Comparative Analysis of Hero Honda Motors Ltd. (Now Hero Motocorp. Ltd.) & Bajaj Auto Ltd.

PROFILE OF THE COMPANIES

Profile of Hero Honda (Now Hero Motocorp Ltd.)

Hero Honda Motors Ltd. (Now Hero MotoCorp Ltd.) is the world's largest manufacturer of two - wheelers, based in India. In 2001, the company achieved the coveted position of being the largest two-wheeler manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of unit volume sales in a calendar year. It continues to maintain this position till date.

VISION OF THE COMPANY

The story of Hero Honda began with a simple vision - the vision of a mobile and an empowered India, powered by its bikes. Hero MotoCorp Ltd., 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.

ACHIEVEMENTS OF THE COMPANY IN 2011 -Two-wheeler Manufacturer of the Year award by Bike India magazine. -Adjudged the "Bike Manufacturer of the Year" at the Economic Times Zig Wheels Car and Bike Awards. -"Most Recommended Two-Wheeler Brand of the Year" award by CNBC Awaaz Consumer Awards - "Best Activity Generating Short or Long-Term Brand Loyalty" by the Promotion Marketing Award of Asia Order of Merit for Hero GoodLife. - Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand Equity "Most Trusted Brand" 2011 survey.

NEW RELEASES
Hero launch its first off-road bike named Hero Impulse

PROFILE OF BAJAJ AUTO LTD.

Bajaj Auto Limited is an Indian motorized vehicleproducing company. Bajaj Auto is a part of Bajaj Group. It is founded by Jamnalal Bajaj at Rajasthan in the 1930s. It is based in Pune, Maharashtra, with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttaranchal. The oldest plant at Akurdi (Pune) now houses the R&D centre Ahead. Bajaj Auto makes and exports automobiles, scooters, motorcycles and the auto rickshaw.

Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two-wheeler manufacturer. Its product range encompasses scooterettes, scooters and motorcycles. Its real growth in numbers has come in the last four years after successful introduction of a few models in the motorcycle segment. The company is headed by Rahul Bajaj who is worth more than US$1.5 billion. Bajaj Auto came into existence on 29 November 1945 as M/s Bachraj Trading Corporation Private Limited. It started off by selling imported two- and three-wheelers in India.

PRODUCTS OF BAJAJ AUTO LTD.

Bajaj has made a number of motorcycles, scooters and cars. Motorcycles in current production are the XCD, Platina, Discover, Pulsar and Avenger. Bajaj also Distributes many motorcycles in India for other manufacturers, such as the Kawasaki Ninja 250R, the Ninja 650R and new for 2012, the KTM Duke 200. Cars include the Bajaj ULC ultra-low-cost car.

NEW RELEASES
2012 - Bajaj RE 60, mini car for intra-city urban transportation 2012 - KTM Duke 200, launch of 200cc bike from the KTM stable 2012 - Bajaj Pulsar 200 NS, launch of 200cc bike

Achievements of the Company in 2010-11

Bike of the Year 2010 by BBC - TopGear Hall of Pride Awards by CNBC Overdrive Bike of the Year by Bike India Bike India upto 150 cc by Bike India 2011 Mc of the year upto 250cc by NDTV Car & Bike Awards "Golden Steering Wheel" for Executive Motorcycle by Auto Build Best Value for Money Vehicle of the Year by ET Zig Wheels

RATIO ANALYSIS
Ratio-analysis is a concept or technique which is as old as accounting concept. Financial analysis is a scientific tool. It has assumed important role as a tool for appraising the real worth of an enterprise, its performance during a period of time and its pit falls. Financial analysis is a vital apparatus for the interpretation of financial statements. It also helps to find out any cross-sectional and time series linkages between various ratios.

RATIO ANALYSIS
Unlike in the past when security was considered to be sufficient consideration for banks and financial institutions to grant loans and advances, nowadays the entire lending is need-based and the emphasis is on the financial viability of a proposal and not only on security alone. Further all business decision contains an element of risk. The risk is more in the case of decisions relating to credits. Ratio analysis and other quantitative techniques facilitate assessment of this risk.

RATIO ANALYSIS
Ratio-analysis means the process of computing, determining and presenting the relationship of related items and groups of items of the financial statements. They provide in a summarized and concise form of fairly good idea about the financial position of a unit. They are important tools for financial analysis.

RATIO ANALYSIS
Its a tool which enables the banker or lender to arrive at the following factors : Liquidity position Profitability Solvency Financial Stability Quality of the Management Safety & Security of the loans & advances to be or already been provided

HOW A RATIO IS EXPRESSED?

As Percentage

such as 25% or 50% . For example if net profit is Rs.25,000/- and the sales is Rs.1,00,000/then the net profit can be said to be 25% of the sales. As Proportion - The above figures may be expressed in terms of the relationship between net profit to sales as 1 : 4. As Pure Number /Times - The same can also be expressed in an alternatively way such as the sale is 4 times of the net profit or profit is 1/4th of the sales.

CLASSIFICATION OF RATIOS
Balance Sheet Ratio P&L Ratio or Income/Revenue Statement Ratio Balance Sheet and Profit & Loss Ratio

Financial Ratio

Operating Ratio

Composite Ratio

Current Ratio Quick Asset Ratio Proprietary Ratio Debt Equity Ratio

Gross Profit Ratio Operating Ratio Expense Ratio Net profit Ratio Stock Turnover Ratio

Fixed Asset Turnover Ratio, Return on Total Resources Ratio, Return on Own Funds Ratio, Earning per Share Ratio, Debtors Turnover Ratio,

1.

Current Ratio : It is the relationship between the current assets and current liabilities of a concern. Current Ratio = Current Assets/Current Liabilities If the Current Assets and Current Liabilities of a concern are Rs.4,00,000 and Rs.2,00,000 respectively, then the Current Ratio will be : Rs.4,00,000/Rs.2,00,000 = 2 : 1 The ideal Current Ratio preferred by Banks is 1.33 : 1 Net Working Capital : This is worked out as surplus of Long Term Sources over Long Tern

2.

3. ACID TEST or QUICK RATIO : It is the ratio between Quick Current

Assets and Current Liabilities. The should be at least equal to 1.
Quick Current Assets : Cash/Bank Balances + Receivables upto 6 months + Quickly realizable securities such as Govt. Securities or quickly marketable/quoted shares and Bank Fixed Deposits Acid Test or Quick Ratio = Quick Current Assets/Current Liabilities

4. DEBT EQUITY RATIO : It is the relationship between borrowers fund (Debt) and Owners Capital (Equity).
Long Term Outside Liabilities / Tangible Net Worth

Liabilities of Long Term Nature

Total of Capital and Reserves & Surplus Less Intangible Assets

5. PROPRIETARY RATIO : This ratio indicates the extent to which Tangible Assets are financed by Owners Fund. Proprietary Ratio = (Tangible Net Worth/Total Tangible Assets) x 100 The ratio will be 100% when there is no Borrowing for purchasing of Assets. 6. GROSS PROFIT RATIO : By comparing Gross Profit percentage to
Net Sales we can arrive at the Gross Profit Ratio which indicates the manufacturing efficiency as well as the pricing policy of the concern.

Gross Profit Ratio = (Gross Profit / Net Sales ) x 100

Alternatively , since Gross Profit is equal to Sales minus Cost of Goods Sold, it can also be interpreted as below :

Gross Profit Ratio = [ (Sales Cost of goods sold)/ Net Sales] x 100
A higher Gross Profit Ratio indicates efficiency in production of the unit.

7. OPERATING PROFIT RATIO :

It is expressed as =>

(Operating Profit / Net Sales ) x 100

Higher the ratio indicates operational efficiency

8. NET PROFIT RATIO : It is expressed as => ( Net Profit / Net Sales ) x 100

It measures overall profitability.

9. STOCK/INVENTORY TURNOVER RATIO :

(Average Inventory/Sales) x 365 for days (Average Inventory/Sales) x 52 for weeks (Average Inventory/Sales) x 12 for months

Average Inventory or Stocks = (Opening Stock + Closing Stock) -----------------------------------------

2
. This ratio indicates the number of times the inventory is rotated during the relevant accounting period

10. DEBTORS TURNOVER RATIO : This is also called Debtors Velocity or Average Collection Period or Period of Credit given . (Average Debtors/Sales ) x 365 for days (52 for weeks & 12 for months) 11. ASSET TRUNOVER RATIO : 12. FIXED ASSET TURNOVER RATIO : Net Sales/Tangible Assets Net Sales /Fixed Assets

13. CURRENT ASSET TURNOVER RATIO : Net Sales / Current Assets 14. CREDITORS TURNOVER RATIO : This is also called Creditors Velocity Ratio, which determines the creditor payment period. (Average Creditors/Purchases)x365 for days (52 for weeks & 12 for months)

15. RETRUN ON ASSETS :

Net Profit after Taxes/Total Assets

16. RETRUN ON CAPITAL EMPLOYED :

( Net Profit before Interest & Tax / Average Capital Employed) x 100

Average Capital Employed is the average of the equity share capital and long term funds provided by the owners and the creditors of the firm at the beginning and end of the accounting period.

Composite Ratio
17. RETRUN ON EQUITY CAPITAL (ROE) : Net Profit after Taxes / Tangible Net Worth 18. EARNING PER SHARE : EPS indicates the quantum of net profit of the year that would be ranking for dividend for each share of the company being held by the equity share holders. Net profit after Taxes and Preference Dividend/ No. of Equity Shares

19. PRICE EARNING RATIO : PE Ratio indicates the number of times the Earning Per Share is covered by its market price.
Market Price Per Equity Share/Earning Per Share

COMPARATIVE ANALYSIS OF BAJAJ AUTO LTD. & HERO HONDA MOTORS LTD.