HH and Bajaj - Financial Analysis

Under The Guidance Of:
Prof. PAWAN JAIN
SUBMITTED BY:
ROCHIT RAJVANSHI 2009195 PAYEL LAHIRI 2009224

RANITREASA JOSEPH 2009209 RAJAN PUNATAR 2009232
RUCHIR SAURABH 2009216 PUNEET SINGHAL 2009231
SAHIL AGGARWAL 2009220 SHRUTI MOHTA 2009242
SAHIL CHOPRA 2009221 SMRITTI BANSAL 2009243
FINANCIAL ANALYSIS
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TABLE OF CONTENTS
1. INTRODUCTION 3
1.1. BAJAJ AUTO LIMITED..............................................................................................................................3
1.2. HERO HONDA MOTORS LIMITED.........................................................................................................3
2. INDUSTRY SWOT ANALYSIS.....................................................................................................................4
2.2. WEAKNESSES............................................................................................................................................4
2.3. OPPORTUNITIES........................................................................................................................................4
2.4. THREATS.....................................................................................................................................................4
3. SWOT ANALYSIS OF HERO HONDA........................................................................................................5
3.1 STRENGTHS.....................................................................................................................................................5
3.2 WEAKNESSES.................................................................................................................................................5
3.3 OPPORTUNITIES.............................................................................................................................................5
3.4 THREATS..........................................................................................................................................................5
4. SWOT ANALYSIS OF BAJAJ MOTOR........................................................................................................6
4.1. STRENGTHS...............................................................................................................................................6
4.2. WEAKNESSES............................................................................................................................................6
4.3. OPPORTUNITIES........................................................................................................................................6
4.4. THREATS.....................................................................................................................................................6
5. RATIO ANALYSIS.............................................................................................................................................7
5.1. RETURN ON ASSETS (ROA) ANALYSIS....................................................................................................7

5.2. RETURN ON INVESTED CAPITAL (ROIC) ANALYSIS............................................................................7
ACTIVITY/TURNOVER RATIOS.........................................................................................................................9
5.4. TOTAL ASSET TURNOVER RATIO (TATR) ANALYSIS:........................................................................9
5.5 INVESTED CAPITAL TURNOVER RATIO (ICTR) ANALYSIS:..............................................................10
5.6. AVERAGE COLLECTION PERIOD (ACP) ANALYSIS:...........................................................................11
5.7. INVENTORY TURNOVER RATIO (ITR) ANALYSIS:.............................................................................12
5.8. DAYS INVENTORY RATIO (DI) ANALYSIS............................................................................................13
5.9 AVG. CREDIT PERIOD RATIO (ACP) ANALYSIS:...................................................................................14
5.10. CURRENT RATIO (CR) ANALYSIS:........................................................................................................15
5.11. DEBT-EQUITY RATIO (DER) ANALYSIS:.............................................................................................16
5.12. DEBT TO TOTAL INVESTED CAPITAL RATIO (DTIC) ANALYSIS:.................................................17
5.13. INTEREST COVERAGE RATIO (ICR) ANALYSIS:................................................................................18
5.14. EARNINGS PER SHARE (EPS) ANALYSIS:............................................................................................19
5.15. DIVIDEND PAYOUT RATIO (DPR) ANALYSIS:...................................................................................20
5.16. NET PROFIT RATIO (NPR) ANALYSIS:..................................................................................................21
5.17. OPERATING PROFIT RATIO (OPR) ANALYSIS:...................................................................................22
5. FINDINGS..................................................................................................................................................... 23
HH & Bajaj/2009-11/IMT-N
FINANCIAL ANALYSIS
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6. CONCLUSION..............................................................................................................................................24
7. BIBLIOGRAPHY..........................................................................................................................................25
1. INTRODUCTION
1.1. BAJAJ AUTO LIMITED
 Bajaj Auto is a major Indian automobile manufacturer. It is India's largest and the
world's 4th largest two- and three-wheeler maker.
 It is based in Pune, Maharashtra. Bajaj Auto manufactures and exports motor
scooters, motorcycles and the auto rickshaw.
 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.
 Its real growth in numbers has come in the last four years after successful introduction
of a few models in the motorcycle segment.
 In 1959, it obtained license from the Government of India to manufacture two- and
three-wheelers and it went public in 1960.
 The demerger of Bajaj Auto Ltd into three separate corporate entities—Bajaj Finserv
Ltd (BFL), Bajaj Auto Ltd (BAL), and Bajaj Holdings and Investment Ltd (BHIL)—
was completed with the shares listing on May 26, 2008.
1.2. HERO HONDA MOTORS LIMITED
 Hero Honda Motors Limited, based in Delhi, India is a joint venture between
the Hero Group of India and Honda of Japan.
 It has been referred to as the world's biggest manufacturer of 2-wheeled motorized

vehicles.
 “Hero” is the brand name used by the Munjal brothers for their flagship company
Hero Cycles Ltd.
 The joint venture between the Hero Group and Honda Motor Company was
established in 1984 as the Hero Honda company.
 During the 1980s, the company introduced motorcycles that were popular in India
for their fuel economy and low cost.
FINANCIAL ANALYSIS
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 Hero Honda has three manufacturing facilities based at Dharuhera and Gurgaon in
Haryana and at Haridwar in Uttarakhand.
 The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors
ranked at 108.
2. INDUSTRY SWOT ANALYSIS
2.1. STRENGTHS
 Skilled low cost manpower in India is strength of the Two wheeler industry, which
would decrease the Manufacturing Cost.
 Decentralised Management provides better functioning of the companies.
 Has 76% in the overall automotive industry.
 Total in-house manufacturing and testing with the latest precision instruments.
 A Technocrat MD, in touch with new technology and fast adaptation of this to the
industry.
 Supplier to one of the largest Two-Wheeler manufacturers in the world has resulted in
exposure to good manufacturing & functional quality systems.
 The Machines of International standards provide better manufacturing capability.
 The industry has high Capital Reserves.
 Strong Lineage with last 29 years experience in the field of Ignition Coils.
2.2. WEAKNESSES
 Low thrust marketing provides lesser propagation of the products amongst the buyers.
 Over dependence on 2 key players, makes the industry performance highly related to
the performance of the two players.
 The Industry has low exports.
2.3. OPPORTUNITIES
 Price war in the market is putting pressure on O.E.Ms.in cutting costs, which provides
the following QCD advantages:
-High Quality Machinery
-Lean Organisation Structure
-Quality Systems in place, mean an ability to contribute to the success of our
customers.
 Technically driven management adds value to conventional processes and products.
 It has globally tuned organisations which makes it open for Foreign Collaborations.
FINANCIAL ANALYSIS
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2.4. THREATS
 The foreign players are a threat to the Indian two wheeler industry especially the
imported two wheelers like Harley- Davidson, Ducati.
 Slow growth in domestic auto sales, is threat in the generating sales increasing
sales revenue.
 Government policies which deal with production or sales constraints can be a
threat to the industry.
3. SWOT ANALYSIS OF HERO HONDA
3.1 STRENGTHS
 The company has an established brand name and a highly extensive dealer network.
 One of the major strengths of the company has been its strong after sales service.
 The company is one of the technology leaders in the market mainly attributed to
Honda Motors R&D.
 The maintenance cost of the vehicles is low and the resale value is high.
 Company’s name is synonymous with fuel-efficient motorcycles and boasts a range of
bikes which are economical on fuel.
 The company has an effective advertising capability.
3.2 WEAKNESSES
 Hero is vulnerable to the joint venture with Honda Motor Company because Honda
Motor Company holds the major stakes in the JV, hence they are more power.
 Brand name of Hero itself has no influence in the automobile industry.
 The company has to rely on the R&D of Honda Motors for advancement of
technology.
3.3 OPPORTUNITIES
 There is a great opportunity for expanding the target market. The female rider market
still remains largely untapped.
 The company can actually look forward to making global footprint. It is time the
company went for global expansion, so that they tap into the European two wheeler
markets as well the markets of other third world countries.
 The financial sector in India has really opened up in the last few years which has
spurred the sale of automobiles in India
 Relatively low rate of interest and the discount of prices offered by the dealers and
manufacturers lead to the increasing demand for two-wheeler vehicles.
FINANCIAL ANALYSIS
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3.4 THREATS
 The 25 years old Hero – Honda Motor Company JV is set to expire in 2014. This can
lead to the Joint Venture to go sour.
 Bajaj Motors has come up as a strong competitor.
 International brands like Harley-Davidson will be introduced soon in the Indian
market.
 There has been a sharp increase in the petrol prices throughout the world. The owning
cost of a vehicle has shot up as a result, which lead to sluggishness in the automobile
market
4. SWOT ANALYSIS OF BAJAJ MOTOR
4.1. STRENGTHS
 Bajaj Motors can boast of a highly experienced management. The company was one
of the first to enter the two wheeler automobile market in India.
 The company has a extensive focus on R&D. This has lead to many technological
breakthroughs in recent past, which has spured the sales of Bajaj two wheelers.
 Due to the advancement of technology, the company has introduced high performance
products across all categories.
 Bajaj has a widespread distribution market in India.
4.2. WEAKNESSES
 The company has struggled to come up with a product to match the success of Hero
Honda’s Splendor in Commuter segment.
 In spite of the huge volume of vehicles in the Indian market, Bajaj Motors have
struggled to make a global footprint.
 Bajaj is not a globally recognized brand as compared to its JV partner Kawasaki.
4.3. OPPORTUNITIES
 With the vastness of the Indian two wheeler market and the favarouble conditions,
there is an ample opportunity for the company to go for a double digit growth.
 There is still untapped market the company could consider to make a foray into, like
motorcycles above 180cc.
 The gearless trendy scooter market is growing at a fast rate. This provides a great
opportunity to the company to focus on the segment.
 There is a growing global demand for entry-level motorcycles especially in the
immerging market.
FINANCIAL ANALYSIS
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4.4. THREATS
 There is a major concern for the company as the competition catches up any new
innovation in no time.
 International brands like Harley-Davidson will be introduced soon in the Indian
market, which will to more competition which will eat into the market share of the
company.
 The increase in the cost of raw materials (aluminium and steel) and lowering of prices
from time to time because of the market forces is leading to decrease in profit margin.
5. RATIO ANALYSIS
5.1. RETURN ON ASSETS (ROA) ANALYSIS

 Useful for managers.
 Formula: Return on Assets = [(Profit after Tax) + Interest (1-T)]/ Total Assets
ROA 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.14 0.14 0.20 0.15
(A) RATIO ANALYSIS FOR BAJAJ
On the basis of the information available and ratio comparison, it can be concluded that till 2007-08
it was increasing as there was a significant decrease in the amount of investments but in 2008-09 it
was decreasing as there was a decrease in the profit.
HERO HONDA 0.28 0.22 0.20 0.22
(B) RATIO ANALYSIS FOR HERO HONDA
On the basis of the information available and ratio comparison, it can be concluded that ROA has
decreased as there was increase in total asset, especially fixed asset and investment while there was
not much change in profit.
COMPARISON BETWEEN BAJAJ AND HERO HONDA
For Hero Honda ROA is higher than Bajaj so it is getting a comparatively higher return on the total
assets acquired, also we can see that for Bajaj the profit has dipped down while Hero Honda has
maintained the level of profit
FINANCIAL ANALYSIS
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Return on Assets (ROA) Analysis

0.3
0.28
0.25
0.22 0.22
0.2 0.2
BAJAJ
0.15 0.14 0.15 HERO HONDA
0.14
0.1
0.05
0
2005-2006 2006-2007 2007-2008 2008-2009
5.2. RETURN ON INVESTED CAPITAL (ROIC) ANALYSIS

 Useful for shareholders and long term lenders
 Formula: Return on Invested Capital = [(Profit after Tax) + Interest (1-T)]/ [Long Term
Liabilities + Shareholder’s Fund]
ROIC 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.18 0.17 0.26 0.19
On the basis of the information available and ratio comparison, it can be concluded in year 2007-08
it decreases as there is a decrease in the reserves. In 2008-09 there is increase in ROIC as the amount
of reserves and unsecured loan increase.
HERO HONDA 0.44 0.33 0.31 0.33
On the basis of the information available and ratio comparison, it can be concluded that ROIC has
decreased as total liabilities (reserves) have increased while there was not much change in profit.
Again, the ROIC is higher for Hero Honda than Bajaj thus it is providing better returns to its
Shareholders and long term lenders as compared to Bajaj.
Return on Invested Capital

0.5
0.45 0.44
0.4
0.35
0.33 0.33 BAJAJ
0.3 0.31
0.25 0.26 HERO HONDA
0.2 0.19
0.18 0.17
0.15
0.1
0.05
0
2005-2006 2006-2007 2007-2008 2008-2009
FINANCIAL ANALYSIS
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5.3. RETURN ON NET WORTH (RONW) ANALYSIS

 Useful for Shareholders and managers
 Formula: Return on Net Worth = [(Profit after Preference Share Dividend]/Net Worth
RONW 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.23 0.22 0.48 0.35
On the basis of the information available and ratio comparison, it can be concluded in year 2007-
08 it increases as there is a decrease in the reserves. In 2008-09 there is decrease as the amount of
reserves and unsecured loan increase.
HERO HONDA 0.48 0.35 0.32 0.34
On the basis of the information available and ratio comparison, it can be concluded that RONW
has decreased as total liabilities (reserves) have increased while there was not much change in
profit.
COMPARISON BETWEEN BAJAJ AND Hero Honda
A contrasting situation here shows that Bajaj is providing higher returns to its shareholders as
compared to Hero Honda since 2007-2008.
Return on Net Worth

0.6
0.5
0.48 0.48
0.4
0.35 0.35 BAJAJ
0.34
0.32 HERO HONDA
0.3
0.23 0.22
0.2
0.1
0
2005-2006 2006-2007 2007-2008 2008-2009
ACTIVITY/TURNOVER RATIOS
5.4. TOTAL ASSET TURNOVER RATIO (TATR) ANALYSIS:

 Useful for managers
 Formula: Total Asset Turnover Ratio = [Sales Revenue (Net of Returns & Excise]/Total
Assets
TATR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.98 1.08 2.3 2.03
FINANCIAL ANALYSIS
10
it was increasing as there is a decent increase in the sales, but in 2008-09 it decreases there is slight
decrease in sales and increase in assets.
HERO HONDA 2.52 2.49 2.12 2.14
On the basis of the information available and ratio comparison, it can be concluded that there is a
slight decrease in TATR as total assets increased more than increase in sales.
If we see the trend we can see that Bajaj is improving on its TATR ratio that means the managers
are effectively utilizing the total assets while for Hero Honda it is decreasing so it could be a
problem here. It could be due to the fact that Bajaj has increased their sales quite efficiently as
compared to Hero Honda.
Total Asset Turnover Ratio

3
2.5 2.52 2.49

2.3
2.12 2.14
2 2.03
BAJAJ
1.5 HERO HONDA
1 0.98 1.08
0.5
0
2005-2006 2006-2007 2007-2008 2008-2009
5.5 INVESTED CAPITAL TURNOVER RATIO (ICTR) ANALYSIS:

 Useful for long term lenders
 Formula: Invested Capital Turnover Ratio = [Sales Revenue (net of returns & Excise)] /(Long
Term Liabilities + Shareholder’s Funds)
ICTR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 1.21 1.32 3.02 2.53
On the basis of the information available and ratio comparison, it can be concluded in year 2007-08
it decreases as there is a decrease in the reserves. In 2008-09 there is increase as the amount of
reserves and unsecured loan increase
HERO 3.18
HONDA 3.97 3.76 3.32
On the basis of the information available and ratio comparison, it can be concluded that ICTR has
decreased slightly as total liability (reserve) has increased.
FINANCIAL ANALYSIS
11

Again we can see that Bajaj is improving on its ICTR ratio that means the managers are effectively
utilizing the funds of its lenders while for Hero Honda it is decreasing so it could be a problem here.
It could be due to the fact that Bajaj has increased their sales quite efficiently as compared to Hero
Honda.
Invested Capital Turnover Ratio

4.5
4 3.97
3.76
3.5
3.32 3.18
3 3.02
BAJAJ
2.5 2.53
HERO HONDA
2
1.5
1.21 1.32
1
0.5
0
2005-2006 2006-2007 2007-2008 2008-2009
5.6. AVERAGE COLLECTION PERIOD (ACP) ANALYSIS:

 Useful for managers and short term lenders
 Formula: average collection period = [debtors*365]/sales
ACP 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 12.72 18 10.19 14.06
On the basis of the information available and ratio comparison, it can be concluded that in 2008-09
it increased as the increase in debtors had a higher effect than the increase in sales.
HERO 4.04
HONDA 5.74 10.59 9.01
On the basis of the information available and ratio comparison, it can be concluded that ACP
increase highly in 2007 than decrease in 2009 because debtor increase in 2007 but then decreased till
2009.
As we can see, the Average collection period for Hero Honda is quite low as compared to Bajaj thus
they are able to recover their debts quite quickly than Bajaj.
FINANCIAL ANALYSIS
12
Average Collection Period

20
18 18
16
14 14.06
12.72 BAJAJ
12
10 10.59 10.19 HERO HONDA
9.01
8
6 5.74
4 4.04
2
0
2005-2006 2006-2007 2007-2008 2008-2009
5.7. INVENTORY TURNOVER RATIO (ITR) ANALYSIS:

 Formula: inventory turnover ratio = cost of goods sold/inventory
ITR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 21.68 24 20.88 20.55
On the basis of the information available and ratio comparison, it can be concluded that it did not
show a significant change thus implies the company was able to maintain the level of inventory.
HERO 29.66
HONDA 29.85 28.83 25.84
On the basis of the information available and ratio comparison, it can be concluded that till 2007 it
was decreasing but in 2008 it was increasing.
<Compare the ratios from 2005 to 2008 of HH>
Again a contrasting situation where Bajaj is able to convert their inventory quicker than Hero
Honda.
FINANCIAL ANALYSIS
13
Inventory Turnover Ratio

35
30 29.85 29.66
28.83
25 25.84
24
21.68 20.88 BAJAJ
20 20.55
HERO HONDA
15
10
0
2005-2006 2006-2007 2007-2008 2008-2009
5.8. DAYS INVENTORY RATIO (DI) ANALYSIS

 Formula: Days Inventory Ratio = [365]/Inventory Turnover Ratio
DI 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 16.84 15.21 17.48 17.76
was decreasing but from 2007 it was increasing.
HERO 12.31
HONDA 12.23 12.66 14.12
was increasing but in 2008 it was decreasing.
<Compare the ratios from 2005 to 2008 of HH>
We can clearly see that Bajaj prefers keeping higher stock of inventory in advance as compared to
Hero Honda.
FINANCIAL ANALYSIS
14
Day's Inventory
20
18 17.48 17.76
16.84
16
15.21
14 14.12
12.66 12.31 BAJAJ
12 12.23
HERO HONDA
10
8
6
4
2
0
2005-2006 2006-2007 2007-2008 2008-2009
5.9 AVG. CREDIT PERIOD RATIO (ACP) ANALYSIS:

 Useful for managers
 Formula: avg. Credit period ratio = [creditors*365]/net purchases
ACP 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 95.1 88.16 63.99 77.37
it was decreasing as the amount of creditor decreased and similarly, it increased in 2008-09 as the
amount of creditors increased.
HERO 63.17
HONDA 70.89 58.93 71.17
On the basis of the information available and ratio comparison, it can be concluded that ACP has
increased in 2008 as creditor increased while it decreased in 2009 as purchases have increased.
As we can see the trend Hero Honda pays off its creditors much more quickly than Bajaj.
FINANCIAL ANALYSIS
15
Average Credit Period

100
95.1
90 88.16
80 77.37
70 70.89 71.17
63.99 63.17 BAJAJ
60 58.93
HERO HONDA
50
40
30
20
10
0
2005-2006 2006-2007 2007-2008 2008-2009
LIQUIDITY RATIOS
5.10. CURRENT RATIO (CR) ANALYSIS:

 Formula: current ratio = [current assets]/current liabilities
CR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.79 0.85 0.88 0.92
On the basis of the information available and ratio comparison, it can be concluded that it is
consistently increasing as there is a proportional change in current assets and current liabilities.
HERO 0.49
HONDA 0.49 0.57 0.48
On the basis of the information available and ratio comparison, it can be concluded that there is a
slight increase in 2007 due to increase in current asset and decrease in current liabilities while CR
decreased in 2008 due to higher increase in current liabilities.
Bajaj has a higher current ratio as compared to Hero Honda which implies that Bajaj has a higher
margin of safety than Hero Honda in case of uneven flow of funds.
FINANCIAL ANALYSIS
16
Current Ratio
1
0.9 0.92
0.85 0.88
0.8 0.79
0.7
BAJAJ
0.6 0.57 HERO HONDA
0.5 0.49 0.48 0.49
0.4
0.3
0.2
0.1
0
2005-2006 2006-2007 2007-2008 2008-2009
SOLVENCY RATIOS:
5.11. DEBT-EQUITY RATIO (DER) ANALYSIS:

 Useful for lenders, shareholders
 Formula: debt-equity ratio = [long term liability]/shareholders fund
DER 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.31 0.29 0.84 0.84
On the basis of the information available and ratio comparison, it can be concluded that it increased
in the year 2007-08 due to decrease in shareholder’s funds (reserves).
HERO 0.02
HONDA 0.09 0.07 0.04
On the basis of the information available and ratio comparison, it can be concluded that there is
continuous decrease in DER as unsecured are decreasing and reserves are increasing continuously.
The DER for Hero Honda is significantly low as compared to Bajaj which shows that they are not
much dependent on the outside debts and rely more on the owner’s funds while for Bajaj its totally
inverse as they depend highly on the outside debt.
FINANCIAL ANALYSIS
17
Debt Equity ratio

0.9
0.84 0.84
0.8
0.7
0.6 BAJAJ
0.5 HERO HONDA
0.4
0.3 0.31 0.29
0.2
0.1 0.09 0.07 0.04 0.02
0
2005-2006 2006-2007 2007-2008 2008-2009
5.12. DEBT TO TOTAL INVESTED CAPITAL RATIO (DTIC) ANALYSIS:

 Useful for lenders and shareholders
 Formula: debt to total invested capital ratio = [long term liability]/(long term
liability+ shareholders fund)
DTIC 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.24 0.23 0.46 0.46
On the basis of the information available and ratio comparison, it can be concluded that it increased
in the year 2007-08 due to decrease in shareholder’s funds (reserves).
HERO 0.08 0.06 0.04 0.02
HONDA
On the basis of the information available and ratio comparison, it can be concluded that there is
continuous decrease in DTIC as unsecured are decreasing and reserves are increasing continuously
We can see that Bajaj has a higher proportion of debt in total long term funds available as
compared to Hero Honda.
FINANCIAL ANALYSIS
18
Debt to Total Invested capital

0.5
0.45 0.46 0.46
0.4
0.35
0.3 BAJAJ
0.25 0.24 HERO HONDA
0.23
0.2
0.15
0.1
0.08
0.05 0.06
0.04
0.02
0
2005-2006 2006-2007 2007-2008 2008-2009
5.13. INTEREST COVERAGE RATIO (ICR) ANALYSIS:

 Useful for lenders and managers
 Formula: interest coverage ratio = [earnings before interest and tax ]/total interest charges
ICR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 5113.94 355.25 243.31 51.79
On the basis of the information available and ratio comparison, it can be concluded
that it was decreasing consistently due to decrease in the earnings and simultaneous
increase in the interest charges.
HERO 99 101.72 117.6 151.47
HONDA
On the basis of the information available and ratio comparison, it can be concluded
that ICR has increased continuously due to increasing EBIT and decreasing interest.
The ICR has come down drastically for Bajaj as the interest rates have risen
significantly while profits dipped but Hero Honda is able to constantly increase their
ICS. As a result Hero Honda is better secured as compared to Bajaj when it comes to
payment of interest charges.
FINANCIAL ANALYSIS
19
Interest Coverage Ratio
6000
5000
4000
BAJAJ
3000 HERO HONDA
2000
1000
0
2005-2006 2006-2007 2007-2008 2008-2009
CAPITAL MARKET RATIOS
5.14. EARNINGS PER SHARE (EPS) ANALYSIS:

 Useful for shareholders
 Formula: Earnings Per Share = [PAT-Preference Share Dividend]/No. of Equity share o/s
EPS 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 108.87 122.35 52.25 45.37
On the basis of the information available and ratio comparison, it can be concluded that till 2006-
07 it was increasing but from 2007-08 it started decreasing as there was a decrease in the net profit
and increase in share capital.
HERO 48.64 42.96 48.47 64.19
HONDA
On the basis of the information available and ratio comparison, it can be concluded that EPS
decreased in 2007 as PAT decreased while it increased highly in 2009 due to high PAT
Bajaj was providing comparatively higher EPS till 2006-2007 but after that it went down quickly
as the Share capital was increased while profits dipped down. On the other hand Hero Honda is
providing decent EPS as a trend.
FINANCIAL ANALYSIS
20
Earnings Per Share

140
120 122.35
108.87
100
BAJAJ
80
HERO HONDA
60 64.19
48.64 52.25
48.47
42.96 45.37
40
20
0
2005-2006 2006-2007 2007-2008 2008-2009
5.15. DIVIDEND PAYOUT RATIO (DPR) ANALYSIS:

 Useful For Shareholders
 Formula: Dividend Payout Ratio = [Dividend]/Profit After Tax
DPR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 0.37 0.33 0.38 0.48
On the basis of the information available and ratio comparison, it can be concluded that it showed an
increase in 2008-09 as the PAT decreased and dividend increased.
HERO 0.41 0.40 0.39 0.31
HONDA
On the basis of the information available and ratio comparison, it can be concluded that DPR is
decreasing continuously due to increasing PAT and almost constant dividend.
Both the firms have been providing almost compatible dividend to the shareholders except in 2008-
2009 where Bajaj overtook Hero Honda by a significant amount. Thus they paid off their
shareholders better off than Hero Honda.
FINANCIAL ANALYSIS
21
Dividend Payout Ratio

0.6
0.5
0.48
0.4 0.41 0.4 0.39

0.37 0.38 BAJAJ
0.33
0.3 0.31 HERO HONDA
0.2
0.1
0
2005-2006 2006-2007 2007-2008 2008-2009
PROFITABILITY RATIOS:
5.16. NET PROFIT RATIO (NPR) ANALYSIS:

 Useful For All The Parties Involved
 Formula: Net Profit Ratio = [Net Profit *100]/Sales Net Of Returns & Excise
NPR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 14.55 8.56 7.55
13.14
On the basis of the information available and ratio comparison, it can be concluded that it was
decreasing consistently as the profit was decreasing and the sales was increasing.
HERO 11.14 8.66 9.36 10.40
HONDA
On the basis of the information available and ratio comparison, it can be concluded that NPR
decreased in 2007 due to decrease in profits while after that it has increased till 2009 due to higher
increase in profit as profit has a higher impact on NPR than sales.
While the NPR has decreased for Bajaj, it has increased for Hero Honda over the years. Thus if we
compare the profitability Hero Honda is performing really well as compared to Bajaj.
FINANCIAL ANALYSIS
22
Gross Profit Ratio

25
22.43
21.86 21.1 20.78
20 19.79 19.96
17.29
BAJAJ
15
HERO HONDA
10
0
2005-2006 2006-2007 2007-2008 2008-2009
5.17. OPERATING PROFIT RATIO (OPR) ANALYSIS:

 Useful for all the parties involved
 Formula: Operating Profit Ratio = [Operating Profit *100]/Sales Net of Returns & excise
OPR 2005-2006 2006-2007 2007-2008 2008-2009

BAJAJ 16.9 14.12 12.29 12.56
On the basis of the information available and ratio comparison, it can be concluded that it was
decreasing consistently as the profit was decreasing and the sales was increasing.
HERO 15.85 12.13 13.22 13.20
HONDA
On the basis of the information available and ratio comparison, it can be concluded that OPR
decreased in 2007 while it increased slightly in the later years as profit has increased.

As against the NPR, we can see that there is not much difference between the two firms as far
as OPR is concerned.
FINANCIAL ANALYSIS
23
Operating Profit Ratio

18
16.9
16 15.85
14 14.12
13.22
12 12.13 12.29 12.56
BAJAJ
10 HERO HONDA
8
6
4
2
0
2005-2006 2006-2007 2007-2008 2008-2009
5. FINDINGS
 Turnover: Hero Honda (FY2008-09)- Rs.12048 cr and Bajaj Auto Ltd(FY2008-09)- Rs.9310
cr. Thus we can note that the turnover of Hero Honda is 30% more than Bajaj Auto Ltd for
FY2008-09. This implies that Hero Honda has a substantial high market share.
 Profit: The profit made by Hero Honda in FY 2008-09 at Rs. 967.88 cr is considerably more
than that made by Bajaj Auto which is at Rs. 656.48 cr. Thus we can note that the profit for
Hero Honda is 47% more than Bajaj Auto Ltd. This implies that the operations at Hero Honda
are more profitable.
 PE ratio: As on 9-09-2009 the PE ratio for Hero Honda was Rs.26 and for Bajaj Auto was
Rs.27.87. Therefore it can be concluded that at present Bajaj Auto is more profitable for the
short term investors.
 Cash flow from operations: In the FY 2008-09, the net cash from operating activity for
Bajaj Auto has been Rs.411.49 cr, where as net cash from operating activity for Hero Honda
has been Rs.1211.78 cr.
 Investments and fixed assets: There has been a consistent increase in this for both the
companies which shows the growth of the overall market and the efforts been taken by Hero
Honda and Bajaj Auto to increase their capacities and research and development capabilities
and also improving their existing manufacturing facilities to compete in this high competitive
segment.
FINANCIAL ANALYSIS
24
6. CONCLUSION
From the financial analysis and the other findings for both the companies we can deduce the
following conclusions:
6.1 FOR SHAREHOLDERS:
From all the analysis done and various ratios calculated such as Return on capital,
Debt-equity ratio, EPS, Net profit ratio etc. we can see that both the companies are
doing fairly good however the shareholders for Hero Honda are in a much better
position than those of Bajaj Auto Ltd.
6.2 FOR LONG TERM LENDERS
From all the analysis done and various ratios calculated such as Return on invested
capital, Invested capital turnover ratio, Interest coverage ratio, Net profit ratio etc. we
can see that though Bajaj is able to provide better utilization of lender’s funds in terms
of sales still they are not able to provide higher and secure interest payments to the
lenders as compared to Hero Honda.
6.3 FOR SHORT TERM LENDERS
From all the analysis done and various ratios calculated such as Average collection
period, Inventory turnover ratio, current ratio, Net profit ratio etc. we can infer that
while Bajaj has high current ratio thus the funds of the creditors are more secure
however the average collection period is low than Hero Honda which means, they are
not able to recover their debts as quickly as Hero Honda.
6.4 FOR MANAGERS
From all the analysis done and various ratios calculated such as Return on net worth,
Total assets turnover ratio we can see that the managers of Bajaj are able to provide
better return/sales on the net worth/assets as compared to Hero Honda. Also the
Inventory turnover ratio and current ratio is better than Hero Honda, thus they prefer
maintaining comparatively higher liquidity. However if we compare the Return on
Assets, Average collection period and Net profit ratio we can see that the managers of
Hero Honda are able to generate higher profits and at the same time able to collect
their debts quickly as compared to Bajaj.
FINANCIAL ANALYSIS
25
7. BIBLIOGRAPHY
1. Annual Report Bajaj Auto Ltd,(2004-05,2005-06,2006-07,2007-08,2008-09)

2. Annual Report Hero Honda Ltd,(2004-05,2005-06,2006-07,2007-08,2008-09)
3. Ramchandran, Neelakantan and Kakani, Ram Kumar, Financial Accounting for Management,
2008.
4. Shah, B.S., Accountancy Principle, 2005.
5. Websites and webpages:
 www.herohonda.com/invest_annual_reports.htm
 www.bajajauto.com/investor_annual.asp
 www.moneycontrol.com/
 www.siamindia.com/

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Under The Guidance Of:

Prof. PAWAN JAIN

ROCHIT RAJVANSHI 2009195 PAYEL LAHIRI 2009224

2. INDUSTRY SWOT ANALYSIS.....................................................................................................................4

3. SWOT ANALYSIS OF HERO HONDA........................................................................................................5

4. SWOT ANALYSIS OF BAJAJ MOTOR........................................................................................................6

5.1. RETURN ON ASSETS (ROA) ANALYSIS....................................................................................................7

1.1. BAJAJ AUTO LIMITED

1.2. HERO HONDA MOTORS LIMITED

 It has been referred to as the world's biggest manufacturer of 2-wheeled motorized

2. INDUSTRY SWOT ANALYSIS

3. SWOT ANALYSIS OF HERO HONDA

4. SWOT ANALYSIS OF BAJAJ MOTOR

5.1. RETURN ON ASSETS (ROA) ANALYSIS

ROA 2005-2006 2006-2007 2007-2008 2008-2009

Return on Assets (ROA) Analysis

5.2. RETURN ON INVESTED CAPITAL (ROIC) ANALYSIS

ROIC 2005-2006 2006-2007 2007-2008 2008-2009

Return on Invested Capital

5.3. RETURN ON NET WORTH (RONW) ANALYSIS

RONW 2005-2006 2006-2007 2007-2008 2008-2009

Return on Net Worth

5.4. TOTAL ASSET TURNOVER RATIO (TATR) ANALYSIS:

TATR 2005-2006 2006-2007 2007-2008 2008-2009

Total Asset Turnover Ratio

2.5 2.52 2.49

5.5 INVESTED CAPITAL TURNOVER RATIO (ICTR) ANALYSIS:

ICTR 2005-2006 2006-2007 2007-2008 2008-2009

COMPARISON BETWEEN BAJAJ AND Hero Honda

Invested Capital Turnover Ratio

5.6. AVERAGE COLLECTION PERIOD (ACP) ANALYSIS:

ACP 2005-2006 2006-2007 2007-2008 2008-2009

Average Collection Period

5.7. INVENTORY TURNOVER RATIO (ITR) ANALYSIS:

ITR 2005-2006 2006-2007 2007-2008 2008-2009

Inventory Turnover Ratio

5.8. DAYS INVENTORY RATIO (DI) ANALYSIS

DI 2005-2006 2006-2007 2007-2008 2008-2009

5.9 AVG. CREDIT PERIOD RATIO (ACP) ANALYSIS:

ACP 2005-2006 2006-2007 2007-2008 2008-2009

Average Credit Period

5.10. CURRENT RATIO (CR) ANALYSIS:

CR 2005-2006 2006-2007 2007-2008 2008-2009

5.11. DEBT-EQUITY RATIO (DER) ANALYSIS:

DER 2005-2006 2006-2007 2007-2008 2008-2009

Debt Equity ratio

5.12. DEBT TO TOTAL INVESTED CAPITAL RATIO (DTIC) ANALYSIS:

DTIC 2005-2006 2006-2007 2007-2008 2008-2009

Debt to Total Invested capital

5.13. INTEREST COVERAGE RATIO (ICR) ANALYSIS:

ICR 2005-2006 2006-2007 2007-2008 2008-2009

Interest Coverage Ratio

CAPITAL MARKET RATIOS

5.14. EARNINGS PER SHARE (EPS) ANALYSIS:

EPS 2005-2006 2006-2007 2007-2008 2008-2009

Earnings Per Share

5.15. DIVIDEND PAYOUT RATIO (DPR) ANALYSIS:

DPR 2005-2006 2006-2007 2007-2008 2008-2009

Dividend Payout Ratio

0.4 0.41 0.4 0.39

5.16. NET PROFIT RATIO (NPR) ANALYSIS:

NPR 2005-2006 2006-2007 2007-2008 2008-2009

Gross Profit Ratio