom our examination of those books;
iii) the balance sheet, profit and loss account and cash flowstatement dealt with by this report are in agreement withthe books of account;
iv) in our opinion, the balance sheet, profit and lossaccount and cash flow statement dealt with by thisreport comply with the accounting standards referred toin sub-section (3C) of section 211 of the CompaniesAct, 1956;
v) on the basis of written representations received from thedirectors and taken on record by the Board of Directors,we report that none of the directors is disqualified as onMarch 31, 2004 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 ofthe Companies Act, 1956;
vi) In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by theCompanies Act, 1956, in the manner so required andgive a true and fair view in conformity with theaccounting principles generally accepted in India:
(a) in the case of the balance sheet, of the state ofaffairs of the Company as at 31 March, 2004;
(b) in the case of the profit and loss account, of theprofit for the year ended on that date; and
(c) in the case of the cash flow statement, of the cashflows for the year ended on that date.
FOR A.F. FERGUSON & CO.,CHARTERED ACCOUNTANTS
A.K. MAHINDRA
Place : New Delhi PARTNERDate : April 12, 2004 (Membership No. 10296)
AUDITORS’ REPORT
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(i) (a) The Company has maintained proper records toshow full particulars, including quantitative detailsand situation of fixed assets.
(b) As explained to us, the Company has a system ofphysical verification, which is designed to cover allassets over a period of three years and inaccordance therewith, physical verification ofcertain fixed assets of the Company was carried outduring the year. In our opinion, the frequency ofphysical verification is reasonable having regard tothe size of the Company and the nature of its fixedassets. The discrepancies noticed on suchverification were not material and have beenproperly dealt with in the books of account.
(c) As the Company has disposed off an insignificantpart of the fixed assets during the year, paragraph4(i)(c) of the Companies (Auditor’s Report) Order,2003 (hereinafter referred to as the Order) is notapplicable.
(ii) (a) During the year, the inventories have beenphysically verified by the management, except forstocks lying with third parties at the year end forwhich confirmations have been obtained in most ofthe cases. In our opinion, the frequency ofverification is reasonable.
(b) In our opinion and according to the information andexplanations given to us, the procedures of physicalverification of inventories followed by themanagement are reasonable and adequate inrelation to the size of the Company and the natureof its business.
(c) On the basis of our examination of the record ofinventories, we are of the opinion that the Companyis maintaining proper records of inventories. Thediscrepancies noticed on physical verification ofinventories as compared to book records were notmaterial and have been properly dealt with in thebooks of account.
(iii) According to the information and explanations given tous, the Company has neither taken nor granted any loans,secured or unsecured from/to companies, firms and otherparties covered in the register maintained under Section301 of the Companies Act, 1956. Accordingly,paragraphs 4 (iii)(b), (c) and (d) of the Order are notapplicable.
(iv) According to the information and explanations given tous, there are adequate internal control procedurescommensurate with the size of the Company and thenature of its business with regard to purchases ofinventories, fixed assets and with regard to sale of goods.During the course of our audit, no major weakness hasbeen noticed in the underlying internal controls.
(v) (a) Based on the audit procedures applied by us andaccording to the information and explanationsgiven to us, the transactions that need to beentered in the register in pursuance of section 301of the Companies Act, 1956 have been so entered.
(b) According to the information and explanationsgiven to us, in respect of the transactions enteredin the register maintained in pursuance of section301 of the Companies Act, 1956, and exceedingthe value of Rs. 5 lacs in respect of any partyduring the year are of a specialized nature forwhich there are no alternate sources of supply toenable a comparison of the prices paid.
(vi) As the Company has not accepted any deposits from thepublic, paragraphs 4 (vi) of the Order is not applicable.
(vii) In our opinion, the Company has an adequate internalaudit system commensurate with the size and nature ofits business.
(viii) We have broadly reviewed the books of accountmaintained by the Company pursuant to the Rules madeby the Central Government for the maintenance of costrecords under section 209(1) (d) of the Companies Act,1956 and are of the opinion that, prima facie, theprescribed accounts and records have been made andmaintained. We have not, however, made a detailedexamination of the records with a view to determinewhether they are accurate or complete.
(ix) (a) As explained to us, the statutory dues payable bythe Company comprise of provident fund, investoreducation protection fund, employees’ stateinsurance, income-tax, sales tax, wealth tax,customs duty, excise duty, cess, value added tax,Haryana local area development tax. According tothe records of the Company and information andexplanations given to us, the Company is regular in
ANNEXURE REFERRED TO IN PARAGRAPH ‘3’ OF THE AUDITORS’ REPORT TO THEMEMBERS OF HERO HONDA MOTORS LIMITED ON THE ACCOUNTS FOR THE YEARENDED MARCH 31, 2004.
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depositing the aforesaid undisputed statutory dueswith the appropriate authorities. There are noundisputed statutory dues as referred to above as atMarch 31, 2004 outstanding for a period of morethan six months from the date they becomepayable.
(b) According to the records of the Company andinformation and explanations given to us, there aredues of sales tax and excise duty aggregatingRs. 1.19 crores and Rs. 0.92 crore respectively,which have not been deposited on account ofvarious disputes, the details of which are set out innote ‘9’ of schedule 14. We have further beeninformed that there are no dues in respect ofincome-tax, wealth tax, customs duty and cesswhich have not been deposited on account of anydispute.
(x) The Company does not have accumulated losses at theend of the financial year March 31, 2004. Further, theCompany has not incurred any cash losses during thefinancial year ended March 31, 2004 and in thepreceding financial year ended March 31, 2003.
(xi) Based on our audit procedures and on the informationand explanations given by management, we are of theopinion that the Company has not defaulted in repaymentof dues to banks. The Company has not taken any loansfrom financial institutions and has not issued debentures.
(xii) As the Company has not granted any loans and advanceson the basis of security by way of pledge of shares,debentures and other securities, paragraph 4 (xii) of theOrder is not applicable.
(xiii) As the Company is not a chit fund/nidhi/mutual benefitfunds/society to which the provisions of special statuterelating to chit fund are applicable, paragraph 4 (xiii) ofthe Order is not applicable.
(xiv) As the Company is not dealing or trading in shares,securities, debentures and other investments,paragraph 4 (xiv) of the Order is not applicable.
(xv) As informed to us, the Company has not given anyguarantee for loans taken by others from banks orfinancial institutions.
(xvi) The Company has term loans comprising of sales taxdeferment from the State Government of Haryana to beutilized for the expansion of Company’s manufacturingfacilities. During the year, sales tax deferment amountingto Rs. 50 crores has been applied for the purpose forwhich it was obtained.
(xvii) The Company has taken short term loan from bankscomprising of packing credit and buyers line of creditwhich has been utilized for working capital requirements.The Company also has long term loans comprising ofsales tax deferment as referred to in paragraph 4(xvi)above. The opening balance of such loans amounting toRs. 134.28 crores as on April 1, 2003 and Rs. 50 croresfor the year ended March 31, 2004 have been utilized forexpansion of Company’s manufacturing facilities.
(xviii) As the Company has not made preferential allotment ofshares to parties and companies covered in the registermaintained under section 301 of the Act,paragraph 4 (xviii) of the Order is not applicable.
(xix) As the Company has not issued any debentures,paragraph 4(xix) of the Order is not applicable.
(xx) During the year, since the Company has not raised moneyby way of public issue, paragraph 4(xx) of the Order is notapplicable.
(xxi) Based upon the audit procedures performed andinformation and explanations given by the management,we report that no fraud on or by the Company has beennoticed or reported during the course of our audit for theyear ended March 31, 2004.
FOR A.F. FERGUSON & CO.,CHARTERED ACCOUNTANTS
A.K. MAHINDRA
Place : New Delhi PARTNERDate : April 12, 2004 (Membership No. 10296)
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Financials
(Rupees in crores)
Schedule As at March As at MarchNo. 31, 2004 31, 2003
SOURCES OF FUNDSSHAREHOLDERS’ FUNDSShare capital 1 39.94 39.94Reserves and surplus 2 1,098.87 821.09
1,138.81 861.03LOAN FUNDSUnsecured 3 174.70 134.28
174.70 134.28DEFERRED TAX LIABILITIES 8 90.02 77.16Total 1,403.53 1,072.47
APPLICATION OF FUNDSFIXED ASSETS 4Gross block 916.91 786.29Less: Depreciation 345.79 278.42
571.12 507.87Capital work in progress 17.69 9.19Net block 588.81 517.06INVESTMENTS 5 1,565.10 1,193.00DEFERRED TAX ASSETS 8 0.68 0.89CURRENT ASSETS, LOANS AND ADVANCES 6Inventories 188.20 200.92Sundry debtors 43.80 141.49Cash and bank balances 37.12 24.33Loans and advances 239.87 109.77
508.99 476.51Less: CURRENT LIABILITIES AND PROVISIONSCurrent liabilities 7 1,003.86 681.52Provisions 256.19 434.17
1,260.05 1,115.69Net current assets (751.06) (639.18)MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted) 9 — 0.70Total 1,403.53 1,072.47
Notes to the accounts 13
BALANCE SHEET As at March 31, 2004
Per our report attached
FOR A.F. FERGUSON & CO.
CHARTERED ACCOUNTANTS
A.K. MAHINDRA
PARTNERMembership Number 10296
New Delhi
April 12, 2004
For and on behalf of the Board of Directors
BRIJMOHAN LALL MUNJAL CHAIRMAN
PAWAN MUNJAL MANAGING DIRECTOR
AKIO KAZUSA JOINT MANAGING DIRECTOR
M.P. WADHAWAN DIRECTOR
RAVI SUD VICE PRESIDENT - FINANCE
ILAM C. KAMBOJ COMPANY SECRETARY
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(Rupees in crores)
Schedule Year ended Year ended
No. March 31, 2004 March 31, 2003
INCOME
Sales and other income 10 5,997.47 5,194.58
EXPENDITURE
Manufacturing and other expenses 11 4,852.33 4,238.12
Depreciation 4 73.33 63.39
Interest (net) 12 (1.35) (1.02)
Miscellaneous expenditure written off 0.70 9.53
Total expenditure 4,925.01 4,310.02
Profit for the year before tax 1,072.46 884.56
Provision for taxation
— current 331.07 298.19
— deferred 13.07 5.61
Profit after tax 728.32 580.76
Balance of profit brought forward 335.75 220.48
Balance available for appropriation 1,064.07 801.24
APPROPRIATIONS
Dividend
– Interim 199.69 —
– Proposed final 199.69 359.44
Tax on dividend 51.16 46.05
Transfer to general reserve 75.00 60.00
Balance carried to balance sheet 538.53 335.75
1,064.07 801.24
Basic and diluted earnings per share face value Rs. 2/-each (in rupees) 36.47 29.08
Notes to the accounts 13
PROFIT AND LOSS ACCOUNT For the year ended March 31, 2004
Per our report attached to the balance sheet
FOR A.F. FERGUSON & CO.
CHARTERED ACCOUNTANTS
A.K. MAHINDRA
PARTNERMembership Number 10296
New Delhi
April 12, 2004
For and on behalf of the Board of Directors
BRIJMOHAN LALL MUNJAL CHAIRMAN
PAWAN MUNJAL MANAGING DIRECTORAKIO KAZUSA JOINT MANAGING DIRECTOR
M.P. WADHAWAN DIRECTOR
RAVI SUD VICE PRESIDENT - FINANCE
ILAM C. KAMBOJ COMPANY SECRETARY
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Financials
(Rupees in crores)
Year ended Year ended
March 31, 2004 March 31, 2003
A. CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax 1,072.66 884.56
Adjustments for:
Add: Depreciation 73.33 63.39
Exchange differences 0.65 0.13
Loss on sale of non-trade investments 12.75 12.53
Loss on fixed assets sold/discarded 1.20 3.86
Interest - others and financial charges 1.72 1.73
Miscellaneous expenditure written off 0.70 9.53
90.35 91.17
Less: Interest received on long term non-trade investments 9.38 —
Interest received on loans, deposits etc. 3.07 2.75
Dividend received on investments 18.00 0.41
Profit on sale on non-trade investments 127.67 85.34
Profit on sale of fixed assets 0.13 0.17
158.25 88.67
Operating profit before working capital changes 1,004.56 887.06
Adjustments for:
Add: Increase in trade payables 314.16 62.63
Decrease in inventories 12.72 —
Increase in security deposits from dealers 1.56 2.09
328.44 64.72
Less: Increase in trade and other receivables 29.24 11.87
Increase in inventories — 22.56
29.24 34.43
Cash generated from operations 1,303.76 917.35
Less: Interest paid 1.73 1.74
Direct taxes paid 330.81 296.60
332.54 298.34
Net cash from operating activities 971.22 619.01
B. CASH FLOW FROM INVESTING ACTIVITIES
Sale of fixed assets 2.86 5.27
Inter corporate deposits received back 150.50 43.05
Sale of investments 6,569.98 4,713.63
Interest received 8.95 2.75
Dividend received on investments 18.00 0.41
6,750.29 4,765.11
Less: Purchase of fixed assets 149.01 98.68
Inter corporate deposits paid 150.50 43.05
Purchase of investments 6,827.16 5,108.05
7,126.67 5,249.78
CASH FLOW STATEMENT For the year ended March 31, 2004
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Net cash (used) in investing activities (376.38) (484.67)
C. CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long term borrowings 9.67 —
Share application money - refundable — 0.02
Dividend paid 550.60 236.78
Tax on dividend 71.63 —
Repayment of customers’ booking advance 0.02 0.03
631.92 236.78
Less : Proceeds from long term borrowings 50.00 17.84
Net cash( used) in financing activities (581.92) (218.94)
Increase in cash and cash equivalents 12.92 (84.60)
Cash and cash equivalents at the beginning of the year 24.33 108.96
Cash and cash equivalents at the end of the year
Cash and bank balances 37.12 24.33
Unrealised exchange loss/(gain) 0.13 0.03
37.25 24.36
Notes to the accounts Schedule 13
(Rupees in crores)
Year ended Year ended
March 31, 2004 March 31, 2003
CASH FLOW STATEMENT (Contd.) For the year ended March 31, 2004
Per our report attached to the balance sheet
FOR A.F. FERGUSON & CO.
CHARTERED ACCOUNTANTS
A.K. MAHINDRA
PARTNERMembership Number 10296
New Delhi
April 12, 2004
For and on behalf of the Board of Directors
BRIJMOHAN LALL MUNJAL CHAIRMAN
PAWAN MUNJAL MANAGING DIRECTORAKIO KAZUSA JOINT MANAGING DIRECTOR
M.P. WADHAWAN DIRECTOR
RAVI SUD VICE PRESIDENT - FINANCE
ILAM C. KAMBOJ COMPANY SECRETARY
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Financials
SCHEDULES 1 TO 13 ANNEXED TO AND FORMING PART OF THE ACCOUNTS
1) SHARE CAPITAL (Rupees in crores)
As at March As at March
31, 2004 31, 2003
AUTHORISED
25,00,00,000 (Previous year 25,00,00,000) 50.00 50.00
Equity shares of Rs. 2 each
4,00,000 (Previous year 4,00,000) Cumulative 4.00 4.00
convertible preference shares of Rs. 100 each
4,00,000 (Previous year 4,00,000) Cumulative 4.00 4.00
redeemable preference shares of Rs. 100 each
58.00 58.00
ISSUED, SUBSCRIBED AND PAID UP
19,96,87,500* (Previous year 19,96,87,500) 39.94 39.94
Equity shares of Rs. 2 each fully paid up
39.94 39.94* Of the above 11,98,12,500 (Previous year 11,98,12,500) shares are
allotted as fully paid bonus shares by capitalisation of general reserve.
2) RESERVES AND SURPLUS (Rupees in crores)
As at March Additions Deductions As at March
31, 2003 31, 2004
CAPITAL RESERVES
On shares forfeited (# Rs. 4,250) # — — #
Share premium account on
forfeited shares reissued (## Rs. 25,500) ## — — ##
REVENUE RESERVES
General reserve 485.34 75.00 — 560.34
Surplus, being balance in profit and loss account 335.75 202.78 — 538.53
821.09 277.78 — 1,098.87
3) LOAN FUNDS (Rupees in crores)
As at March As at March
31, 2004 31, 2003
UNSECURED LOANS
Other loans and advances - others
Sales tax deferment from the State Government of Haryana 174.70 134.28
174.70 134.28
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4) FIXED ASSETS (Rupees in crores)
GROSS BLOCK (AT COST) DEPRECIATION NET BLOCK
As at Additions Deductions As at As at For the On As at As at As at
March March March year deductions March March March
31,2003 31, 2004 31,2003 31, 2004 31, 2004 31, 2003
Land 27.04 – – 27.04 – – – 27.04 27.04
Buildings 99.33 13.19 0.12 112.40 15.84 2.98 0.07 18.75 93.65 83.49
Plant & machinery 589.32 92.76* 4.78 677.30 234.46 54.13 2.83 285.76 391.54 354.86
Furniture, fixtures 17.27 1.81 2.61 16.47 6.73 1.06 1.90 5.89 10.58 10.54and office equipment
Vehicles 9.10 0.74 1.88 7.96 2.95 0.81 0.83 2.93 5.03 6.15
Computer and dataprocessing machines 28.00 8.82 0.50 36.32 13.03 4.30 0.33 17.00 19.32 14.97
TOTAL 770.06 117.32 9.89 877.49 273.01 63.28 5.96 330.33 547.16 497.05
Intangible assetsModel fee 16.23 23.19 – 39.42 5.41 10.05 – 15.46 23.96 10.82
786.29 140.51 9.89 916.91 278.42 73.33 5.96 345.79 571.12
Previous Year 704.52 99.18 17.41 786.29 223.47 63.39 8.44 278.42 507.87
Capital work in progress {including capital advances Rs. 8.78 crores (previous year Rs. 3.48 crores)} 17.69 9.19
588.81 517.06
Note :
* Includes reduction of Rs. 0.24 crore (Previous year increase Rs. 0.12 crore) due to fluctuation in exchange rates
5) INVESTMENTS (Rupees in crores)
As at March As at March
31, 2004 31, 2003
CURRENT INVESTMENTS
Non-trade
Unquoted
In Mutual fund units:
Debt fund
(Units of the face value of Rs. 10 each)
Prudential ICICI Mutual Fund
27567651 (Previous year 91531842) units in income plan - growth 46.57 154.64
90078990 (Previous year 234574805) units in flexible income plan - growth option 98.24 241.73
Nil (Previous year 50000000) units in FMP growth yearly series VI — 50.00
40087769 (Previous year Nil) units in institutional income plan growth 76.07 —
Birla Sunlife Mutual Fund
Nil (Previous year 59160421) units in income plus plan B: growth — 142.50
5672750 (Previous year Nil) units in income plus institutional plan : growth 15.00 —
Nil (Previous year 8001662) units in FMP yearly growth 3 plan B : growth — 8.00
Alliance Capital Mutual Fund
Nil (Previous year 5316321) units in income fund - regular growth — 9.99
Nil (Previous year 50000000) units in term plans - 378 days - 210602 - growth — 50.00
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HDFC Mutual Fund
7023310 (Previous year 38117747) units in income fund - growth 9.20 49.92
Nil (Previous year 25000000) units in FIP June 2002 (1) - growth — 25.00
DSP Merrill Lynch Mutual Fund
459874 (Previous year 28317023) units in bond fund - retail growth 0.90 55.22
5000000 (Previous year 5000000) units in bond fund - institutional plan- growth 5.00 5.00
Standard Chartered Mutual Fund
10545260 (Previous year 25583040) units in GSSG GSSIF-investment plan - growth option 13.99 33.94
17815785 (Previous year Nil) units in dynamic bond fund - growth 20.00 —
69135310 (Previous year Nil) units in dynamic bond fund institutional plan B- growth 81.23 —
IL & FS Mutual Fund
Nil (Previous year 26889793) units in bond fund - growth plan — 38.81
Templeton Mutual Fund
Nil (Previous year 60669635) units in India income builderaccount - institutional plan - growth — 65.00
Nil (Previous year 23275950) units in floating rate incomefund-short term plan - growth — 25.00
Cholamandalam Mutual Fund
Nil (Previous year 5907576) units in Chola triple ace -bonus — 6.67
17272983 (Previous year Nil) units in Chola freedom income STF-Inst.Cum - Bonus 17.65 —
Tata Mutual Fund
48452909 (Previous year Nil) units in Tata income fund appreciation - bonus 50.00 —
HSBC Mutual Fund
52401600 (Previous year 14839437) units in institutional
income fund - investment plan -growth 55.00 15.00
19013488 (Previous year Nil) units in income fund-investment plan-growth 20.00 —
Sundaram Mutual Fund
6905830 (Previous year 6905830) units in bond saver bonus option 7.11 7.11
ING Vysya Mutual Fund
19884503 (Previous year Nil) units in income fund-institutional-bonus option 20.00 —
5) INVESTMENTS (Contd.) (Rupees in crores)
As at March As at March31, 2004 31, 2003
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Reliance Mutual Fund
10000000 (Previous year Nil) units in fixed term scheme-monthly plan-6-growth option 10.00 —
25000000 (Previous year Nil) units in fixed term scheme-annual plan-3-growth option 25.00 —
Escorts Mutual Fund
9527152 (Previous year Nil) units in income plan-bonus 10.00 —
Repurchase Price Rs.621.61 crores (Previous year Rs.1041.80 crores) 580.96 983.53
Fund of Funds
(Units of the face value of Rs.10 each)
Prudential ICICI Mutual Fund
50000000 (Previous year Nil) units in cautious plan cumulative option 50.00 —
Birla Sunlife Mutual Fund
5000000 (Previous year Nil) units in asset allocation conservative plan growth 5.00 —
Repurchase Price Rs.56.36 crores (Previous year Rs.Nil) 55.00 —
Monthly Income Plan
(Units of the face value of Rs.10 each)
Prudential ICICI Mutual Fund
187804326 (Previous year Nil) units in MIP - cumulative 263.74 —
50000000 (Previous year Nil) units in income multiplier regular plan growth 50.00 —
I L &F S Mutual Fund
29934032 (Previous year Nil) units in growth plan 30.00 —
HDFC Mutual Fund
25000000 (Previous year Nil) units in long term - growth 25.00 —
Templeton Mutual Fund
91517630 (Previous year Nil) units in FT India Monthly income plan A growth 137.40 —
Reliance Mutual Fund
5000000 (Previous year Nil) units in growth plan 5.00 —
Tata Mutual Fund
20000000 (Previous year Nil) units MIP plus-growth 20.00 —
5) INVESTMENTS (Contd.) (Rupees in crores)
As at March As at March31, 2004 31, 2003
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HSBC Mutual Fund
15000000 (Previous year Nil) units in MIP-savings plan-growth 15.00 —
25000000 (Previous year Nil) units in MIP-regular plan-growth 25.00 —
DSP Merrill Lynch Mutual Fund
21393486 (Previous year Nil) units in savings plus-growth 25.00 —
Repurchase Price Rs.613.07 crores (Previous year Rs.Nil) 596.14 —
Liquid fund
(Units of the face value of Rs.10 each)
Prudential ICICI Mutual Fund
19059871 (Previous year Nil) units in institutional liquid plan growth 29.76 —
32836050 (Previous year Nil) units in liquid plan institutional plus-growth 51.35 —
Nil (Previous year 98428768) units in liquid plan — 146.25
DSP Merrill Lynch Mutual Fund
3233358 (Previous year Nil) units in liquidity fund-growth 5.00 —
Birla Sunlife Mutual Fund
2919742 (Previous year Nil) units in cash plus institutional plan:growth 5.00 -
Nil (Previous year 40064032) units in cash plus-plan A :dividend reinvestment — 43.19
Principal Mutual Fund
1199798 (Previous year Nil) units in cash management fund liquid option growth plan 1.50 —
(Units of the face value of Rs.1000 each)
Templeton Mutual Fund
Nil (Previous year 30445) units in liquid treasury management account-growth — 4.55
Repurchase Price Rs.92.64 crores (Previous year Rs.194.18 crores) 92.61 193.99
Non-trade
In Equity Shares:
Quoted
1225000 (Previous year Nil) equity shares of Rs.10 each
fully paid up of Indian Petrochemicals Corporation Limited 20.83 —
42583 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Dredging Corporation of India Limited 1.70 —
5) INVESTMENTS (Contd.) (Rupees in crores)
As at March As at March31, 2004 31, 2003
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81
790187 (Previous year Nil) equity shares of Rs.10 each
fully paid up of GAIL (India) Limited 15.41 —
3378200 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Petronet LNG Limited 5.07 —
411002 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Oil and Natural Gas Corporation Limited 30.82 —
Market value Rs.80.83 crores (Previous year Rs.Nil) 73.83 —
Unquoted *
307000 (Previous year Nil) equity shares of Rs.10 eachfully paid up of Power Trading Corporation of India Limited 0.49 —
42400 (Previous year Nil) equity shares of Rs.5 eachfully paid up of Biocon Limited 1.34 —
*Quoted on The Stock Exchange, Mumbai andNational Stock Exchange of India on April 7, 2004 1.83 —
LONG TERM INVESTMENTS
Non-trade
Quoted
In Mutual Funds units
Equity fund
(Units of the face value of Rs.10 each)
Morgan Stanley Mutual fund
Nil (Previous year 12862228) units in growth units — 10.50
Market value Rs.Nil (Previous year Rs.10.80 crores) — 10.50
Unit Trust of India
(Units of the face value of Rs.10 each)
Nil (Previous year 1524994) units of Unit scheme 1964 — 2.04
less : provision for permanent diminution in value — 0.52
Market value Rs. Nil (Previous year Rs.1.52 crores) — 1.52
In Bonds
15501507 (Previous year Nil) 6.75%Tax free US64 bonds of Rs.100 each 161.27 —
Market value Rs.168.19 crores (Previous year Rs.Nil)
5) INVESTMENTS (Contd.) (Rupees in crores)
As at March As at March31, 2004 31, 2003
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5) INVESTMENTS (Contd.) (Rupees in crores)
As at March As at March31, 2004 31, 2003
Trade
Unquoted
In Equity Shares:
2715000 (Previous year 2715000) equity shares of Rs.10 each
fully paid up of Hero Honda Finlease Limited 3.46 3.46
1,565.10 1,193.00
(Rupees in crores)
Cost Cost
This year Previous year
The following investments were purchased during the year
Mutual Funds
Debt Funds
891070520 (Previous year 1461335601) units of the face value of Rs.10 each 1,054.49 1,818.70
Monthly Income Plans
577909684 (Previous year Nil) units of the face value of Rs.10 each 758.27 —
Fund of Funds Scheme
55000000 (Previous year Nil) units of the face value of Rs.10 each 55.00 —
Equity Funds
22263926 (Previous year 15786740) units of the face value of Rs.10 each 54.22 37.86
Gilt Funds
43054134 (Previous year Nil) units of the face value of Rs.10 each 90.31 —
Liquid Funds
3153381274 (Previous year 2272740385) units of the face value of Rs.10 each 4,311.96 3,129.09
746608 (Previous year 851562) units of the face value of Rs.1000 each 115.98 122.40
Equity Shares
6153972 (Previous year Nil) equity shares of the face value of Rs.10 each 74.32 —
42400 (Previous year Nil) equity shares of the face value of Rs.5 each 1.34 —
Bonds
15501507 (Previous year Nil) bonds of the face value of Rs.10 each 161.27 —
Units
144218967 (Previous year Nil) units of the face value of Rs.10 each of 150.00 —
Unit Trust of India -Unit Scheme 1964
6,827.16 5,108.05
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The following investments were sold during the year
Mutual Funds
Debt Funds
1118316437 (Previous year 1215971154) units of the face value of Rs.10 each 1,457.06 1,547.36
Monthly income plans
107260210 (Previous year Nil) units of the face value of Rs.10 each 162.13 —
Equity Funds
35126154 (Previous year 13812108) units of the face value of Rs.10 each 64.72 35.96
Gilt Funds
43054134 (Previous year Nil) units of the face value of Rs.10 each 90.31 —
Liquid Funds
3232625254 (Previous year 2134247585) units of the face value of Rs.10 each 4,408.79 2,939.65
777053 (Previous year 821117) units of the face value of Rs.1000 each 120.53 117.85
Units
145743961 (Previous year Nil) units of the face value of Rs.10 each of
Unit Trust of India -Unit Scheme 1964 151.52 —
6,455.06 4,640.82
As at March As at March
31, 2004 31, 2003
Aggregate value of Book Market Book Market
value value value value
Quoted investments 235.10 249.02 12.02 12.33
Unquoted investments 1,330.00 — 1,180.98 —
1,565.10 249.02 1,193.00 12.33
5) INVESTMENTS (Contd.) (Rupees in crores)
Cost Cost
This year Previous year
(Rupees in crores)
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6) CURRENT ASSETS, LOANS AND ADVANCES (Rupees in crores)
As at As atMarch 31, 2004 March 31, 2003
CURRENT ASSETS
INVENTORIES #Stores and spares (at cost or under) 14.47 14.41Loose tools (at cost or under) 9.19 10.63Raw materials and components* 121.92 111.67Finished goods *
Motorcycles 7.69 22.99Spare parts 23.13 31.85
Work in progress * 11.80 9.37188.20 200.92
*Lower of cost and net realisable value#Includes goods in transit Rs.15.50 crores (Previous year Rs.29.56 crores)
SUNDRY DEBTORSDebts outstanding for a period exceeding six months
Secured -considered good 0.33 0.36Unsecured -considered good 0.28 0.47
-considered doubtful 1.20 1.49Other debts
Secured -considered good 6.23 9.63Unsecured -considered good 36.96 131.03
45.00 142.98Less : Provision for doubtful debts 1.20 1.49
43.80 141.49CASH AND BANK BALANCESCash in hand 0.24 0.27Cheques in hand 1.62 0.04With scheduled banks:
On current accounts 34.78 23.43On deposit accounts# 0.43 0.54
With post office (pledged with excise authorities)On deposit account 0.01 0.01On savings account 0.04 0.04
37.12 24.33LOANS AND ADVANCES(Unsecured and considered good)Advances recoverable in cash or in kind or for value to be received* 224.66 98.14Income-tax deducted at source 11.50 11.31Interest accrued on investments 3.50 —Deposits with excise authorities on current account 0.21 0.32
239.87 109.77
# Includes Rs.Nil (previous year Rs.0.04 crore) held as margin money towards a guarantee* Due from an officer of the Company Rs.0.01 crore (Previous year Rs.0.02 crore);
Maximum amount due during the year Rs.0.02 crore (Previous year Rs.0.03 crore)
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7) CURRENT LIABILITIES AND PROVISIONS (Rupees in crores)
As at March As at March31, 2004 31, 2003
CURRENT LIABILITIESAcceptances 79.57 78.50Sundry creditors
Total outstanding dues of small scaleindustrial undertakings* 0.42 0.16Total outstanding dues of creditors otherthan small scale industrial undertakings 619.00 331.28
Other liabilities ** 284.78 253.05Security deposits from dealers 20.09 18.53
1,003.86 681.52PROVISIONSProposed dividend 199.69 359.44Provision for taxation less payments 11.35 10.90Provision for tax on dividend 25.58 46.05Warranties 19.57 17.78
256.19 434.17
* The Company does not owe any sum which is outstanding for more than 30 days** Other liabilities do not include any amount outstanding as on March 31,2004 which are
required to be credited to the Investor Education and Protection Fund (Fund)
8) DEFERRED TAX ASSETS AND LIABILITIES (Rupees in crores)
As at March As at March31, 2004 31, 2003
DEFERRED TAX ASSETSAccrued expenses deductible on payment 0.25 0.25Others 0.43 0.64
0.68 0.89DEFERRED TAX LIABILITIESAccumulated depreciation 90.02 76.91Others — 0.25
90.02 77.16
9) MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted) (Rupees in crores)
As at March As at March31, 2004 31, 2003
Deferred revenue expenditure:On leased assets– interest paid on capital advances prior to
commencement of lease — 0.48– installation and commissioning charges — 0.22
— 0.70
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10) SALES AND OTHER INCOME (Rupees in crores)
Year ended Year endedMarch 31, 2004 March 31, 2003
SALES 5,832.43 5,101.71Dividend Income
On current investments - Non trade 13.33 —On long term investments - Trade 4.67 0.41
18.00 0.41Interest on long term non trade investments 9.38 —Profit on sale of non trade investments
On current investments* 106.21 72.81On long term investments 8.71 —
114.92 72.81Provision for doubtful debts written back 0.29 —Exchange difference 0.07 0.05Profit on sale of fixed assets 0.13 0.17Miscellaneous income 22.25 19.43
5,997.47 5,194.58* After adjusting loss on sale of current investments aggregating
Rs. 12.75 crores (previous year Rs. 12.53 crores)
11) MANUFACTURING AND OTHER EXPENSES (Rupees in crores)
Year ended Year endedMarch 31, 2004 March 31, 2003
MATERIALS CONSUMEDPurchase of spares etc. for re-sale 173.04 162.33Consumption of raw materials and components 4,013.95 3,514.41Less: - Sale of components to ancillaries on cost to cost basis 170.02 178.30
3,843.93 3,336.11Less : - Cash discount 0.83 0.60
3,843.10 3,335.51Add: Opening stock
Motorcycles 22.99 15.49Spare parts 31.85 18.53Work in progress 9.37 9.11
64.21 43.13Less:Closing stock
Motorcycles 7.69 22.99Spare parts 23.13 31.85Work in progress 11.80 9.37
42.62 64.21Net consumption 4,037.73 3,476.76Less: Scrap sales 7.12 5.99
4,030.61 3,470.77OTHER EXPENSES*Payments to and provisions for employees:
Salaries, wages, bonus, gratuity and leave encashment benefit 211.13 179.22Contribution to provident and other funds 11.32 8.23Staff welfare expenses 9.07 14.18
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12) INTEREST (NET) (Rupees in crores)
Year ended Year ended
March 31, 2004 March 31, 2003
Interest - others and financial charges 1.72 1.73
1.72 1.73
Less : Interest received on loans, deposits, etc.* 3.07 2.75
(1.35) (1.02)
*Income tax deducted at source Rs. 0.14 crore (Previous year Rs. 0.97 crore)
11) MANUFACTURING AND OTHER EXPENSES (Contd.) (Rupees in crores)
Year ended Year endedMarch 31, 2004 March 31, 2003
Expenses for manufacturing, administration and sellingStores and tools consumed 39.22 33.37Power and fuel 29.75 25.82Rent 2.58 2.45
Repairs and maintenance:Plant and machinery 17.08 14.40Buildings 2.40 1.93Others 0.54 0.48
Insurance 6.55 7.12Rates and taxes** 6.54 9.75Packing, forwarding, freight etc. 115.62 98.92Royalty 89.64 68.91Advertisement and publicity 124.46 141.86Commision
Export 5.72 3.76Others 2.94 1.39
8.66 5.15Donations 2.38 2.03Lease rent 21.23 23.09Other expenses 122.35 125.19Provision for doubtful debts — 1.39Loss on fixed assets sold/discarded 1.20 3.86
4,852.33 4,238.12
* Research and development expenses of Rs. 9.33 crores (Previous year Rs. 6.97 crores)have been charged to respective heads
** Includes excise duty provision on finished goods Rs. 1.41 crores (Previous year Rs. 4.15 crores)
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13) NOTES TO THE ACCOUNTS
1) SIGNIFICANT ACCOUNTING POLICIES
i) Accounting convention
The financial statements are prepared under the historical cost convention, in accordance with applicable accountingstandards and relevant presentational requirements of the Companies Act,1956.
ii) Fixed /Intangible assets and depreciation /amortisation
Fixed assets are stated at cost less accumulated depreciation. Cost of acquisition is inclusive of freight, duties, taxesand other incidental expenses and in the case of plant and machinery, interest on loan taken for the acquisition ofassets upto the date of commissioning of assets. Roll over charges on forward exchange contracts and loss or gain onconversion of foreign currency liabilities for acquisition of fixed assets are added to or deducted from the cost of theassets.Depreciation is charged on a pro-rata basis at the straight line method rates prescribed in schedule XIV to theCompanies Act,1956 except where the historical cost of a depreciable asset has undergone a change due to increaseor decrease in long term liability on account of exchange fluctuations, the depreciation on the revised unamortiseddepreciable amount is provided prospectively over the residual useful life of the asset. Assets costing less thanRs. 5000 are fully depreciated in the year of purchase.Intangible assets, comprising of expenditure on model fee etc, incurred upto March 31, 2003 and on or after April 1,2003 are being amortised on a straight line method over a period of three and five years respectively.
iii) Investments
Current investments are stated at lower of cost and fair value. Long term investments are stated at cost less provisionfor permanent diminution.
iv) Inventories
Stores and spares and loose tools are stated at cost or under.
Raw materials and components, finished goods and work in progress are valued at cost or net realisable value,whichever is lower.
The bases of determining cost for various categories of inventories are as follows:-
Stores and spares,loose tools,raw – Weighted average costmaterials and componentsMaterials in transit – Actual costWork in progress and finished goods – Material cost plus appropriate
share of labour, manufacturingoverheads and excise duty.
v) Retirement benefits
The Company has various schemes of retirement benefits such as provident fund, superannuation fund, gratuity fundduly recognised by the income tax authorities and leave encashment benefit fund. The funds are administeredthrough trustees and the contributions are charged against revenue every year.
vi) Foreign currency transactions
Exchange differences are dealt with as follows :-
Transactions in foreign currency are recorded at the exchange rate prevailing at the time of the transaction. In case ofloans taken for the acquisition of fixed assets, the loss or gain on conversion (at the rates prevailing at the year end orat the forward rates where forward cover has been taken) and roll over charges in respect of forward cover is includedin the carrying amount of the related fixed assets and loans.
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Current assets, (other than inventories) and current liabilities, (other than relating to fixed assets) are restated at therates prevailing at the year end or at the forward rates where forward cover has been taken and the differencebetween the year end rate / forward rate and the exchange rate at the date of the transaction is recognised as incomeor expense over the life of the contract and is taken to the profit and loss account.
vii) Sales
Sale of goods is recognised at the point of despatch of finished goods to the customers. Sale of motorcycles isinclusive of freight and is exclusive of excise duty and sales tax. Sale of spare parts are inclusive of excise duty anddelivery charges but exclusive of sales tax.
viii) Scrap
Scrap sale is accounted for on sale basis.
ix) Warranty claims
Warranty costs are provided on accrual basis on the total sales of motorcycles during the year,which are based on pastexperience of claims.
x) Research and development expenses
Research and development expenditure of a revenue nature is expensed out under the respective heads of account inthe year in which it is incurred.
xi) Taxation
The provision for taxation is ascertained on the basis of assessable profits computed in accordance with theprovisions of the Income Tax Act,1961.
Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the differencebetween taxable income and accounting income that originate in one period and are capable of reversal in one ormore subsequent periods.
2) CONTINGENT LIABILITIES :(Rupees in crores)
This year Previous year
i) In respect of income-tax cases pending at various
stages of appeal with the authorities 0.61 —
3) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 105.39 crores(Previous year Rs. 42.87 crores ).
4) i) The Company had entered into lease agreements for the rental of plant and machinery. Typically,lease rentals are fora period of five years. As at March 31, 2004, the Company had commitments under the lease agreements of Rs.16.85 crores (Previous year Rs. 35.93 crores).
ii) The Company has also entered into operating lease agreements for motor vehicles, dies and data processingmachines. These lease arrangements are cancellable in nature and range between two to four years. The aggregatelease rentals under these arrangements amounting to Rs. 2.45 crores (Previous year Rs. 0.12 crore) have beencharged under “Lease rentals ” in Schedule 11.
5) During the year, the Company has implemented Accounting Standard (AS-26) ‘Intangible Assets ’issued by the Institute ofChartered Accountants of India and has accordingly recognized expenditure on model fee aggregating Rs. 23.19 crores as‘Intangible Assets’ under Schedule 5 ‘Fixed Assets’, whereas expenditure on model fee incurred upto March 31, 2003aggregating Rs. 10.82 (Gross Rs. 16.23 crores and accumulated amortisation Rs. 5.41 crores) hitherto accounted for asdeferred revenue expenditure under Schedule 9 ‘Miscellaneous expenditure ’has been recast as ‘Intangible assets’.
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The amortisation of intangible assets amounting to Rs 10.05 crores has been included in depreciation for the year in theprofit and loss account.
6) As the Company ’s business activity falls within a single primary business segment viz. Motorcycles and its parts’ thedisclosure requirements of Accounting Standard (AS-17)“Segment Reporting”, issued by The Institute of CharteredAccountants of India are not applicable.
7) Related party disclosures under Accounting Standard 18
a) Enterprises in which the Company has controlHero Honda Finlease Limited
b) Parties in respect of which the Company is a joint ventureHonda Motor Co., Ltd., JapanHero Cycles LimitedBhadurchand Investments Private LimitedHero Investments Private Limited
c) Key management personnelMr. Brijmohan Lall Munjal – ChairmanMr. Pawan Munjal – Managing DirectorMr. Akio Kazusa – Joint Managing DirectorMr. Shinichi Nakayama – Whole time Director (w.e.f. 9 th May 2003)Mr. Kazumi Yanagida – Whole time Director (Upto 24 th April 2003)
d) Enterprises over which key management personnel and their relatives are able to exercise significant influence ;-Brijmohan Lall Associates, A.G.Industries Private Limited, Hero Corporate Services Limited, Highway IndustriesLimited, Honda Trading Corporation, Honda Trading (Thailand) Ltd. Majestic Auto Limited, Munjal Auto IndustriesLimited, Munjal Showa Limited, Rockman Cycle Industries Limited, Sunbeam Auto Limited and Satyam AutoComponents Limited.
Transactions with related parties during the year
a) Enterprises in which the Company has control(Rupees in crores)
This year Previous yearLease rentals 19.14 22.01Dividend received 4.62 0.41Intercorporate deposits given and repaid 150.50 43.05Interest received on Inter Corporate deposits 0.66 0.03Balance outstanding at the year end-Payables — 0.01
b) Parties in respect of which the Company is a joint venture.(Rupees in crores)
This year Previous yearRemittance of dividends 290.74 124.60Royalty 89.64 68.91Export commission 5.72 3.76Model Fee 22.09 10.62Technical guidance fee 0.39 0.11Purchase of raw materials,components,spares and capital goods 219.55 297.57Balance outstanding at the year end-Receivables — 0.01-Payables 7.16 17.22
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c) Key management personnel(Rupees in crores)
This year Previous yearRemuneration 1.57 0.75Commission 43.94 36.88Balance outstanding at the year end-Payables (other than commission) 0.14 0.04
d) Enterprises over which key management personnel and their relatives are able to exercise significant influence
(Rupees in crores)
This year Previous yearPurchase of raw materials and components 1,177.09 1,162.81Purchase of fixed assets 4.62 -Sale of components etc 4.14 9.71Sale of fixed assets 0.12 2.93Payment towards rent and other services 3.53 1.60Balance outstanding as at the year end-Receivables 0.27 0.76-Payables 183.67 110.55
8) EARNINGS PER SHARE
This year Previous year
Profit after taxation as per profit and loss account (Rupees in crores) 728.32 580.76
Weighted average number of equity shares outstanding 19,96,87,500 19,96,87,500
Basic and diluted earnings per share in rupees 36.47 29.08
(face value –Rs.2 per share)
9) Information pursuant to clause 4 (ix) (b) of the Companies (Auditor’s Report) Order, 2003 in respect of disputed dues, notdeposited, pending with various authorities (excluding interest)
Nature of the Statue Nature of Dues As at March 31, 2003 Forum where dispute is
(Rupees in crores) pending
1) Sales Tax Laws Sales Tax 1.19 Sales Tax Tribunal
2) Central Excise Excise duty 0.92 Commissioner (Appeals)
10. ADDITIONAL INFORMATION
a) Details of capacity and production:
Class of goods Units Licensed capacity* Installed capacity** Actual Production***
This year Previous year This year Previous year This year Previous year
Motorised two wheelers upto
350CC engine capacity Nos. 200000 200000 2250000 1800000 2064698 1680277
* The Company’s products are exempt from Licensing requirements under New Industrial Policy in terms of Notificationno. S.O. 477 (E) dated 25th July, 1991.
** On triple shift basis, as certified by the management and relied on by the auditors being a technical matter.***Includes 49 (previous year 140) motorcycles produced and capitalised during the year.
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b) Particulars in respect of opening stock, purchases, sales and closing stock for each class of goods dealt with by theCompany:
Class of goods Units Opening stock PurchasesThis year Previous year This year Previous year
Quantity Value Quantity Value Quantity Value Quantity Value(Rupees in crores) (Rupees in crores) (Rupees in crores) (Rupees in crores)
Motorcycles Nos. 8335 22.99 5733 15.49 — — — —Spares - * 31.85 * 18.53 * 173.04 * 162.33
54.84 34.02 173.04 162.33
Class of goods Units Sales Closing stockThis year Previous year This year Previous year
Quantity Value Quantity Value Quantity Value Quantity Value(Rupees in crores) (Rupees in crores) (Rupees in crores) (Rupees in crores)
Motorcycles Nos. 2070147++ 5,553.75 1677535++ 4,862.90 2837 7.69 8335 22.99Spares - * 277.37 * 224.40 * 23.13 * 31.85Miscellaneous * 1.31 14.41Components
5,832.43 5,101.71 30.82 54.84
* It is not practicable to furnish quantitative information in view of the considerable number of items diverse in size andnature. These items in value individually account for less than 10% of the total value of the purchases, stocks andturnover of the aforesaid spares and miscellaneous components.
++ Excluding 49 (previous year 140) motorcycles capitalised.
c) Raw materials and components consumed:
Class of goods Units This year Previous yearQuantity Value Quantity Value
(Rupees in crores) (Rupees in crores)
Steel sheets MT 9286.02 47.25 8529.79 44.05Components * 3,796.68 * 3,292.06
3,843.93 ** 3,336.11 **
* It is not practicable to furnish quantitative information of components consumed in view of the considerable number ofitems diverse in size and nature.These items in value individually account for less than 10%of the total value ofcomponents consumed.
** Includes Rs.0.12 crore (Previous year Rs.0.45 crore)for motorcycles produced and capitalised during the year.
d) CIF Value of imports:
Class of goods This year Previous year(Rupees in crores) (Rupees in crores)
Capital goods* 56.06 28.24Raw materials 58.90 37.28Components, spare parts and others 266.54 263.27
* Excludes reduction of Rs.0.24 crore (Previous year increase of Rs.0.12 crore) capitalised due to fluctuation inexchange rates.
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e) Value of imported and indigenous raw materials,components and spares consumed and percentage of each to the totalconsumption:
Class of goods This year Previous year
Value Percentage Value Percentage
(Rupees in crores) (Rupees in crores)
Raw materials
– Imported 46.52 1.21% 41.48 1.24%
– Indigenous 0.73 0.02% 2.67 0.08%
Components
– Imported 75.73 1.97% 124.58 3.73%
– Indigenous 3,720.95 96.80% 3,167.38 94.95%
*3,843.93 100.00% 3,336.11 100.00%
Spares consumed (charged to repairs and maintenance)
– Imported 3.34 29.56% 2.66 19.25%
– Indigenous 7.96 70.44% 11.16 80.75%
11.30 100.00% 13.82 100.00%
*Includes Rs.0.12 crore (Previous year Rs 0.45 crore) for motorcycles produced and capitalised during the year.
f) Expenditure in foreign currency (on accrual basis):
This year Previous year
(Rupees in crores) (Rupees in crores)
Royalty 89.64 68.91
Technical guidance fee 0.39 0.49
Technical know-how fee 22.09 15.50
Export commission 5.72 3.76
Travel and other accounts 0.94 1.67
Advertisement and Publicity 7.96 14.46
g) Earnings in foreign currency (on accrual basis):
This year Previous year
(Rupees in crores) (Rupees in crores)
FOB value of exports 117.40 94.06
Freight and insurance 0.81 0.85
h) Managerial remuneration:*
This year Previous year
(Rupees in crores) (Rupees in crores)
Remuneration 1.57 0.75
Commission 43.94 36.88
Directors’ sitting fee 0.06 0.03
45.57 37.66
*Excludes incremental contribution for gratuity, as the contributions are determined for the Company as a whole.
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Computation of net profit in accordance with section 198 of the Companies Act, 1956.
This year Previous year(Rupees in crores) (Rupees in crores)
Profit before taxation as perprofit and loss account 1,072.46 884.53Add:-Managerial remuneration 45.57 37.66Less:-Provision for Bad Debts Written back 0.29 —Profit on sale of non trade long term investments 8.71 —Net profit as per section 349 of the Companies Act,1956 1,109.03 922.19Commission @1% of the above profit for the four directors 44.36 36.88Restricted to 43.94* 36.88
*Mr. Kazumi Yanagida, whole time director was in employment with the Company up to April 24, 2003. Mr. ShinichiNakayama joined the Company in place of Mr. Kazumi Yanagida with effect from May 9, 2003. Accordingly, commissionon profit has been apportioned on a pro-rata basis to these whole-time directors and to the other three whole-timedirectors on a full year basis.
i) Provision and/or payment in respect of Auditors’ Remuneration :
This year Previous year(Rupees in crores) (Rupees in crores)
a) As auditors (Audit fee) 0.17 0.15b) In other capacity
– taxation matters — 0.04– limited review of unaudited financial results 0.12 0.04– corporate governance and other certification 0.02 0.03
c) Out of pocket expenses # ## This year Rs. 60,151 (Previous year Rs. 82,738)
j) Amount remitted in foreign currencies towards dividends during the year:
This year Previous yearNo. of No. of equity Dividend No. of No of equity Dividend
Non-Resident shares held remitted Non-Resident shares held remittedshareholders (Rupees in crores) shareholders (Rupees in crores)
2001-2002 - Final — — — 1 51918750 52.962002-2003 - Final 1 51918750 93.45 — — —2003-2004 - Interim 1 51918750 51.92
145.37 52.96
11. Previous year’s figures have been recast/regrouped wherever necessary.
New Delhi
April 12, 2004
For and on behalf of the Board of Directors
BRIJMOHAN LALL MUNJAL CHAIRMAN
PAWAN MUNJAL MANAGING DIRECTOR
AKIO KAZUSA JOINT MANAGING DIRECTOR
M.P. WADHAWAN DIRECTOR
RAVI SUD VICE PRESIDENT - FINANCE
ILAM C. KAMBOJ COMPANY SECRETARY
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BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
I. Registration Details
Registration No. 17354
State Code 55
Balance Sheet Date 31.03.2004
II. Capital Raised during the year (Rupees in crores)
Public Issue Nil Rights Issue Nil
Bonus Issue Nil Private Placement Nil
III. Position of Mobilisation and Deployment of Funds (Rupees in crores)
Total Liabilities 1313.51 Total Assets 1313.51
Sources of Funds Application of Funds
Paid-Up Capital 39.94 Net Fixed Assets 588.81
Reserves & Surplus 1098.87 Investments 1565.10
Secured Loans Nil Net Current Assets* (840.40)
Unsecured Loans 174.70 Misc. Expenditure Nil
*Includes Deferred Tax Liability (Net) Rs. 89.34 crores
IV. Performance of Company (Rupees in crores)
Turnover 5,997.47
Total Expenditure 4,925.01
Profit before tax 1072.46
Profit after tax 728.32
Earnings per share (Rs.) 36.47
Dividend Rate (%) 1000
V. Generic names of Three Principal Products/ Services of Company (as per monetary terms)
Item Code No. (ITC Code) 87112003
Product Description Motorised two wheelers upto 350cc engine capacity
PART IV OF SCHEDULE VI To The Companies Act, 1956
Per our report attached
FOR A.F. FERGUSON & CO.
CHARTERED ACCOUNTANTS
A.K. MAHINDRA
PARTNERMembership Number 10296
New Delhi
April 12, 2004
For and on behalf of the Board of Directors
BRIJMOHAN LALL MUNJAL CHAIRMAN
PAWAN MUNJAL MANAGING DIRECTOR
AKIO KAZUSA JOINT MANAGING DIRECTOR
M.P. WADHAWAN DIRECTOR
RAVI SUD VICE PRESIDENT - FINANCE
ILAM C. KAMBOJ COMPANY SECRETARY
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