A OVERALL STUDY ABOUT HERO MOTOCORP LTD, TRICHY-620005 . BY S.JAYA PRAKASH (Register No.814111631014) A Project Report Submitted to the SHIVANI SCHOOL OF BUSINESS MANAGEMENT in partial fulfillment of the requirements for the award of the degree Of MASTER OF BUSINESS ADMINISTRATION ANNA UNIVERSITY CHENNAI-600025 OCTOBER 2012 1 BONAFIDE CERTIFICATE Certified that this project report titled A OVERALL STUDY ABOUT HERO MOTOCORP LTD, TRICHY- 620005 is the bonafide work of S.JAYAPRASH (814111631014), who carried out the project work under my supervision. Certified further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate. INTERNAL GUIDE Dr.M.Velavan Dr. Suryamurthi Director Asst. Professor Shivani School of Business Management Shivani School of Business Management Tiruchirappalli Tiruchirapalli INTERNAL EXAMINER EXTERNAL EXAMINER Date of Viva-Voce Examination: 2 Pers/proj/ Director, Shivani school of Business Management, Navalur Kuttapattu, Trichy – 620009. Dear sir, Sub: Summer Project – permission for your student – reg We are pleased to permit Mr S Jayaprakash, I MBA of your college to do summer project work in our organization. The student may please be advised to contact the undersigned for further details. Thanking you, Yours faithfully, R and D Tech, Srirangam, Tiruchirappalli, Tamil Nadu 3 DECLARATION I hereby declare that the project title A OVERALL STUDY ABOUT HERO MOTOCORP LTD, TRICHY, 620005. Submitted for the award of Master of Business Administration in Anna University, Chennai has carried out under the guidance of Assistant professor Dr.Suryamoorthi MBA Assistant Professor Shivani School of Business Management, Tiruchirappalli and it is my original work which does not form part of the award of any other degree. Place: Signature of the candidate Date: 4 ACKNOWLEDGEMENT It gives me immense pleasure to express sincere thanks to all who helped me in the successful completion of this project work. First of all, I would like to thank the GOD ALMIGHTY, who has been a constant support in every walk of my life and source of strength in presenting this project. I wish to convey my sincere thanks to Dr.P.Selvaraj, Chairman, Er.S.Vigneshwaran, Secretary, Shivani School of Business Management, Trichy for their encouragement in doing this project. I express my special privilege and heartful thanks to Dr.M.Velavan, Director, Shivani School of Business Management, Trichy for his guidance and encouragement. I am greatly thankful to Dr.J.Sivasubramanian, Dean, Shivani School of Business Management, Trichy for his guidance and encouragement. I am greatly thankful to Dr.Suryamurthi, my internal guide for giving me this opportunity and for extending constant support and valuable guidance throughout the project work. I extend my sincere thanks to the Project Coordinator Mr.B.Narayanan, Assistant Professor, Shivani School of Business Management, Trichy. I would like to thank Mr. Manoj kumar, Personal Manager for providing me with an opportunity to undertake this project in HERO MOTOCORP LTD, TRICHY. My sincere thanks go to all faculty members of Shivani School of Business Management for their help and assistance for the completion of the study. Last but not least I wish to extend my sincere gratitude to my parents and friends, for the support and co-operation they rendered to me to make this project perfect in its total. I convey my thanks to all who helped me directly and indirectly to carry out this project successfully. S.JAYAPRAKASH 5 TABLE OF CONTENTS S.No Title Page no. 1 INTRODUCTION 7 2 HISTORY 9 3 COMPANY PROFILE 11 4 CORPORATE PROFILE 12 5 KEY EXECUTIVES 14 6 TERMINATION OF HONDA JOINT VENTURE 16 7 COMPANY PERFORMANCE 17 8 RECOGNITION 17 9 MOTORCYCLE MODEL 18 10 SUPPLIERS 18 11 COMPETITORS 19 12 DEPARTMENTS 20 12.1 FINANCE 20 HUMAN RESOURCE FUNCTION 23 12.2 13 CONCLUSION 6 25 INTRODUCTION Hero MotoCorp Ltd., formerly Hero Honda, is an Indian motorcycle and scooter manufacturer based in New Delhi, India. Hero Honda started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan. The company is the largest two wheeler manufacturer in India. The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at #108. In 2010, when Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity On June 4, 2012,Hero MotoCorp approved a proposal to merge the investment arm of its parent Hero Investment Pvt. Ltd. into the automaker. The decision comes after 18 months of its split from Honda Motors. 7 Type Public company Traded as BSE: 500182 NSE: HEROMOTOCO BSE SENSEX Constituent Industry Automotive Founded January 19, 1984 Founder(s) Brijmohan Lall Munjal Headquarters New Delhi, India Area served India, Sri Lanka Key people Deya Varadh Sens Pawan Munjal (MD & CEO) Products Motorcycles, Scooters, Three-Wheeler vehicles Revenue 239.43 billion (US$4.36 billion) (2012) Net income 23.78 billion (US$432.8 million) (2012) Total assets 60.58 billion (US$1.1 billion) (2012) 8 (Chairman) Parent Hero Group Website www.heromotocorp.com History Hero MotoCorp was started in 1984 as Hero Honda Motors Ltd. 1956—Formation of Hero Cycles in Ludhiana(majestic auto limited) 1975—Hero Cycles becomes largest bicycle manufacturer in India. 1983—Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed 1984—Hero Honda Motors Ltd. incorporated 1985—Hero Honda motorcycle CD 100 launched. 1989—Hero Honda motorcycle Sleek launched. 1991—Hero Honda motorcycle CD 100 SS launched. 1994 - Hero Honda motorcycle Splendor launched. 1997—Hero Honda motorcycle Street launched. 1999 - Hero Honda motorcycle CBZ launched. 2001 - Hero Honda motorcycle Passion and Hero Honda Joy launched. 2002—Hero Honda motorcycle Dawn and Hero Honda motorcycle Ambition launched. 2003—Hero Honda motorcycle CD Dawn, Hero Honda motorcycle Splendor plus, Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Karizma launched. 9 2004—Hero Honda motorcycle Ambition 135 and Hero Honda motorcycle CBZ* launched. 2005—Hero Honda motorcycle Super Splendor, Hero Honda motorcycle CD Deluxe, Hero Honda motorcycle Glamour, Hero Honda motorcycle Achiever and Hero Honda Scooter Pleasure. 2007—New Models of Hero Honda motorcycle Splendor NXG, New Models of Hero Honda motorcycle CD Deluxe, New Models of Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Hunk launched. 2008—New Models of Hero Honda motorcycles Pleasure, CBZ Xtreme, Glamour, Glamour Fi and Hero Honda motorcycle Passion Pro launched. 2009—New Models of Hero Honda motorcycle Karizma:Karizma - ZMR and limited edition of Hero Honda motorcycle Hunk launched 2010—New Models of Hero Honda motorcycle Splendor Pro and New Hero Honda motorcycle Hunk and New Hero Honda Motorcycle Super Splendor launched. 2011—New Models of Hero Honda motorcycles Glamour, Glamour FI, CBZ Xtreme, Karizma launched. New licensing arrangement signed between Hero and Honda. In August Hero and Honda parted company, thus forming Hero MotoCorp and Honda moving out of the Hero Honda joint venture. In November, Hero launched its first ever Off Road Bike Named Hero "Impulse". 2012-New Models of Hero MotoCorp Maestro the Masculine scooter and Ignitor the young generation bike are launched 10 Company profile “Hero” is the brand name used by the Munjal brothers for their flagship company, Hero Cycles Ltd. A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero Honda Motors Limited at Dharuhera, India. Munjal family and Honda group both owned 26% stake in the Company. In 2010, it was reported that Honda planned to sell its stake in the venture to the Munjal family. During the 1980s, the company introduced motorcycles that were popular in India for their fuel economy and low cost. A popular advertising campaign based on the slogan 'Fill it - Shut it Forget it' that emphasized the motorcycle's fuel efficiency helped the company grow at a doubledigit pace since inception. The technology in the bikes of Hero Honda for almost 26 years (1984–2010) has come from the Japanese counterpart Honda. Hero MotoCorp has three manufacturing facilities based at Dharuhera, Gurgaon in Haryana and at Haridwar in Uttarakhand. These plants together are capable of churning out 3 million bikes per year. Hero MotoCorp has a large sales and service network with over 3,000 dealerships and service points across India. Hero Honda has a customer loyalty program since 2000, called the Hero Honda Passport Program. The company has a stated aim of achieving revenues of $10 billion and volumes of 10 million two-wheelers by 2016–17. This in conjunction with new countries where they can now market their two-wheelers following the disengagement from Honda. Hero MotoCorp hopes to achieve 10 per cent of their revenues from international markets, and they expected to launch sales in Nigeria by end-2011 or early-2012. 11 CORPORATE PROFILE Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two – wheelers, based in India. In 2001, the Company achieved the coveted position of being the largest two-wheeler manufacturing Company in India and also, the ‘World No.1’ two-wheeler Company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till date. Vision The story began with a simple vision – the vision of a mobile and an empowered India, powered by its bikes. Hero MotoCorp Ltd., company’s new identity, reflects its commitment towards providing world class mobility solutions with renewed focus on expanding company’s footprint in the global arena. Mission Hero MotoCorp mission is to become a global enterprise fulfilling its customers’ needs and aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts its customers into its brand advocates. The Company will provide an engaging environment for its people to perform to their true potential. It will continue its focus on value creation and enduring relationships with its partners. Strategy Hero MotoCorp key strategies are to build a robust product portfolio across categories, explore growth Opportunities globally, continuously improve its operational efficiency; aggressively expand its reach to customers, Continue to invest in brand building activities and ensure customer and shareholder delight. Manufacturing Hero Honda bikes are manufactured across three globally benchmarked manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in northern India. The third and the latest Manufacturing plant is based at Haridwar, in the hill state of Uttarakhand. Technology In the 1980’s the Company pioneered the introduction of fuel-efficient, environment friendly four-stroke motorcycles in the country. It became the first Company to launch the Fuel Injection (FI) technology in Indian motorcycles, with the launch of the Glamour FI in June 2006. Its plants use world class equipment and processes and have become a benchmark in leanness and productivity. 12 Hero MotoCorp, in its endeavor to remain technology pioneer, will continue to innovate and develop cutting edge products and processes. Products Hero Honda's product range includes variety of motorcycles that have set the industry standards across all the market segments. The Company also started manufacturing scooter in 2005. Hero Honda offers large no. of products and caters to wide variety of requirements across all the segments. Distribution The Company’s growth in the two wheeler market in India is the result of an intrinsic ability to increase reach in new geographies and growth markets. Hero MotoCorp extensive sales and service network now spans over to 5000 customer touch points. These comprise a mix of authorized dealerships, Service & Spare Parts outlets, and dealer-appointed outlets across the country. Brand The new Hero is rising and is poised to shine on the global arena. Company’s new identity “Hero MotoCorp Ltd.” Is truly reflective of its vision to strengthen focus on mobility and technology and creating global footprint. Building and promoting new brand identity will be central to all its initiatives, utilizing every opportunity and leveraging its strong presence across sports, entertainment and ground- level activation. 2010-11 Performance Total unit sales of 54, 02,444 two-wheelers, growth of 17.44 per cent Total net operating income of Rs. 19,401.15 Crores, growth of 22.32 per cent Net profit after tax at Rs. 1,927.90 Crores Total dividend of 5250% or Rs. 105 per share including Interim Dividend of Rs. 70 per share on face value of each Share of Rs. 2 each EBIDTA margin for the year 13.49 per cent EPS of Rs. 96.54 13 KEY EXECUTIVES: S.No Name Designation 1 Brijmohan Lall Munjal Chairman 3 Pawan Munjal Managing Director 2 Ilam C Kamboj Company Secretary 4 Suman Kant Munjal Non-Executive Director 5 Paul Edgerley Non-Executive Director 6 Sunil Kant Munjal Joint Managing Director 10 Non-Executive & Independent V P Malik Director 11 Non-Executive & Independent M Damodaran Director 12 Non-Executive & Independent Ravi Nath Director 7 Non-Executive & Independent Pradeep Dinodia Director 8 Non-Executive & Independent Pritam Singh Director 14 Senior Management. MR. RAVI SUD Sr. Vice President and Chief Financial Officer. MR. ANIL DUA Sr. Vice President - Marketing and Sales MR. VIKRAM KASBEKAR Sr. Vice President and Head of Operations & Supply Chain DR. ANADI S. PANDE Vice President (HRM, Corporate Planning & Strategy) MR. VIJAY SETHI Vice President and Chief Information Officer, Hero MotoCorp Ltd. MR. NEERAJ MATHUR Vice President- Strategic Sourcing & Supply Chain Management HARJEET SINGH Vice President and Head R&D 15 Termination of Honda joint venture In December 2010, the Board of Directors of the Hero Honda Group has decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export. Since the beginning, the Hero Group relied on their Japanese partner Honda for the technology in their bikes. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone. The Japanese auto major will exit the joint venture through a series of off market transactions by giving the Munjal family—that held a 26% stake in the company—an additional 26%. Honda, which also has an independent fully owned two wheeler subsidiary—Honda Motorcycle and Scooter India (HMSI)—will exit Hero Honda at a discount and get over $1 billion for its stake. The discount will be between 30% and 50% to the current value of Honda's stake as per the price of the stock after the market closed on Wednesday. The rising differences between the two partners gradually emerged as an irritant. Differences had been brewing for a few years before the split over a variety of issues, ranging from Honda's reluctance to fully and freely share technology with Hero (despite a 10-year technology tie-up that expires in 2014) as well as Indian partner's uneasiness over high royalty payouts to the Japanese company. Another major irritant for Honda was the refusal of Hero Honda (mainly managed by the Munjal family) to merge the company's spare parts business with Honda's new fully owned subsidiary Honda Motorcycle and Scooter India (HMSI). 16 As per the arrangement, it will be a two-leg deal. In the first part, the Munjal family, led by Brijmohan Lal Munjal group, will form an overseas-incorporated special purpose vehicle (SPV) to buy out Honda's entire stake, which will be backed by bridge loans. This SPV would eventually be thrown open for private equity participation and those in the fray include Warburg Pincus, Kohlberg Kravis Roberts (KKR), TPG, Bain Capital, and Carlyle Group. Honda will continue to provide technology to Hero Honda motorbikes until 2014 for existing as well as future models.[20] Company performance During the fiscal year 2008-09, the company sold 3.7 million bikes, a growth of 12% over last year. In the same year, the company had a market share of 57% in the Indian market. Hero Honda sells more two wheelers than the second, third and fourth placed two-wheeler companies put together. Hero Honda's bike Hero Honda Splendor sells more than one million units per year. On 1 June 2012, Hero MotoCorp reported its highest ever monthly sales at 5, 56,644 units in May, registering a growth of 11.28%. Recognition The Brand Trust Report published by Trust Research Advisory has ranked Hero in the 13th position among the brands in India. 17 Motorcycle models Streak Achiever Ambition 133, Ambition 135 CBZ, CBZ Star, CBZ Extreme CD 100, CD 100 SS, CD Dawn, CD Deluxe, CD Deluxe (Self Start) Glamour, Glamour F.I Hunk Karizma, Karizma R, Karizma ZMR FI Passion, Passion Plus, Passion Pro Pleasure Splendor, Splendor+, Splendor+ (Limited Edition), Super Splendor, Splendor NXG,Splendor PRO Hero Impulse launched in 2011 after the separation of hero and Honda. Its India's first off-road and on road Bike. Suppliers It is reported Hero Honda has five joint ventures or associate companies, Munjal Showa, AG Industries, Sunbeam Auto, Rockman Industries and Satyam Auto Components, that supply a majority of its components. 18 Competitors: Bajaj Auto TVS Motor Maharashtra Scooters Atul Auto Scooters India Kinetic Engg LML Kinetic Motors VCCL 19 DEPARTMENTS. FINANCE: Revenues rise 2.5% yoy on back of a 3.6% yoy increase in realizations. The improvement was sharp sequentially wherein net sales were better by 19.3% qoq post a weak Q2 FY12 Margins at 12.6% were down 304bps yoy and 128bps qoq on back of increased ad spends and higher material costs (unfavorable product mix) Depreciation which includes royalty payments to Honda was noted lower by 2.2% qoq on back of weakening of yen against Rupee On back of slightly better volumes in H2 FY12, we build in flat volumes for the year and assume moderate growth in FY13 Maintain Market Performer with a revised 9-month price target of Rs1, 945. 20 Result table (Rs m) Q3 FY12 Q3 FY11 % Q2 FY12 % qoq yoy Volume 1,573,135 1,589,286 (1.0) 1,332,805 18.0 Realisation 39,333 37,979 3.6 38,921 1.1 Net sales 61,876 60,360 2.5 51,875 19.3 Material costs (45,854) (43,948) 4.3 (37,702) 21.6 Personnel costs (1,982) (1,993) (0.5) (1,922) 3.2 Other overheads (6,253) (4,987) 25.4 (5,059) 23.6 Operating profit 7,786 9,432 (17.4) 7,192 8.3 OPM (%) 12.6 15.6 (304) 13.9 (128) bps bps Depreciation (2,832) (2,987) (5.2) (2,895) (2.2) Interest (30) (35) (15.7) (30) 0.3 Other income 901 828 8.8 993 (9.3) PBT 5,826 7,238 (19.5) 5,261 10.7 Tax (947) (1,108) (14.5) (855) 10.7 Effective tax rate 16.3 15.3 95 16.3 0 bps (%) bps PAT 4,879 6,130 (20.4) 4,406 10.7 PAT margin (%) 7.9 10.2 (227) 8.5 (61) bps bps 21 Ann. EPS (Rs) 97.7 122.8 (20.4) 88.2 Volumes rebound on festive chee. Gains back some market share Hero Motocorp Ltd (HMCL) reported 19.3% qoq increase in revenues to Rs61.9bn on back of strong festive sales booked in the quarter. Total volumes sold during the quarter were at 1,573,135 units which were 1% down yoy but up by a healthy 18% on qoq basis. The realizations were higher sequentially by 1.1% on back of a slightly better product mix in motorcycles wherein the dispatches of 125cc-150cc category increased during the quarter. The quarter sales enabled HMCL to regain market share by 190bps in domestic motorcycle segment on a sequential basis. In the scooters segment also HMCL made smart market share gains of 3.9% at the expense of market leader HMSI. The share of scooters in total domestic volumes continued to increase to 10.2% (vis-à-vis 9.9% in Q2 FY12) on back of the success of the Pleasure and Maestro. Management indicated of increasing the capacity in scooters and slew of product launches in this segment going ahead to further reap this market. 22 10.7 HR FUNCTIONS: The following are main function of Human Resource department and manager. They are as follows: Recruitment Training Disciplinary action Preparing an organization chart Maintain and updating employee’s personnel data Long term settlement co-ordination Shift & attendance record Employee grievances Safety Security Employee social arrangement Leave records maintenances Leave records maintenances 23 Advise to wages calculation Retirement Award distribution Annual day celebration Communication, union, employee ship council meeting conducting safety programs Providing uniforms. 24 CONCLUSION: It is one of the great choices to do practical analysis in industry through this field work. I got some exposure, knowledge from the resources. And I know about the peaceful setup how helps the management and worker to succeed in their life. And I thank who all helped me to finish this project report. 25