IS Advisors HERO MOTOCORP LTD. - COMPANY INFORMATION & SWOT ANALYSIS December 2011 1. Snapshot 1.1 Company Details 1.2 Company Address 1.3 Price Information 1.4 Company Size 1.5 Company vs. Sensex 2. Financial Highlights 2.1 Key Financials (in USD) 2.2 Key Ratios 2.3 Market Cues 3. Profile 3.1 Background 3.2 Product Range of the Company 3.3 Milestones, Achievements & Recognitions 4. Key Personnel 5. Shareholders Information 5.1 Shareholding Pattern (Last 5 Quarters) 5.2 List of Key Shareholders 6. Peer Group Comparison 7. Latest News & Developments 8. SWOT Analysis 8.1 Strengths 8.2 Weaknesses 8.3 Opportunities 8.4 Threats 9. Financials (in USD) 9.1 Quarterly Income & Expenditure Statement 9.2 Annual Income & Expenditure Statement 9.3 Balance Sheet 9.4 Cash Flow Statement 10. Ratio Analysis Table of Contents 2 www.investshoppe.com 3 3 3 3 3 3 4-5 4 5 5 6-11 6 7 8 12 13 13 13 14 15 16 – 38 17 26 29 34 39 39 41 43 45 46-49 KEY MILESTONES 2011 New licensing arrangement signed between Hero and Honda Launch of new refreshed versions of Glamour, Glamour FI, CBZ Xtreme, Karizma Crosses the landmark figure of 5 million cumulative sales in a single year July 29, 2011 - Hero Honda Motors changed its name to Hero MotoCorp following the exit of its erstwhile Japanese promoter, Honda, from the company 2010 New model Splendor Pro launched Launch of new Super Splendor and New Hunk 2009 Hero Honda GoodLife Program launched Hunk' (Limited Edition) launched Splendor completed 11 million production landmark New motorcycle model 'Karizma - ZMR' launched Silver jubilee celebrations 2008 Hero Honda Haridwar Plant inauguration 8 www.investshoppe.com DEBT FREE COMPANY: Hero Honda has been a debt free company for the last 10 years. The unsecured loan of INR 32.71crores in FY11 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 few years. EFFECTIVE WORKING CAPITAL MANAGEMENT: The Company has always sought to efficiently use the various components of working capital cycle. It has been able to effectively control the receivable and inventories, enabling it to continue to operate on negative working capital. 25 www.investshoppe.com HMC has a sound balance sheet with low debt, higher return on equity and capital employed. TAX FREE PERIOD LAPSING: The approaching end of tax holidays for HMC in excise-free zones will hit the company hard. The income tax holiday for HMC’s plant in Haridwar, Uttarakhand, which started operations in April 2008, comes to an end in March 2013. When the 100% tax holiday gets over in the fiscal ending March 2013, only 30% of the firm’s profit from the unit will be exempt from tax. This will effectively increase the company’s tax rate from the current 17-18% to 22%. Income tax benefits have served as a cushion against rising raw material prices, and their reduction will put margins under some pressure. 28 www.investshoppe.com