Company Analysis Report

Of

HERO HONDA

LOGO

COMPANY PROFILE & INTRODUCTION:

“Hero” is the brand name used by the Munjal brothers in the year 1956 with the flagship company Hero Cycles.

The joint venture between India's Hero Group and Honda Motor Company, they are related to Jagdish Lal Munjal.

During the 80s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads.

As Brijmohan Lall Munjal, the Chairman, Hero Honda Motors succinctly points out.

'Fill it - Shut it - Forget it‘.

Over 20 million Hero Honda two wheelers tread Indian roads today. These are almost as many as the number of people in Finland, Ireland and Sweden put together!.

Hero Honda has consistently grown at double digits since inception; and today, every second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero Honda's top -selling motorcycle – Splendor.

Hero Honda bikes currently roll out from its three globally benchmarked manufacturing facilities. Two of these are based at Dharuhera and Gurgaon in Haryana and the third state of the art manufacturing facility was inaugurated at Haridwar, Uttrakhand in April this year.

These plants together are capable of churning out 3.9 million bikes per year.

Hero Honda is worlds third largest two wheeler maker.

By 2002 Hero Group had sold 86 million bicycles producing 16000 bicycles a day.

Today Hero Honda has an assembly line of nine different models of motorcycles available. It holds the record for most popular bike in the world by sales for Its Splendor model.

PRODUCTS:

HERO HONDA CD100

HERO HONDA JOY

HERO HONDA CD DAWN

HERO HONDA SLPENDORHERO HONDA SLPENDOR PLUS

HERO HONDA PASSION PLUSHERO HONDA PASSION

CBZ EXTREMECBZ

KARIZMA

RATIO ANALYSIS

Liquidity Ratio’s.

1)CURRENT RATIO:

CURRENT ASSETS CURRENT LIABILITIES

Interpretation: The ideal ratio 2:1 . The liquidity position of the company is not satisfactory

because it is not reached the ideal ratio 2:1 . The company should increase the current assets and decrease the current liabilities.

2005 2006 2007 2008

0.31 0.51 0.62 0.57

Quick Ratio: Current assets –inventories. Current liabilities

Interpretation: the liquidity position of the company is not satisfactory because the ratio is

decrease and not reached the ideal ratio 1:1 the company should increase quick assets such as cash and bank balance and decrease the current liabilities.

2005 2006 2007 2008

0.11 0.30 0.36 0.33

LEVERAGE RATIO’S:LEVERAGE RATIO’S:

1)Debt equity Ratio

2)Proprietary Ratio

3)Fixed Asset Ratio

4)Interest Coverage RatiO

Debt Equity Ratio:

Long term debts/Equity share holder funds.

InterpretationInterpretation:

The Ideal Ratio is 2:1.The solvency position of the company is satisfactory but it should decrease the loans such as secured and unsecured. It should increase the reserves and share capital also.

2005 2006 2007 2008

0.14 0.09 0.07 0.04

Proprietary Ratio:

Net Worth Net Worth //Total AssetsTotal Assets

Interpretation: These ratio is the indicative of strong financial position

of business . The higher the ratio , the better it is. but the company

Should increase the shareholders funds.

2005 2006 2007 2008

0.83 0.87 0.89 0.92

Fixed Assets Ratio:

Fixed Assets Net worth

Interpretation: This ratio is satisfactory and the ideal ratio is 0.67 and it will

never be more than 1 , the long term funds are used to buy or acquire the fixed assets.

2005 2006 2007 2008

0.42 0.45 0.51 0.50

Interest coverage Ratio: PBIT/Fixed Interest Charges

Interpretation:

The ideal ratio is 6. This Ratio indicates whether a business is earning sufficient profits to pay the interest charges. This ratio is not satisfactory and company should increase the sales and profits , to pay the interest charges for the long term debts.

2005 2006 2007 2008

117.74 231.38 55.20 40.38

Turn Over Ratios

1)inventory holding periods

2)working capital turnover

3)inventory turnover ratio

4)fixed assets turnover ratio

Inventory Holding PeriodInventory Holding Period::

No . Of Days In Years/S.T.RNo . Of Days In Years/S.T.R

Interpretation: The Inventory turnover ratio also be expressed in terms

of no. of days (or) months it takes for the stock to get converted into sales. Here the company is satisfactory and company has to work hard to have more sales

2005 2006 2007 2008

11.38days 10.58 10.42 11.93

Working Capital TurnOver RatioWorking Capital TurnOver Ratio Net Sales/Working Capital

Interpretation: The Company should increase the sales and also

increase the working capital i.e., increase the current assets and decrease current liabilities .

2005 2006 2007 2008

-7.85 -11.75 -17.49 -11.64

Inventory TurnOver Ratio:

CGS/Avg. Inventory

Interpretation:

The ideal ratio is 8. the company should control the cost of goods sold expenses and increase the sales in order to increase the ratio.

2005 2006 2007 2008

31.80 34.02 34.56 30.17

Fixed Assets Turn Over Ratio:

TurnOver/ Fixed AssetsTurnOver/ Fixed Assets

Interpretation: The ideal ratio is 5. the ratio is decreasing from year to year and we should

increase the sales up to the maximum level and we should use the fixed assets up to full 100% capacity.

2005 2006 2007 2008

10.38 8.77 7.30 6.67

Profitability Ratio’s:

1)Gross Profit Ratio

2)Operating Ratio

3)Earning per share

EARNING PER SHARE:

2005 2006 2007 2008

RS.40.59

RS.48.64 RS.42.96 RS.48.47

Interpretation : The profits of the company are increasing slightly and we should increase the sales and we should decrease the cost of goods sold , operating expenses. The shareholders returns on their investment is increasing year to year

PAT-Preference dividends No. of Equity shares

Gross profit ratio: gross profit X 100 Sales

Interpretation: The profitability position of the company is The profitability position of the company is

satisfactory because of the Gross profit ratio is satisfactory because of the Gross profit ratio is increasing from year to year but it is not enough increasing from year to year but it is not enough the company should control the cost of goods the company should control the cost of goods sold expenses and increase the sales.sold expenses and increase the sales.

2005 2006 2007 2008

15.91% 15.91% 12.34% 13.46%

Operating Ratio:

CGS + Operating Exp X 100 Net Sales

Interpretation: The company had controlled the operating expenses that’s why the ratio is

decreased ,the lower the ratio the better it is, the company should continue this performance in the future also. It is satisfactory .

2005 2006 2007 2008

85.30% 85.40% 89.07% 88.09%