Bajaj Auto

Index

0 Objective (pg no1)

1 Introduction (pg no 1)

2 History (pg no 2)

3 Entry Barriers(pg no 2)

4 SWOT Analysis (pg no 3)

5 Porter’s Analysis (pg no 4)

6 Managerial Style(pg no5)

7 Hierarchy( pg no 6)

8 HR Practices(pg no 7 )

9 Business Stratergies(pg no 8)
9a, Marketing Strategies (pg no 8)
9b, Other Strategic Issues (pg no 10)

10 Cost effective and Environmental strategies (pg no 12)

10a, Conservation of energy (pg no 12)

11 Community leadership programmes (pg no 13)

12 New projects (pgno15)

13 Profits during recession (pg no 17)

14. Performance of the company (pg no 17)

14a, Total Sales (pg no 17)

14b, Financials (pg no 18)
14c, Motorcycle sales, domestic and exports (in numbers) (pg no 18)
14d, Bajaj Auto's exports (in numbers) (pg no 18)
14e, Three-wheeler sales (in numbers) (pg no 19)
14f, Goods carriers (pg no 19)
14g, Three-wheelers (pg no 19)
14f, International Business snapshot (pg no 20)

15 Industrial relations ( pg no 20)

16 Subsidiaries (pg no 21)

17 Spare parts Division (pg no22)

18 Corporate social responsibility activities (pg no 23)

19 Awards Won by Bajaj Auto Ltd. (pg no 25)

20 Research and development (pg no 26)

21 The Future (pg no 27)

22 Recommendations (pg no 29)

23 Learning Acquired (pg no 30)

23 References (pg no 30)

Pg#1
0.Objective: To get the information about the genesis, growth and the
performance of the company in the recent past. To study the strategies,
policies, hierarchy, managerial style etc. the company adopted which led to
it’s success.

1.Introduction:
Bajaj Auto is a major India Automobile manufacturer. It is India's largest and
the world's 4th largest two- and three-wheeler maker. It is based in Pune,
Maharashtra, with plants in Akurdi and Chakan (near Pune),Waluj and
Patnagar in Uttaranchal. Bajaj Auto makes and exports motor 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 scooters and Motorcycles. It’s 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 November 29, 1945 as M/s Bachraj Trading
Corporation Private Limited. It started off by selling imported two- and three-
wheelers in India. In 1959, it obtained license from the Government of India to
manufacture two- and three-wheelers and it went public in 1960. In 1970, it
rolled out its 100,000th vehicle. In 1977, it managed to produce and sell
100,000 vehicles in a single financial year. In 1985, it started producing at
Waluj in Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles
in a single financial year. In 1995, it rolled out its ten millionth vehicle and
produced and sold 1 million vehicles in a year.
Pg#2
2.History:
Founded in 1926, at the height of India's movement for independence from
the British, the group has an illustrious history. The integrity, dedication,
resourcefulness and determination to succeed which are characteristic of the
group today, are often traced back to its birth during those days of relentless
devotion to a common cause. Jamnalal Bajaj, founder of the group, was a close
confidant and disciple of Mahatma Gandhi. In fact, Gandhiji had adopted him
as his son.This close relationship and his deep involvement in the
independence movement did not leave Jamnalal Bajaj with much time to
spend on his newly launched business venture.

His son, Kamalnayan Bajaj, then 27, took over the reins of business in 1942. He
too was close to Gandhiji and it was only after Independence in 1947, that he
was able to give his full attention to the business. Kamalnayan Bajaj not only
consolidated the group, but also diversified into various manufacturing
activities.

The present Chairman of the group, Rahul Bajaj, took charge of the business in
1965. Under his leadership, the turnover of the Bajaj Auto the flagship
company has gone up from Rs.72 million to Rs.46.16 billion (USD 936
million),its product portfolio has expanded from one to and the brand has
found a global market. He is one of India's most distinguished business leaders
and internationally respected for his business acumen and entrepreneurial
spirit.

3.Entry Barriers:

 Entry barriers are high.

Pg # 3

 The market runs on high economies of scale and on high economies of

scope.
 The need for technical expertise is high.
 Owning a strong distribution network is important and is very costly.

 All these make the barrier high enough to be a deterrent for new
entrants.

4.SWOT Analysis:
Let's analyze the position of Bajaj in the current market set-up, evaluating its
strengths, weaknesses, threats and opportunities available.

Strengths:

 Highly experienced management.

 Product design and development capabilities.
 Extensive R & D focus.
 Widespread distribution network.
 High performance products across all categories.
 High export to domestic sales ratio.
 Great financial support network (For financing the automobile)
 High economies of scale.
 High economies of scope.

Weaknesses:

 Hasn't employed the excess cash for long.

 Still has no established brand to match Hero Honda's Splendor in
commuter segment.
 Not a global player in spite of huge volumes.
 Not a globally recognizable brand (unlike the JV partner Kawasaki)
Pg #4

Threats:

 The competition catches-up any new innovation in no time.

 Threat of cheap imported motorcycles from China.
 Margins getting squeezed from both the directions (Price as well as Cost)
 TATA Ace is a serious competition for the three-wheeler cargo segment.

Opportunities:

 Double-digit growth in two-wheeler market.

 Untapped market above 180 cc in motorcycles.
 More maturity and movement towards higher-end motorcycles.
 The growing gearless trendy scooters and scooterette market.
 Growing world demand for entry-level motorcycles especially in
emerging markets.

5.Porter’s Five Forces Analysis:

 Supplier Bargaining Power: Suppliers of auto components are
fragmented and are extremely critical for this industry since most of the
component work is outsourced. Proper supply chain management is a
costly yet critical need.

 Buyer's Bargaining Power: Buyers in automobile market have more

choice to choose from and the increasing competition is driving the
bargaining power of customers uphill. With more models to choose from
in almost all categories, the market forces have empowered the buyers
to a large extent.
 Industry Rivalry: The industry rivalry is extremely high with any product
being matched in a few months by competitor. This instinct of the
industry is primarily driven by the technical capabilities acquired over
years of gestation under the technical collaboration with international
players.
 Pg#5

 Substitutes: There is no perfect substitute to this industry. Also, if there

is any substitute to a two-wheeler, Bajaj has presence in it. Cars, which
again are a mode of transport, do never directly compete or come in
consideration while selecting a two-wheeler, cycles do never even
compete with the low entry level moped for even this choice comes at a
comparatively higher economic potential.

6. Managerial Style:
Off late Bajaj Auto Limited, India’s premier automotive company, has
emphasised a lot on organizational restructuring for the Auto business.
With this restructuring, the existing business roles and responsibilities at
the company has been strengthened and enhanced to ensure greater
operational empowerment and effective management.

The five pillars of this new structure (Strategic units) are R&D, Engineering,
Two Wheeler Business Unit, and Commercial Vehicles Business Unit &
International Business Unit. These pillars will be supported by functions of
Finance, MIS, HR, Business Development and Commercial.

Pradeep Srivastava, who was VP-Engineering prior to restructuring, will now

be President- Engineering. As per the reorganized structure the company
will have three CEO’s. S. Sridhar, currently, VP, Mktg. & Sales Two-
Wheelers, will now head the Two Wheeler Business Unit as CEO with
manufacturing operations at Waluj and Akurdi also reporting to him. RC
Maheshwari has joined Bajaj Auto as CEO Commercial Vehicles. The
company is in the process of identifying a CEO for its International Business.
The three CEO’s will be responsible for Top line, Business Growth &
profitability of their respective businesses. Abraham Joseph will continue to
lead Research & Development.
Pg #6

Mr. Rajiv Bajaj, Managing Director, Bajaj Auto Ltd. Said, “The new structure
would assist in “Aligning the Vectors” of the organization and will enable
the company to live its Brand Values & be “Distinctly Ahead”. The objective
of this is to transit from relatively narrow functional definitions into more
integrated and cross-functional working with clear focus on business results
(Ahead) as well as focus on our Brand Values of speed, Innovation, and
Perfection (Distinctly).”

7. Hierarchy:

Rahul Bajaj Chairman

Madhur Bajaj Vice Chairman
Rajiv Bajaj Managing Director
Sanjiv Bajaj Executive Director
Eric Vas President (New Projects)
Abraham Joseph President (Research & Development)
Pradeep Shrivastava President (Engineering)
S Sridhar CEO (2WH)
R C Maheshwari CEO (Commercial Vehicles)
Rakesh Sharma CEO (International Business)
C P Tripathi Vice President (Corporate)
N H Hingorani Vice President (Commercial)
Kevin P D'sa Vice President (Finance)
V S Raghavan CEO (Operations, BHIL)
S Ravikumar Vice President (Business Development)
K Srinivas Vice President (Human Resources)
Ranjit Gupta President (Insurance, BFSL)
J. Sridhar Company Secretary
Pg#7

8. HR Practices:
 The Company affirms that its competitiveness is interlinked with the well
being of all sections of the Indian society.

 The Company believes that equal opportunity in employment for all

sections of the society is a component of its growth and
competitiveness. It further believes that inclusive growth is a component
of growth and development of the country.

 The Company affirms the recognition that diversity to reflect socially

disadvantages sections of the society in the workplace has a positive
impact on business.

 The Company will not practice nor support conscious discrimination in

any form.

 The Company does not bias employment away from applicants

belonging to disadvantaged sections of society if such applicants possess
competitive skills and job credentials.

 The Company's selection of business partners is not based on any

considerations other than normal business parameters. In case of equal
business offers, the Company will select a business partner belonging to
a socially disadvantaged section of society.

 This Code of Conduct for Affirmative Action will be put up on the

company web-site to encourage applications from socially
disadvantaged sections of society.

 The Company makes all efforts for up skilling and continual training of all
its employees in order to enhance their capabilities and competitive
skills. No discrimination of any type will be shown in this process.

 The Company may have a partnership programme with educational

institution/s to support and aid students from socially disadvantaged
 Pg#8

sections of society.

 The Company will maintain records of Affirmative Action.

 The Company has nominated Mr K Srinivas, Vice President (HR), to

oversee and promote the Affirmative Action policies and programmes.
He will be accountable to the Chairman.

 The Company will make available its learning and experiences as a good
corporate citizen in Affirmative Action to other companies desiring to
incorporate such policies in their own business.

9. Business Stratergies:

9A, Marketing Strategies:

The focus of BAL off late has been on providing the best of the class models at
competitive prices. Most of the Bajaj models come loaded with the latest
features within the price band acceptable by the market. BAL has been the
pioneer in stretching competition into providing latest features in the price
segment by updating the low price bikes with the latest features like disk-
brakes, anti-skid technology and dual suspension, etc.

BAL adopted different marketing strategies for different models, few of them
are discussed below: -

Kawasaki 4S - First attempt by bajaj to make a mark in the motorcycle

segment. The target customer was the father in the family but the target
audience of the commercial was the son in the family. The time at which
Kawasaki 4S was launched Hero Honda was the market leader in fuel-efficient
bikes and Yamaha in the performance bikes.

Boxer - It took the reins from where the Kawasaki 4S left. Target was the rural
population and the price sensitive customer. Boxer marketed as a value for
money bike with great mileage. Larger wheelbase, high ground clearance and
high mileage were the selling factors and it was in direct competition to Hero
Honda Dawn and Suzuki MX100.
Pg#9

Caliber - The focus for the Caliber 115 was youth. And though Bajaj made the
bike look bigger and feel more powerful than its predecessor (characteristics
that will attract the average, 25-plus, executive segment bike buyer), its
approach towards advertising is even more radically different this time around.
Bajaj gave the mandate for the ad campaign to Lowe, picking them from the
clique of three agencies that do promos for the company (the other two being
Leo Burnett and O&M). Going by the initial market response, the campaign
was clearly a hit in the 5-10 years age bracket. So, the teaser campaign and the
emphasis on the Caliber 115 being a `Hoodibabaa' bike placed it as a trendy
motorcycle for the college-goers and the 25 plus executives both at the same
time.

Pulsar - Pulsar was launched in direct competition to the Hero Honda's 'CBZ'
model in 150 cc plus segment. The campaign beared innovative punch line of
"Definitely Male" positioning Pulsar to be a masculine-looking model with an
appeal to the performance sensitive customers. The Pulsar went one step
ahead of Hero Honda's 'CBZ' and launched a twin variant of Pulsar with the 180
cc model. The model was a great success and has already crossed 1 million
mark in sales.

Discover - The same DTSI technology of Pulsar extended to 125 cc Discover

was a great success. With this, Bajaj could realize its success riding on the back
of technological innovation rather than the joint venture way followed by
competitors to gain market share.

BAL now is taking a leaf out of the FMCG business model to take the company
to greater heights.Bajaj has kicked off a project to completely restructure the
company's retail network and create multiple sales channels.

Over the next few months, the company will set-up separate sales channels
for every segment of its business and consumers. Bajaj Auto's entire product
portfolio, from the entry-level to the premium, is being sold by the same
dealers. The restructuring will involve separate dealer networks catering to the
urban and rural markets as well as its three-wheeler and premium bikes
segments. Bajaj Auto also plans to set-up an independent network of dealers
for the rural areas. The needs of financing, selling, distribution and even after-
sales service are completely different in the rural areas and do not makes
sense for city dealers to control this. The company also plans to set-up
exclusive dealerships
Pg#10

for its three-wheeler products instead of having them sold through an

estimated 300 of its existing dealers.

9b,Other Strategic Issues:

Cash is strength: Bajaj Auto has been sitting on a cash pile for over five years
now. Over the next couple of years, competition in the two-wheeler market is
set to intensify. TVS Motors and Hero Honda are on a product expansion binge.
To fight this battle and retain its hard-earned market share in the motorcycle
segment, Bajaj Auto will need its cash muscle. A look at its own story over the
past five years provides valuable insight.

Delisting worry: What is worrying is that there is an idea to delist the

investment company (also an indirect indication that it would be listed
initially). This would be closing the valve of equitable ownership distribution.

There is a hint of a buyback of shares of the investment company as this is the

only way it can be delisted. The company would not be short of cash to put
through such a buyback.

Factors such as low valuation, low trading interest and the need to provide
shareholders may be cited as plausible reasons for the buyback.

Stake for Kawasaki: Bajaj Auto's attempt to vest the surplus cash in a
separate company may be a prelude to offering a stake to Kawasaki of Japan in
the equity of the automobile company. The latter has been playing an
increasingly active role in Bajaj's recent models, and its brand name is also
more visible in Bajaj bikes than in the past.

Better value proposition: Shareholder interests may be better served if the

cash is retained to pursue growth in a tough market. This would also obviate
the need to fork-out fancy sums as stamp duty to the government for the de-
merger. A combination of a large one-time dividend and a regular buyback
program through the tender route may offer better value. A strategic stake for
Kawasaki would only positively influence the stock's valuation.

Strategies for the Overseas Markets:Bajaj Auto looks at external markets

primarily with three strategies: -
1) A market where all BAL need to do is distribute through CKD or CBU routes.
Pg#11

2) Markets where BAL need to create new products.

3) Markets where BAL need to enter with existing products and probably with
a good distributor or a production facility or a joint venture.

Earlier, most of the products that Bajaj exported were scooters and some
motorcycles. However, in its target markets, like in India, the shift was towards
motorcycles. With the expansion in Bajaj's own range to almost five-six
platforms of motorcycles, it had a better offering to export, also the reason for
its stronger showing. For the last fiscal, 60 per cent of its exports were two-
wheelers and the rest three-wheelers. Of the two-wheeler exports, close to 90
per cent were motorcycles.

Bajaj has identified certain key markets, which hold potential. Its first overseas
office established at the Jebel Ali free trade zone has been the focal point for
exports to middle Africa and the Saharan nations. Egypt and Iran also continue
to be strong markets for Bajaj.

The other market, which would be a focus area, is South America, where the
company feels it is fairly well represented in most countries, except in Brazil,
the largest market. The company recently participated in a large auto
exhibition in Brazil and found good consumer acceptance to products like
Pulsar and Wind 125.The other focus area is the ASEAN nations, which
constitute the third biggest consumer of two-wheelers. The biggest among
them is Indonesia, where Bajaj distributors are looking to introduce eco-
friendly four-stroke auto rickshaws. But two-wheeler market requires great
deal of effort from BAL. Everybody is there with Honda leading the show.
There's Suzuki, Kawasaki and some Korean and Chinese models. BAL should
look at the right product mix for two-wheelers. Bajaj's Pulsar model has taken
off well there. It also wants to develop a new step-through model for the
Indonesian market, but for now it will create a base there with its motorcycle
models.

Bajaj has also made a beginning by selling bikes in the Philippines branded in
the name of its technical partner, Kawasaki. The two signed an MoU in
February. Kawasaki, a large multi-product conglomerate, only makes high-end
bikes and does not have sub-200cc models. Kawasaki is marketing the new
model, Wind 125, developed by both companies, in the Philippines. The Bajaj-
developed models, Caliber and Byke, which is a fuel-efficient bike, are also
being
Pg#12

distributed by Kawasaki. This is a good beginning strategically for Kawasaki to

evince interest in Bajaj products for markets which can still buy less than 150
cc.

10. Cost effective and Environmental strategies:

10a,Conservation of energy:

As a part of continuing efforts to conserve various resources, following

steps were taken to conserve energy

Electrical energy saving was achieved by installation of localised

portable air compressors at various shops during low production periods,
energy efficient screw compressors by replacing CPT compressors, real timer
electrical circuits installed to switch off electrical equipments during
lunch / tea breaks and during non utilisation of production equipments,
fan less cooling towers for AC plants, high efficiency reflector fittings
with electronic ballasts tube lights, use of LED & CFT street lights,
replacement of 350 W air circulators by 180 W air circulators, 150 W MH
lamps instead of 250 W HPSV lamps at shop floors, Variable Frequency Drives
(VFD) for ASUs in paint shops, washing machine blowers, compressors etc and
rationalisation of pumping hours of main pump as well as booster pump of
pump house.

Water saving was achieved by replacement of old under-ground water pipes

with aboveground pipes to avoid water wastage through leakage, drip
irrigation system for gardening, installation of localised fresh water
storage systems, usage of treated water for bin washing and paint shop
process, rain water harvesting and use of bio-chemical additives to reduce
frequency of water change in various paint processes; and

LPG saving was achieved by installation of waste heat recovery system for
hot water generation used in pre-treatment process of paint shop, use of
reflective coating inside furnaces for better heat retention, three-wheeler
electro-deposition (ED) painting process changed from Acrylic ED to
Cathodic ED, optimisation of loading pattern in CGC and seal quench
Pg#13

furnaces, reduction of hot water temperature for pre-treatment, use of bio-

gas for cooking in canteens, start-up losses in ovens and hot water
generation plants and changed design of paint jigs to reduce jig stripping
frequency.

Impact of measures taken:

As a result of the initiatives taken for conservation of energy and natural

resources, the company has effected an overall reduction in consumption as
under:-

Reduction achieved in:

2008-09 2007-08
% %

Electrical energy 23 23
Water 11 16
LPG 44 12

Investment / savings:

Investment for energy conservation activities: Rs.9.35 million

Saving achieved through above activities: Rs.24.2 million

11. Community leadership programmes:

During the year, the employees volunteered for blood donation camp at
Deenanath Mangeshkar Hospital, Pune and Dr Susheela Tiwari Hospital,
Pantnagar Fire fighting teams of the company along with vehicles responded
to 20 Fire assistance calls from Government Fire Department / other
industrial units outside the factory premises in the larger interests of
saving invaluable life and property.
Pg#14

Community Care:

In line with the commitment to enrich the life of all with whom bajaj deals, it
showes sensitivity to the employees, who opted for voluntary retirement at
the Akurdi Plant.

Soon after the Akurdi employees expressed their interest in accepting the
Voluntary Retirement Scheme, the company organised a series of interactive
meetings with leading financial institutions. The officers explained the
need to prudently and safely invest the monies received, considering the
various options available today. The company devised attractive schemes for
interested employees so that they could receive regular monthly payments,
in addition to lump sum compensation announced. They were also
provided with options of taking loans at competitive rates of interest.

By these actions, it is the company's endeavour that the employees, who

have accepted voluntary retirement scheme, are independently self-sustaining
and can take good care of their families. Employees were also guided for
alternative possibilities, whether as employee or entrepreneur.

Health:
Government of India- Ministry of Health and Family Welfare - National Aids
Control Organisation (NACO) and CII have initiated Public Private
Partnership (PPP) in order to provide better healthcare to AIDs patients.
Your company has signed a tripartite MoU with NACO and Yeshwantrao
Chavan Municipal Hospital (YCMH) in Pimpri to set up an Anti Retroviral
Treatment Centre (ART Centre) at YCMH in Pimpri, Pune with the cooperation
of Pimpri Chinchwad Municipal Corporation for HIV patients.

Many dignitaries from Global Fund, WHO and such other organisations have
visited the ART centre, which is the largest unit run by an industry under
Public Private Partnership programme. Apart from two doctors and six
supporting medical staff, the ART centre has added audio-visual facilities
for group counseling, as a result of which the ART centre registration has
reached 1,900 numbers and the unit is recognised today as one of the best
Pg#15

ART centres in the country. Rural and community development activities and
empowerment of women.

The company continued with its rural development activities in Pune and
Aurangabad districts of Maharashtra through its trust, Jankidevi Bajaj Gram
Vikas Sanstha (JBGVS). JBGVS aims at an integrated development of 43
selected villages, to be carried out by the villagers under their own
leadership and through united efforts forged by local organisations with
JBGVS acting as a catalyst.

During the year, JBGVS undertook a number of development initiatives viz.

watershed development, sanitation, healthcare, HIV / AIDs awareness and
prevention, basic education, women empowerment etc. It also initiated
various income generation programmes, supporting 50 self-help groups
women members and developed 400 vermicompost plots. It encouraged and
facilitated entrepreneurship development through projects, like goat rearing,
candle and paper dish production, shops and stalls etc.

Through JBGVS encouragement and technical assistance, 4 educated youths

installed cultivation facilities under polynet and 32 farmers have
established WADI concept mango groves of 20 trees each. NABARD will
partner with JBGVS for a Rs.3.50 crore WADI Project for the next seven years.

The trust supported construction of low cost houses and latrines; conducted
tests and provided treatment during the HIV / AIDs awareness programmes.

Samaj Seva Kendra (SSK) as part of JBGVS provides facilities for social
development of the residents of Akurdi, Nigdi and adjoining townships, with
the aim of improving their quality of life, through skill development
training, hobby centre, nursery education, health care, sports, music,
dance, cultural programmes etc.

12. New projects:

Chakan 4-wheeler plant-The 'Lite' range of 4 wheeler vehicles, both in
Passenger and Cargo segments of the Industry, are under re-design, to
sharpen the competitive positioning of the products.
Pg#16

The Cargo version code named ' PV 1500' is likely to be launched in 2011.

The Techno-economic feasibility for the Passenger 4 wheeler will be

evaluated by Bajaj Renault-Nissan for a final decision, leading to firming
up of the co-operation parameters among partners and a suitable JV
Agreement.

company continues to focus on expanding its design & testing teams,

which has enabled it to make the new generation products. R & D has
enhanced its internal competencies by installation of advanced machines in
proto shop and introduction of special equipments in testing areas.

The expenditure on research and development during 2008-09 and in the

previous year was:

Rs In Million
2008-09 2007-08

i. Capital (including
technical know-how) 310.8 481.4

ii. Recurring 837.9 706.0

1,148.7 1,187.4
iii. Total research
and development
expenditure as a NA NA
percentage of sales,
net of excise duty 1.36 1.37
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13. Profits during recession:

2008-09 has been a tumultuous year for the global economy. The year began
with a continuation of a world-wide inflationary spiral and ended with the
worst slowdown since the Great Depression of the 1930s. While India did not
face a contraction in GDP growth like the USA, the Euro zone, the UK and
Japan, it has witnessed a 250 basis point compression in growth rate - from
9% in 2007-08 to an expected 6.5% or thereabout in 2008-09.

The second half of 2008-09 has seen severe financial distress across broad
sections of Indian industry-especially the manufacturing sectors. Companies
have got re-rated; have scrapped investment plans and capital expenditure;
cut down capacities; struggled with finances because of their earlier over-
leveraged positions; delayed payments to vendors; and had to borrow funds
at prohibitive interest rates.

It is in this context that one must look at the performance of Bajaj Auto
Limited (Bajaj Auto', BAL or the Company'). Despite falling demand in
the motorcycle segment, the company has succeeded in maintaining an
operating EBITDA (earnings before interest, taxes, depreciation and
amortisation) margin of 13.6% of net sales and other operating income.

14. Performance of the company:

14a,Total Sales:
2008-09 2007-08
(Nos.) (Nos.)

Motorcycles 1,907,853 2,139,779

Other two-wheelers 11,772 21,316
Total Two wheelers 1,919,625 2,161,095
Three wheelers 274,529 290,312
Total Two & Three wheelers 2,194,154 2,451,407
Of the above, exports were
Pg#18

Two wheelers 633,463 482,026

Three wheelers 139,056 136,315
Total Exports 772,519 618,341

14b,Financials:

Rs. In Million
2008-09 2007-08
Net sales & other income 89,323 91,688
Gross profit before exceptional items,
interest & depreciation 13,140 14,162

14c,Motorcycle sales, domestic and exports (in numbers):

Year Ended Salse Sales BAL (nos. BAL's BAL's

31st March (nos. growth Millions) growth market
Millions) share

2003 3.757 31.3% 0.868 32.3% 23.1%

2004 4.317 14.9% 1.024 17.9% 23.7%
2005 5.218 20.9% 1.450 41.6% 27.8%
2006 6.201 18.8% 1.912 31.9% 30.8%
2007 7.100 14.5% 2.379 24.4% 33.5%
2008 6.544 (7.8%) 2.140 (10.1%) 32.7%
2009 6.806 4.0% 1.908 (10.8%) 28.0%

Sales growth:

Source: SIAM and Company data:-

14d,Bajaj Auto's exports (in numbers):

Product 2007-08 2008-09 Growth

Total two-wheelers 482,026 633,463 31

Pg#19

Three-wheelers 136,315 139,056 2

Total vehicles 618,341 772,519 25

The total value of exports was Rs.26.4 billion, representing a growth of

29%.

14e,Three-wheeler sales (in numbers):

2007-08 2008-09 Rate of growth

Passenger vehicle sales:

Industry sales 375,180 415,411 10.7%

Bajaj Auto sales 263,598 264,332 0.3%

Bajaj Auto market share 70.3% 63.6% (6.7%)

14f,Goods carriers:

Industry sales 130,826 82,382 (37.0%)

Bajaj Auto sales 26,714 10,197 (61.8%)

Bajaj Auto market share 20.4% 12.4% (8.0%)

14g,Three-wheelers:

Industry sales 506,006 497,793 (1.6%)

Bajaj Auto sales 290,312 274,529 (5.4%)

Bajaj Auto market share 57.4% 55.1% (2.3%)

Source: SIAM and Company data.

Pg#20

The heartening news for this segment is that state governments have
increased the permits for plying energy efficient three-wheelers. Bajaj
Auto has a market share in excess of 90% in the permit-driven markets. The
company also intends to introduce a RE Diesel upgrade in 2009-10, which
will have a high mileage, accommodate more passengers with a luggage hold
area, and will attempt to capture a larger share of the rural market.

13f,

15.Industrial relations:
At Akurdi, the management signed the wage settlement on 18 July 2008 with
Vishwakalyan Kamgar Sanghatana, the recognised union, in conciliation and
accordingly, the benefits of the settlement have been given to all daily-
rated employees at Akurdi.
Subsequently, with a view to downsizing the workforce at Akurdi, Voluntary
Retirement Scheme was floated for the permanent dailyrated workmen. 2,331
workmen availed of the benefit under the scheme.

Relations with staff and workmen across the plants at Akurdi, Waluj, Chakan
Pg#21

and Pantnagar remained cordial.

16.Subsidiaries:
PT. Bajaj Auto Indonesia (PT BAI), was incorporated as a subsidiary company
in Indonesia with an issued, subscribed & paid-up capital of US$ 12.5
million (Rs.562 million) in 2006-07. Bajaj Auto holds 97.5% shares in this
company, with balance being held by a local partner. The subsidiary company
has accumulated losses of Rs. 830.7 million as on 31 March 2009. Through
the efforts, which are planned in the coming years, it is expected that PT
BAI will turn around within a reasonable time.

During the year under review, sales and service network reach have been
expanded substantially covering the major cities of Jawa, Sumatara, Bali
and Sulawesi islands. Total showroom strength stands at around 63 numbers,
covering 46 cities of Indonesia.

PT BAI assembles and markets Bajaj Pulsar and Bajaj XCD in Indonesia,
establishing Bajaj as a high quality tech-savvy brand. PT BAI plans to
expand its presence, product range and reach towards becoming a strong
player in this market currently dominated by Japanese 2-wheeler majors.

Bajaj Auto International Holdings BV, Netherlands (BAIHBV) -was

incorporated as a wholly owned subsidiary company in Netherlands with an
issued, subscribed and paid-up capital of Euros 200,000 during 2007-08.
Further capital of Euro 98.2 million was invested in this company during
the previous year, by way of premium. It is proposed to make strategic
investments in overseas ventures, by way of equity shares and / or loans
and to undertake related activities through this company.
Pg#22

17. Spare parts Division:

Automobiles need periodic replacement of parts. Not surprisingly,
therefore, spare parts comprise a profitable business for major automobile
manufacturers.

The objectives of spare parts business of Bajaj Auto are to perform an

effective role in supporting new vehicle sales, maintain vehicle goodwill'
across different geographies, makes and consumer groups, and contribute to
the bottom-line. These translate into three goals:

* Make spare parts available to customer at all time.

* Make them affordable.

* Achieve profitable business growth and greater penetration.

The company's spare parts business has done well. Domestic sales of spare
parts grew by 17.5% to achieve a revenue of Rs.5.88 billion in 2008-09. And
exports rose by 84% to Rs.1.45 billion.

There is huge head room for further growth of this business. Even today,
despite significant expansion of Bajaj Auto's authorised service network,
more than 70% of the services during post-warranty period happens in the
neighbourhood private garages. Hence, the challenge - and the business
opportunity - is to make the company's spare parts available in not only
the authorised service centres but also the private garages and spare part
shops that dot the country. This is a high volume, credit intensive
business that requires mastery over the supply of heterogeneous products.
To do so, Bajaj Auto created a separate channel exclusively for
distribution of spare parts in 2004-05. Today, the channel has 73
distributors, who cater directly to over 15,000 retail shops across the
country. This channel now accounts for over 70% of total spare parts sales
of BAL.

The results demonstrate the success of the channel; and the data suggests
that there is still scope for significant growth.
Pg#23

Table 4: Bajaj Auto's plant-wise capacities (in units):

Plant 2007-08 2008-09

Waluj 1,860,000 1,860,000

Chakan 1,200,000 1,200,000
Pantnagar 900,000 900,000
Total 3,960,000 3,960,000

18. Corporate social responsibility activities:

During the year, the company continued affirmative action and corporate
social responsibility initiatives in various fields.

The company continues to place emphasis on inclusive growth and has put in
place certain processes for delivering the intended social outcome in
measurable terms. The company believes strongly that its competitiveness is
interlinked with the well being of all sections of Indian society and that
equal opportunity for all sections of the society is a component of its
growth and competitiveness. The company is constantly endeavouring to
ensure that no discrimination of any type is shown to the socially
disadvantaged sections of the society in the work place.

Education:
The company has launched a programme that would help SC/ST students
achieve academic excellence and make them on par with those, who can
afford coaching for entrance to IITs. During the year under review, one
student with a brilliant academic record was identified from the
underprivileged and low-income group, for reimbursement of complete
fees for the preparation of IIT entrance test under the guidance of IITians
Prashikshan Kendra.

Under the central government initiative of Public Private Participation

(PPP), the company has volunteered to adopt 3 ITIs (Industrial Training
Institute) for up-gradation:
Pg#24

* ITI Mulshi - A Memorandum of Agreement and Institute Development Plan

are awaiting approval by the central government and funds are expected in
the financial year 2009-10. The construction of a new building at Pirangut is
in an advanced stage and is expected to be occupied by June 2009.

* ITI Haveli - A Memorandum of Agreement and Institute Development Plan

are awaiting final clearance from the central government.

* ITI Ramnager near the Pantnagar Plant (Uttarakhand) - The Central

Government has approved the Institute Development Plan. The Institute
Management Committee has received the funds for the up-gradation. Further
developmental actions are currently underway.

The company organised a two day training program for the Principals,
Instructors and staff of the Institutes. This was done to 'open the minds'
to 'aim high' and receive better ideas and go out and achieve excellence. A
detailed individual action plan was set by each participant for further
action by themselves.

The other activities include:

 Bajaj Auto Ltd. was the first and only company to launch ecologically
friendly CNG engines for three wheelers in Delhi.

 The company has been committed to its social and environmental

responsibilities both within and outside the company, reiterating that a
happy workforce is a productive workforce.
 Bajaj Auto promotes several welfare programmes for its employees as
well as various initiatives related to environment, health, education and
rural development in the communities around the plant areas.
 The company supports these initiative through the Jankidevi Bajaj
GramVikas Sanstha, a registered charitable trust and a society. The trust
oversees integrated development of twenty four villages adjoining the
 Pg#25

locations of BAL factories in Pune and Aurangabad. The activities are

centered around improvement of natural resources, increased
productivity of land, empowerment of women, health, education,
sanitation and income generation programmes.

 Bajaj Auto Ltd. is also a member of the Prince of Wales International

Business Leaders Forum and Business and Community Foundation.
 Bajaj AutoLtd. has started contributing toward the fight against AIDS in
various ways, including committing funds for medicines for AIDS victims,
committing funds for awareness campaigns against HIV/AIDS, providing
free condoms, taking initiatives to promote HIV/AIDS awareness among
employees and other community members, framing non-discriminatory
policies regarding HV/AIDS and providing victims with a support system
in the workplace, etc.

19. Awards Won by Bajaj Auto Ltd:

Bajaj Auto Ltd. had several bountiful years with awards galore across its
product line.NFO Customer satisfaction and CNBC-Auto Car Auto Awards, the
most coveted awards in the industry, were all showered on Bajaj Auto.

While ICICI Bank-OVERDRIVE bestowed three awards to Bajaj under various

categories including the Bike Maker of the year, BBC World Wheels showered
four awards including the viewer choice 2wheeler of the year to Pulsar 180
DTSi, BS Motoring awarded the coveted Bike Of The Year award to Wind 125.
NFO, the leading international marketing research firm awarded Bajaj Pulsar
for Motorcycle Total Customer Satisfaction in the premium segment. The latest
to confer the award, CNBC-Auto Car Award gave the "Two Wheeler of The Year
Award" again to Wind 125.

The rapid fire winning of awards by Bajaj Auto for almost all its product range -
from the entry level Boxer, to the newly launched Wind 125 as well as for the
DTSi technology - signals the changing face of Bajaj and its endeavour to offer
Pg#26

technologically superior products across the entry, executive and premium

segments. The winning of awards, which started as a trickle in 2001 has now
become a deluge.

Product Award Award Body

Business Standard
Bajaj Wind 125 Bike of the Year 2004 Motoring
CNBC AUTOCAR
Bajaj Wind 125 Two Wheeler of the Year 2004 AUTOAWARDS 2004
Bajaj Pulsar ICICI Bank OVERDRIVE
DTS-i Bike of the Year 2004 Awards 2004
DTS-i ICICI Bank OVERDRIVE
Technology Auto Tech of the Year 2004 Awards 2004
ICICI Bank OVERDRIVE
BAJAJ AUTO Bike Maker of the Year 2004 Awards 2004
Bajaj Boxer AT BBC World Wheels Award for Best
KTEC Two Wheeler under Rs 30,000 BBC World Wheels
BBC World Wheels Award for Best
Bajaj Pulsar 150 Two Wheeler between Rs 45,000
DTS-i to Rs 55,000 BBC World Wheels
BBC World Wheels Award for Best
Bajaj Pulsar 180 Two Wheeler between Rs 55,000
DTS-i to Rs 70,000 BBC World Wheels
Bajaj Pulsar 180 BBC World Wheels Viewers Choice
DTS-i Two Wheeler of Year 2003 BBC World Wheels
Motorcycle Total Customer
Bajaj Pulsar Satisfaction Study 2003 NFO Automotive
ICICI Bank OVERDRIVE
Bajaj Pulsar Bike of the Year 2003 Awards 2003
Business Standard
Bajaj Pulsar Bike of the Year 2002 Motoring
Most Exciting Bike of the Year
Bajaj Pulsar 2002 OVERDRIVE
Bajaj Eliminator Bike of the Year 2002 OVERDRIVE
Bajaj Eliminator Most Exciting Bike of the Year OVERDRIVE
 2001

20. Research and development:

Bajaj Auto has a huge, extensive and very well-equipped Research and
Development wing geared to meet two critical organizational goals:
development of exciting new products that anticipate and meet emerging
customer needs in India and abroad, and development of eco-friendly
automobile technologies.

While the manpower strength of the R&D represents a cross-section of in-

depth design and engineering expertise, the company has also been investing
heavily in the latest, sophisticated technologies to scale down product
development lifecycles and enhance testing capabilities.

Bajaj Auto R&D also enjoys access to the specialized expertise of leading
international design and automobile engineering companies working in specific
areas.

Based on their own brand of globalization, they have built their distribution
network over 60 countries worldwide and multiplied the exports from 1% of
total turnover in Fiscal 1989-90 to over 5% in Fiscal 1996-97.

The countries where their products have a large market are USA, Argentina,
Colombia, Peru, Bangladesh, Sri Lanka, Italy, Sweden, Germany, Iran and Egypt.
Bajaj leads Colombia with 65% of the scooter market, in Uruguay with 30% of
the motorcycle market and in Bangladesh with 95% of the three-wheeler
market.

Several new models are being developed specifically for global markets and
with these the company will progressively endeavor to establish its presence in
Europe too.

21. The Future:

Although the avalanche of motorcycles offered Indian consumers a wide
variety of models to choose from, it also resulted in increased pressure on the
companies to concentrate on cost-cuts, technology enhancements and up-
Pg # 28

gradations and styling. Their margins came under pressure as marketing costs
escalated.

The companies were forced to reduce prices and offer discounts to survive the
competition. Moreover, analysts were skeptical about the segment's ability to
maintain the growth rate in the years to come. One of the major assumptions
underlying the motorcycles rush was that if the market was considerably large
and was growing at a constant pace, there was room for a profitable existence
for all brands.

In 2001, there were over 30 motorcycle brands in the market. However, with
the top five brands accounting for more than 60% of the market, only 40% of
the market was available for all other new brands put together. Despite the
launch of more vehicles, the survival prospects of many of the individual
brands were deemed to be rather bleak.

Further, the growth in the motorcycle segment was dependant on continuing

favourable market conditions. Analysts claimed that to sustain this growth
rate, the segment would have to completely cannibalize the market for
scooters and a considerable part of the market for scooterettes and mopeds.

Considering the fast growing scooterettes segment, with high demand from
female customers, followed by the moderately growing moped segment and
the restructuring in the scooter segment with major national and foreign
players reinforcing their presence, it was unlikely that the entire growth in the
two-wheeler sector would be due to motorcycles.

Analysts also commented that as the two-wheeler industry had grown steadily
for eight years, stages in the product life cycle would apply to the field sooner,
rather than later and the decline stage would invariably come some day. There
was little differentiation between the brands being launched apart from styling
as most companies had introduced their four-stroke vehicles.

With the failure of the joint ventures, the expected introduction of cheaper
Chinese brands, stringent emission norms and threat from major international
players, the survival of indigenous brands looked uncertain. Constrained with
the ruling price levels in the market place, limited infrastructure and lack of
Pg#29

technological innovations when compared to their foreign counterparts,

whether the Indian companies would succeed in generating the kind of
volumes needed to sustain in the competitive motorcycle market, remains to
be seen.

22. Recommendations:
Focus on High Margin Products: Around 50% of the two-wheeler consumers
buy high quality products (products of executive and premium segment
motorcycles). Margins on these products are higher.

BAL should adopt a deliberate strategy of focusing on executive and premium

segment motorcycles and three-wheelers, and a couple of brands on lower-
end of motorcycles (To grab the market share) and scooters segment.

High margin products - Pulsar, Discover, Three-wheelers, Avenger.

Low margin products - Platina, Scooters, Mopeds.

Now with increasing competition in the economy segment and limited scope
from cost saving measures, it is believed this strategy of focusing on higher
margin products would enable the company in retaining its operating margins.

Below are other recommendations: -

 Company should keep focusing on the fast growing motorcycle segment.

 In view of the new threat posed by Honda Motors in the scooter
segment, the company needs to review its products line-up and launch
new products to cater the changed demand.
 The company needs to take a look at its ungeared scooters offerings and
need to adapt to the latest trends. ( compete with models like Honda
Activa)
 The company needs to tap the export market more efficiently as there is
a huge potential to make India as the world's two-wheelers production
base. For this, it needs to look for joint ventures abroad.
 It needs to target the young age group more effectively as this group is
extremely trend savvy. The advertising should have a fresh look and the
product should live up to the Gen-X's expectations.
Pg #30

Learning Acquired: Able to understand that how the concepts that I have
learnt from the book were used in the corporate world and how the
companies are flexible enough to change according to their business
requirements ( i.e. How the policies and the structures change).

23. References:
 www.bajajauto.com

 http://www.business-standard.com/india/news/bajaj-auto-revamps-
organisational-structure/

 http://www.karmayog.org/csr500companies/csr500companies_7373.ht
m

 www.wikipedia.org

 http://www.bma.ac.in/KnowledgeCentre/index1.html

 http://www.prdomain.com/companies/B/BajajAuto

 http://www.coolavenues.com/know/gm