A

PROJECT REPORT

ON

“COMPARITIVE FINANCIAL STUDY OF TOP THREE TWO

WHEELER COMPANIES”

FOR

HEROHONDA, BAJAJAUTO, TVSMOTOR.

SUBMITTED TO TILAK MAHARASHTRA UNIVERSITY

IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE

MASTER OF BUSINESS ADMINISTRATION

(MBA)

Submitted By:

IRFANHUSEN BHORANIA

(Batch 2008-10)

Guided By:

Prof.R.GANESHAN

1
MAHARASHTRA COSMOPOLITAN EDUCATION SOCIETY’S

PAI INTERNATIONAL CENTRE FOR MANAGEMENT

EXCELLENCE

CAMP PUNE-411001

CERTIFICATE

This is certify that BHORANIA IRFANHUSEN student of PAI international centre for
management excellence, Maharashtra Cosmopolitan Education society, Pune has completed his
field work report on the topic of COMPARATIVE FINANCIAL STUDY OF TOP THREE TWO WHEELER
COMPANIES and has submitted the field work report in partial fulfillment of MBA of the college for
the academic year 2008-2010.

He has worked under our guidance and direction. The said report is based on bonafide
information.

Project guide name Prof. R Ganesan

Designation Director

2
 PAI INTERNATIONAL CENTRE

FOR

MANAGEMENT EXCELLENCE

Maharashtra Cosmopolitan Education Society

DECLARATION

I hereby declare that the project titled “COMPARATIVE FINANCIAL STUDY OF TOP THREE TWO
WHEELER COMPANIES” is an original piece of research work carried out by me under the guidance
and supervision of Prof.R.GANESHAN. The information has been collected from genuine & authentic
sources. The work has been submitted in partial fulfilment of the requirement of MASTER OF
BUSINESS ADMINISTRATION (MBA).

Place: Signature:

Date: IRFAN HUSEN

BHORANIA

3
 ACKNOWLEDGEMENT

I am very grateful to my project-guide prof. Mr. R. Ganesan for encouraging me to take up

a project on COMPARATIVE FINANCIAL STUDIES OF TOP THREE TWO WHEELER
COMPANIES. It was a very enlightening project. It gave me a practical understanding about the
subject. The guidance that was provided from time to time helped me to keep track record of the
project in proper order

I am heartily thankful to Mr. Riesa for his kind and valuable support for providing me
detailed information regarding my project and to extend his cooperation. And also thankful to all
faculty members for their kind support.

My sincere thanks to somiya madam and all the other faculty members, (Internal
guide-PICME, PUNE) for guiding me throughout the, project.

Last but not the least; I would like to express my sincere gratitude to all the faculty
members who have taught me in my entire MBA curriculum and to our Director Prof. R. Ganesan
who has always been a source of guidance, inspiration and motivation.

Irfanhusen Bhorania

4
 EXECUTIVE SUMMARY

I had undertaken a project titled “comparative financial study of top three two wheeler companies”

This project work consists of the analytical and different financial study of two wheeler companies.

In my project, I have shown the comparative financial study of hero Honda motors limited, Bajaj
auto limited, TVs motors limited. This project highlights on the comparative financial study, for
which company is best for investment, which company‟s performance is good in a various business
activity.

The project studied with help of investors and government, because comparative study shows
historical performance and current financial condition of various companies.

In my project, I have use ratios, because ratio analysis is effective tool for comparative financial
study of various companies.

5
 CONTENTS

Sr no CHAPTERS PAGE
NO
1 Introduction 7

2 Companies profile 9

(i) hero Honda motors limited

(ii) Bajaj auto limited

(iii) TVs motors limited

3 Balansheets 17

4 Ratio analysis 18

5 Object 37

6 Important 39

7 Advantages &limitation 41

8 Conclusion 43

9 Bibliography 44

6
 INTRODUCTION

India is the second largest manufacturer and producer of two-wheelers in the world. It stands next
only to Japan and China in terms of the number of two-wheelers produced and domestic sales
respectively. This distinction was achieved due to variety of reasons like restrictive policy followed
by the Government of India towards the passenger car industry, rising demand for personal
transport, inefficiency in the public transportation system etc.

The Indian two-wheeler industry made a small beginning in the early 50s when Automobile
Products of India (API) started manufacturing scooters in the country. Until 1958, API and Enfield
were the sole producers.

In 1948, Bajaj Auto began trading in imported Vespa scooters and three-wheelers. Finally, in 1960,
it set up a shop to manufacture them in technical collaboration with Piaggio of Italy. The agreement
expired in 1971.

In the initial stages, the scooter segment was dominated by API; it was later overtaken by Bajaj
Auto. Although various government and private enterprises entered the fray for scooters, the only
new player that has lasted till today is LML.

Under the regulated regime, foreign companies were not allowed to operate in India. It was a
complete seller market with the waiting period for getting a scooter from Bajaj Auto being as high
as 12 years.

The motorcycles segment was no different, with only three manufacturers viz Enfield, Ideal Jawa
and Escorts. While Enfield bullet was a four-stroke bike, Jawa and the Rajdoot were two-stroke
bikes. The motorcycle segment was initially dominated by Enfield 350cc bikes and Escorts 175cc
bike.

The two-wheeler market was opened to foreign competition in the mid-80s. And the then market
leaders - Escorts and Enfield - were caught unaware by the onslaught of the 100cc bikes of the four
Indo-Japanese joint ventures. With the availability of fuel efficient low power bikes, demand
swelled, resulting in Hero Honda - then the only producer of four stroke bikes (100cc category),
gaining a top slot.

The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki and Hero Honda
brought in the first two-stroke and four-stroke engine motorcycles respectively. These two players
7
initially started with assembly of CKD kits, and later on progressed to indigenous manufacturing. In
the 90s the major growth for motorcycle segment was brought in by Japanese motorcycles, which
grew at a rate of nearly 25% CAGR in the last five years.

The industry had a smooth ride in the 50s, 60s and 70s when the Government prohibited new
entries and strictly controlled capacity expansion. The industry saw a sudden growth in the 80s. The
industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990.

8
THE TWO WHEELER IN INDIA:

The two-wheeler industry in India has grown rapidly in the country since the announcement of the
process of liberalization in 1991 by the then finance minister Dr. Manmohan Singh, now Prime
Minister of India.

Previously, there were only a handful of two-wheeler models available in the country. Currently,
India is the second largest producer of two-wheelers in the world. It stands next only to China and
Japan in terms of the number of two-wheelers produced and the sales of two-wheelers respectively.
In the year 2005-2006, the annual production of two-wheelers in India stood at around 7600801
units.

The trend of owning two-wheelers is due to a variety of facts peculiar to India. One of the chief
factors is poor public transport in many parts of India. Additionally, two-wheelers offer a great deal
of convenience and mobility for the Indian family.

Bajaj auto began trading in imported Vespa Scooters in 1948. Meanwhile Automobile Products of
India (API) commenced production of scooters in the country in the early 50‟s. Until 1958, API and
Enfield were the only producers of two-wheelers in India. However, Bajaj signed a technical
collaboration in 1960 with Piaggio of Italy to produce Bajaj Scooters. This deal expired in 1971.

The condition of motorcycle manufacturers was no different. Until the mid 80‟s, there were only
three major motorcycle manufacturers in India namely Rajdoot, Escorts, and Enfield. The two-
wheeler market was opened to foreign manufacturers in the mid 80‟s. The industry, which had seen
a smooth ride before, faced fierce foreign competition.

Motorcycle companies like the Yamaha, Honda, and Kawasaki, set up shop in India in collaboration
with various Indian two-wheeler companies. Companies like Escorts, Rajdoot and faced immense
competition from smaller 100 cc Japanese technology motorbikes. Bikes manufactured by Hero
Honda, the only company manufacturing four-stroke bikes at that time, gained massive popularity.

In the mid 80‟s, Kinetic introduced a variomatic gearless scooter in collaboration with Honda. This
scooter became instantly popular with the younger generation, especially people who found it
difficult to use geared scooters. The introduction of scooterettes created another segment for people
such as women and teenagers who could not get used to driving either motorcycles or gearless
scooters. Many companies such as Kinetc, TVS, and Hero also started manufacturing mopeds that
proved immensely popular with people who wanted a simple riding machine.

The change in the government‟s policy owning to pollution control norms and the Kyoto agreement
saw the phasing out of two stroke two-wheelers from production. Currently there are around 10
9
two-wheeler manufacturers in the country, they being Bajaj, Hero, Hero Honda, Honda, Indus,
Kinetic, Royal Enfield, Suzuki, TVS, and Yamaha.

The latest trend in the two-wheeler market is the introduction of electrically operated vehicles from
a range of manufacturers such as Indus and Hero. These can be recharged from convenient
household electrical points. The only disadvantage is speed, which is restricted to around 25 miles
per hour.

10
 COMPANIES PROFLE:

Hero Honda

Hero Honda Motors Ltd.

Type Public company BSE:HEROHONDA M

January 19, 1984 in Gurgaon, Haryana,

Founded
India

Headquarters New Delhi, India

Brijmohan Lal Munjal (chair and founder)

Toshiaki Nakagawa (joint managing

Key people
director)

Pawan Munjal (CEO)

Industry Automotive

Products Motorcycles, Scooters

Revenue U$ 2.8 billion

Website http://www.herohonda.com/

11
Hero Honda Motors Limited, based in Delhi, India, is the world's third largest manufacturer of
motorcycles after Honda and Yamaha. Hero Honda is a joint venture that began in 1984 between
the Hero Group of India and Honda of Japan. It has been the world's biggest manufacturer of 2-
wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year.

Hero Honda's Splendor is the world's largest selling motorcycle. Its 2 plants are in Dharuhera and
Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has also started production by April,
2008. It will have production facilities such as Lean Manufacturing concept, more flexible lines &
stream line material flow, within & proximity (planning to set vendors in nearby locations
constituting HHML Park) to achieve just-in-time manufacturing. It specializes in dual use
motorcycles that are low powered but very fuel efficient.

“Hero” is the brand name used by the Munjal brothers in the year 1956 with the flagship company
Hero Cycles. The joint venture between India's Hero Group and Honda Motor Company, they are
related to Jagdish Lal Munjal

During the 80s, Hero Honda became the first company in India to prove that it was possible to drive
a vehicle without polluting the roads. The company introduced new generation motorcycles that set
industry benchmarks for fuel thrift and low emission. A legendary 'Fill it - Shut it - Forget it'
campaign captured the imagination of commuters across India, and Hero Honda sold millions of
bikes purely on the commitment of increased mileage

Hero Honda has consistently grown at double digits since inception; and today, every second
motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero
Honda's top -selling motorcycle - Splendor.

Hero Honda bikes currently roll out from two globally benchmarked manufacturing facilities based
at Dharuhera and Gurgaon in Haryana. These plants together are capable of churning out 3.9
million bikes per year. A third state of the art manufacturing facility at Hardwar in Uttranchal will
soon be commissioned to cope with sustained customer demand.

Hero Honda's extensive sales and service network now spans over 3000 customer touch points.
These comprise a mix of dealerships, service and spare points, spare parts stockiest and authorized
representatives of dealers located across different geographies.

Hero Honda values its relationship with customers. Its unique CRM initiative - Hero Honda
Passport Program, one of the largest programs of this kind in the world, has over 3 million members

12
on its roster. The program has not only helped Hero Honda understand its customers and deliver
value at different price points, but has also created a loyal community of brand ambassadors.

History

Hero Honda is world‟s third largest two wheeler maker. India has the largest number of two
wheelers in the world with 41.6 million vehicles. India has a mix of 30 percent automobiles and 70
percent two wheelers in the country. India was the second largest two wheeler manufacturer in the
world starting in the 1950‟s with the birth of Automobile Products of India (API) that manufactured
scooters. API manufactured the Lambrettas but, another company, Bajaj Auto Ltd. surpassed API
and remained through the turn of the century from its association with Piaggio of Italy
(manufacturer of Vespa scooters).

The license raj that existed between the 1940s to 1980s in India did not allow foreign companies to
enter the market and imports were tightly controlled. This regulatory maze, before the economic
liberalization, made business easier for local players to have a seller‟s market. Customers in India
were forced to wait 12 years to buy a scooter from Bajaj. The CEO of Bajaj commented that he did
not need a marketing department, only a dispatch department. By the year 1990, Bajaj had a waiting
list that was twenty-six times its annual output for scooters.

The motorcycle segment had the same long wait times with three manufacturers: Royal Enfield,
Ideal Jawa, and Escorts. Royal Enfield made a 350cc Bullet with the only four-stroke engine at that
time and took the higher end of the market but there was little competition for their customers. Ideal
Jawa and Escorts took the middle and lower end of the market respectively.

In the mid-1980s, the Indian government regulations changed and permitted foreign companies to
enter the Indian market through minority joint ventures. The two-wheeler market changed with four
Indo-Japanese joint ventures: Hero Honda, TVS Suzuki, Bajaj Kawasaki and Kinetic Motor
Company (Kinetic Honda). The entry of these foreign companies changed the Indian market
dynamics from the supply side to the demand side. With a larger selection of two-wheelers on the
Indian market, consumers started to gain influence over the products they bought and raised higher
customer expectations. The industry produced more models, styling options, prices, and different
fuel efficiencies. The foreign companies new technologies helped make the products more reliable
and with better quality. Indian companies had to change to keep up with their global counterparts.

The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108.

13
 BOARD OF DIRECTORS

No. Name of the Directors Designation

1 Mr. Brijmohan Lall Munjal Chairman & Whole-time Director
2 Mr. Pawan Munjal Managing Director & CEO
3 Mr. Toshiaki Nakagawa Joint Managing Director
4 Mr. Sumihisa Fukuda Technical Director
5 Mr. Om Prakash Munjal Non-executive Director
6 Mr. Sunil Kant Munjal Non-executive Director
7 Mr. Masahiro Takedagawa Non-executive Director
8 Mr. Satoshi Matsuzawa Non-executive Director
(Alternate Director to Mr. Takashi
Nagai)
9 Mr. Pradeep Dinodia Non-executive & Independent Director
10 Gen. (Retd.) Ved Prakash Malik Non-executive & Independent Director
11 Mr. Analjit Singh Non-executive & Independent Director
12 Dr. Pritam Singh Non-executive & Independent Director
13 Ms. Shobhana Bhartia Non-executive & Independent Director
14 Mr. Sunil Bharti Mittal Non-executive & Independent Director
15. Mr. Meleveetil Damodaran Non-executive & Independent Director
16. Mr. Arun Nath Maira Non-executive & Independent Director

14
BAJAJ AUTO

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, with plants in Akurdi and
Chakan (near Pune),Waluj (near Aurangabad) and Pantnagar in Uttaranchal. Bajaj Auto makers and
exports motor scooters, motorcycles and the auto rickshaw.

The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1946

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

Bajaj Auto Ltd

Type Public

Founded 1945

Headquarters Pune, India

Rahul Bajaj (Chairman), Rajiv Bajaj

Key people
(Managing Director)

▲ Rs. 81.063 billion (2005) or USD 1.32

Revenue
billion

Net income ▲ Rs. 11.016 billion

Employees 10,250 (2006-07)

Website http://www.bajajauto.com/

15
Company's history

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.

According to the authors of Globality: Competing with Everyone from Everywhere for Everything
[3]
, Bajaj has grown operations in 50 countries by creating a line of value-for-money bikes targeted
to the different preferences of entry-level buyers with quality such that Kawasaki buys Bajaj
products for some of its market

16
 Board of Directors
No. Name of the Directors Designation

1. Rahul Bajaj Chairman

2. Madhur Bajaj Vice Chairman
3. Rajiv Bajaj Managing Director
4. Sanjiv Bajaj Executive Director
5. D S Mehta
6. Kantikumar R Podar
7. Shekhar Bajaj
8. D J Bajaj Rao
9. J N Godrej
10. S H Khan
11. Naresh Chandra
12. Ms Suman Kirloskar
13. Nanoo Pamnani
14. Manish Kejriwal
15. P Murari
16. Niraj Bajaj

17
 TVS MOTOR COMPANY
"Inspiration in Motion"

TVS Motor is the third largest two-wheeler manufacturer in India and ranks among
the top ten globally. It is the first company in the world to be honored with The Deming Prize for
Total Quality Management. The company was the first in India to launch 2-seater 50cc moped and
100cc Indo-Japanese motorcycles. At present TVS Apache, TVS Victor, TVS Scooty, TVS Centra
and TVS Fiero are the popular bikes in Indian market.

Quick Facts

Founder T V Sundaram Iyengar

Country India

Year of Establishment August 1980 (TVS Group in 1911)

Industry Manufacturing of two-wheelers and auto components

Business Group TVS Group

Listings & its codes NSE

TVS - Suzuki Ltd: TVSSUZUKI
TVS Motor Company Limited: TVSMOTOR
TVS Motor Company Limited: TVS-SUZUKI
BSE
TVS Motor Company Ltd.: 532343

Head Office TVS Motor Company

Jayalakshmi Estates V Floor
8, Haddows Road, Chennai - 600006
Tel.: +(91)-(44)-28272233
Fax: +(91)-(44)-28257121

Factory Post Box No. 4

Harita, Hosur - 635 109
Tel.: +(91)-(4344)-276780

18
 Fax: +(91)-(4344)-276878

Post Box No.1

Byathahalli Village, Kadakola Post
Mysore - 571 311
Tel.: +(91)-(821)-2596561
Fax: +(91)-(821)-2596550/ 2596553

Website http://www.tvsmotor.in/

Company Flashback

TVS Motor Company Limited is the flagship company of TVS Group, the USD 2.2 billion
group. The Group is the third largest two-wheeler manufacturer in India and globally among the
top ten, with an annual turnover of over USD 650 million.

Currently, the group has more than 30 companies and employs over 40,000 people worldwide.
With steady growth, expansion and diversification, it commands a strong presence in the
manufacturing of two-wheelers, auto components and computer peripherals. They also have
vibrant businesses in the distribution of heavy commercial vehicles (HCV) passenger cars,
finance and insurance.

1980 is the red letter year for TVS when India's first two-seater moped rolled out. It ushered in
an era of affordable personal transportation.

Globally, TVS Motor Company is the first two-wheeler manufacturer to be honoured with the
hallmark of Japanese Quality - The Deming Prize for Total Quality Management.

19
Board of Directors

No. Name of the Directors Designation

1. VENU SRINIVASAN Chairman & Managing

2. GOPAL SRINIVASAN Director

3. T. K. BALAJI Director

4. H. LAKSHMANAN Director

5. T. KANNAN Director

6. N. GANGA RAM Director

7. C. R. DUA Director

8. K. S. BAJPAI Director

9. T. R. PRASAD Director

20
 Comparison of Balance sheet

In Rs crores

Hero Honda Bajaj Auto TVS Motor

Mar '08 Mar '08 Mar '08
Sources Of Funds
Total Share Capital 39.94 144.68 23.75
Equity Share Capital 39.94 144.68 23.75
Share Application
0.00 0.00 0.00
Money
Preference Share Capital 0.00 0.00 0.00
Reserves 2,946.30 1,442.91 797.83
Revaluation Reserves 0.00 0.00 0.00
Net worth 2,986.24 1,587.59 821.58
Secured Loans 0.00 6.95 452.68
Unsecured Loans 132.00 1,327.39 213.66
Total Debt 132.00 1,334.34 666.34
Total Liabilities 3,118.24 2,921.93 1,487.92
Application Of Funds
Gross Block 1,938.78 2,994.68 1,790.97
Less: Accum.
782.52 1,726.07 774.49
Depreciation
Net Block 1,156.26 1,268.61 1,016.48
Capital Work in Progress 408.49 34.74 26.57
Investments 2,566.82 1,857.14 338.96
Inventories 317.10 349.61 405.38
Sundry Debtors 297.44 275.31 87.86
Cash and Bank Balance 130.58 54.74 3.44
Total Current Assets 745.12 679.66 496.68
Loans and Advances 196.37 1,099.68 342.87
Fixed Deposits 0.51 1.33 0.29
Total CA, Loans &
942.00 1,780.67 839.84
Advances
Deffered Credit 0.00 0.00 0.00
Current Liabilities 1,455.57 1,185.19 725.71
Provisions 499.76 834.04 60.99
Total CL & Provisions 1,955.33 2,019.23 786.70
Net Current Assets -1,013.33 -238.56 53.14
Miscellaneous Expenses 0.00 0.00 52.77
Total Assets 3,118.24 2,921.93 1,487.92

Contingent Liabilities 56.37 1,129.29 135.65

Book Value (Rs) 149.55 109.73 34.59

21
RATIO ANALYSIS

 PROFITABILITY RATIO

A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time. For
most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a
previous period is indicative that the company is doing well.

Some examples of profitability ratios are profit margin, return on assets and return on equity. It is
important to note that a little bit of background knowledge is necessary in order to make relevant
comparisons when analyzing these ratios.

For instances, some industries experience seasonality in their operations. The retail industry, for
example, typically experiences higher revenues and earnings for the Christmas season. Therefore, it
would not be too useful to compare a retailer's fourth-quarter profit margin with its first-quarter
profit margin. On the other hand, comparing a retailer's fourth-quarter profit margin with the profit
margin from the same period a year before would be far more informative.

22
 Operating margin

A ratio used to measure a company's pricing strategy and operating efficiency.

Operating margin is a measurement of what proportion of a company's revenue is left over after
paying for variable costs of production such as wages, raw materials, etc. A healthy operating
margin is required for a company to be able to pay for its fixed costs, such as interest on debt. It Is
Also known as "operating profit margin."

Calculated as:

Operating margin gives analysts an idea of how much a company makes (before interest and
taxes) on each dollar of sales. When looking at operating margin to determine the quality of a
company, it is best to look at the change in operating margin over time and to compare the
company's yearly or quarterly figures to those of its competitors. If a company's margin is
increasing, it is earning more per dollar of sales. For example, if a company has an operating margin
of 12%, this means that it makes $0.12 (before interest and taxes) for every dollar of sales. Often,
nonrecurring cash flows, such as cash paid out in a lawsuit settlement, are excluded from the
operating margin calculation because they don't represent a company's true operating performance.

RATIO AT 31 -MARCH
Sr Name of companies percentage

1. HERO HONDA MOTORS LIMITED 13.22

2. BAJAJ AUTO LIMITED 12.29

3. TVS MOTORS LIMITED 1.40

23
 COMPARISION OF RATIO
13.22
14 12.29

12

10

4
1.4
2

0
HERO HONDA BAJAJ AUTO TVS MOTORS

 EXPLAINATION
It shows that operating efficiency of hero Honda motors limited is better than Bajaj auto and TVS
motors. While operating efficiency of TVS motors limited is lower than hero Honda motors and
Bajaj auto limited. So rank of operating efficiency of two wheelers companies can be given as hero
Honda motors limited, Bajaj auto limited and TVS motors.

 GROSS PROFIT MARGIN

A financial metric used to assess a firm's financial health by revealing the proportion of money left
over from revenues after accounting for the cost of goods sold. Gross profit margin serves as
the source for paying additional expenses and future savings. It is also known as "gross margin".

Calculated as:

For example, suppose that ABC Corp. earned $20 million in revenue from producing widgets and
incurred $10 million in COGS-related expense. ABC's gross profit margin would be 50%. This
means that for every dollar that ABC earns on widgets, it really has only $0.50 at the end of the day.

This metric can be used to compare a company with its competitors. More efficient companies will
usually see higher profit margins.
24
 RATIO AT 31 -MARCH

Sr NAME OF COMPANIES PERCENTASE

1 HERO HONDA MOTORS LIMITED 11.67

2 BAJAJ AUTO LIMITED 10.32
3 TVS MOTORS LIMITED -1.53

14
COMPARISON OF RATIO
12 11.67
10.32
10

0
HERO HONDA BAJAJ AUTO TVS MOTORS
-2 -1.53

-4

 EXPLAINATION
This ratio shows financial position of company. Here financial position of hero
Honda motors limited is better than Bajaj auto and TVS motors. So hero Honda is first rank by its
financial position then Bajaj auto limited and TVs motors limited

 NET PROFIT MARGIN

For a business to survive in the long term it must generate profit. Therefore the net profit margin
ratio is one of the key performance indicators for your business.

The net profit margin ratio indicates profit levels of a business after all costs have been taken into

25
account. It is worth analysing the ratio over time. A variation in the ratio from year to year may be
due to abnormal conditions or expenses. Variations may also indicate cost blowouts which need to
be addressed.

A decline in the ratio over time may indicate a margin squeeze suggesting that productivity
improvements may need to be initiated. In some cases, the costs of such improvements may lead to
a further drop in the ratio or even losses before increased profitability is achieved.

The calculation used to obtain the ratio is:

Net Profit Margin = Net Profit x 100

Sales

Sr NAME OF COMPANIES PERCENTAGE

1 Hero Honda motors limited 9.27%

2 Bajaj auto limited 8.32%
3 TVs motors limited 0.96%

RATIO AT 31 -MARCH

9.27
comparison of ratio
10
8.32
9

2 0.96

0
hero honda bajaj auto tvs motors

26
 EXPLAINATION
This ratio is key performance indicators for business. Key performance means the
profit level of company; from above graph we can say that performance of hero Honda motors
limited is better than Bajaj auto limited and TVs motors limited. So profit level of hero Honda
motors limited is at first rank than comes Bajaj auto limited and TVs motors limited.

 RETURN ON NETWORTH

Return on Net worth (RONW) is used in finance as a measure of a company‟s profitability. It

reveals how much profit a company generates with the money that the equity shareholders have
invested. Therefore, it is also called „Return on Equity‟ (ROE)

 It is expressed as:-

Net Income
RONW = ------------------------------------------- X 100
Shareholder‟s Equity

The numerator is equal to a fiscal year‟s net income (after payment of preference share dividends
but before payment of equity share dividends).The denominator excludes preference shares and
considers only the equity shareholding. So, RONW measures how much return the company
management can generate for its equity shareholders.
RONW is a measure for judging the returns that a shareholder gets on his investment
As a shareholder, equity represents your money and so it makes good sense to know how well
management is doing with it.

27
 RATIO AT 31-MARCH

Sr NAME OF COMPANIES PERCENTAGE

1 HERO HONDA LIMITED 32.41

2 BAJAJ AUTO LIMITED 47.16

3 TVS MOTORS LIMITED 4.13

Comparison of ratio
47.16
50
45
40 32.41
35
30
25
20
15
10 4.13
5
0
HERO HONDA BAJAJ AUTO TVS MOTORS

 EXPLAINATION
This ratio is useful for comparing the profitability of a company to that of other firm in the same
industry. Here; profitability of Bajaj auto limited is more than hero Honda motors limited and
TVs motors limited. So we can say that Bajaj auto is at first rank by its profitability than comes
hero Honda motors limited and TVs motors limited

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Profitability ratio related to investments:-

 RETURN ON INVESTMENT:
As already observed, the profitability ratio can also be computed by relating the profit of
a firm to its investment. Such ratio is popularly termed as return on investment. There are three
different concept of investments vogue in financial literature: assets, capital employed and
shereholders‟equity.based on each of them, there are three broad cateragories of ROIs. There are
(I) return on assets (ii) return on capital employed (iii) return on share holders‟ equity.

RATIO AT 31-MARCH
Sr NAME OF COMPNIES PERCENTAGE

1 HERO HNDA MOTORS LIMITED 32.41

2 BAJAJ AUTO LIMITED 47.16
3 TVS MOTORS LIMITED 4.13

Comparison
47.16
of ratio
50
45
40
32.41
35
30
25
20
15
10 4.13

5
0
HERO HONDA BAJAJ AUTO TVS MOTORS

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 EXPLAINATION
This ratio shows return on investment. Here, Bajaj auto limited‟s this ratio high comparison
of hero Honda and TVs motors limited. And second number on hero Honda and third on TVs
motors limited

 DIVIDEND YIELD RATIO

A financial ratio that shows how much a company pays out in
dividends each year relative to its share price. In the absence of any capital gains, the dividend yield
is the return on investment for a stock. Dividend yield is calculated as follows:

To better explain the concept, refer to this dividend yield example: If two companies both pay
annual dividends of $1 per share, but ABC Company‟s stock is trading at $20 while XYZ
Company‟s stock is trading at $40, then ABC has a dividend yield of 5% while XYZ is only
yielding 2.5%. Thus, assuming all other factors are equivalent, an investor looking to supplement
his or her income would likely prefer ABC's stock over that of XYZ.

RATIO AT 31-MARCH

Sr NAME OF COMPANIES PERCENTAGE

1 HERO HONDA MOTORS LIMITED 45.86

2 BAJAJ AUTO LIMITED 44.78
3 TVS MOTORS LIMITED 61.25

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 COMPARISON OF RATIO
70 61.25

60
45.86 44.78
50

40

30

20

10

0
HERO HONDA BAJAJ AUTO TVS MOTORS

 EXPLAINATION
Dividend yield is a way to measure how much cash flow you are getting for each dollar
invested in an equity position here,tvs motors limited‟ this ratio high compare hero Honda and Bajaj
auto limited. Its means TVs motors limited‟s shareholder receive more dividend from his company,
compare hero Honda motors limited and Bajaj auto limiteds‟shareholders

 LEVERAGE RATIO

Any ratio used to calculate the financial leverage of a company to get an idea of the company's
methods of financing or to measure its ability to meet financial obligations. There are several
different ratios, but the main factors looked at include debt, equity, assets and interest expenses.

A ratio used to measure a company's mix of operating costs, giving an idea of how changes in
output will affect operating income. Fixed and variable costs are the two types of operating costs;
depending on the company and the industry, the mix will differ.

The most well known financial leverage ratio is the debt-to-equity ratio. For example, if a company
has $10M in debt and $20M in equity, it has a debt-to-equity ratio of 0.5 ($10M/$20M).

Companies with high fixed costs, after reaching the breakeven point, see a greater increase in
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operating revenue when output is increased compared to companies with high variable costs. The
reason for this is that the costs have already been incurred, so every sale after the breakeven
transfers to the operating income. On the other hand, a high variable cost company sees little
increase in operating income with additional output, because costs continue to be imputed into the
outputs. The degree of operating leverage is the ratio used to calculate this mix and its effects on
operating income

 DEBT-EQUITY RATIO

A measure of a company's financial leverage calculated by dividing its total

liabilities by stockholders' equity.

Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the
calculation. It is also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal
financial statements as well as companies'.

A high debt/equity ratio generally means that a company has been aggressive in financing its
growth with debt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could
potentially generate more earnings than it would have without this outside financing. If this were to
increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit
as more earnings are being spread among the same amount of shareholders. However, the cost of
this debt financing may outweigh the return that the company generates on the debt through
investment and business activities and become too much for the company to handle. This can lead
to bankruptcy, which would leave shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates. For example,
capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2,
while personal computer companies have a debt/equity of under 0

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 RATIO AT 31-MARCH
Sr Name of Companies percentage

1 Hero Honda motors limited 0.04

2 Bajaj auto limited 0.84

3 TVs motors limited 0.81

Comparison of ratio
0.84
0.9 0.81
0.8

0.7

0.6

0.5

0.4

0.3

0.2
0.04
0.1

0
hero honda bajaj auto tvs motors

33
 EXPLAINATION
This ratio indicates what proportion of equity and debt the company is using to
finance its assets. From above diagram we can say that Bajaj auto limited has a high debt equity
ratio means it is aggressive in financing its growth with debt. Than after TVs motors limited has a
low debt equity ratio as comparison with Bajaj auto limited. And hero Honda motors limited comes
at third rank in debt equity ratio.

 FIXED ASSETS TURNOVER RATIO

Measure of the productivity of a firm, it indicates the amount of sales generated by each dollar spent
on fixed assets, and the amount of fixed assets required to generate a specific level of revenue.
Changes in the ratio over time reflect whether or not the firm is becoming more efficient in the use
of its fixed assets. Formula: Sales revenue ÷ average fixed assets.

RATIO AT 31-MARCH
Sr NAME OF THE COMPANIES PERCENTAGE

1 HERO HONDA MOTORS LIMITED 5.89

2 BAJAJ AUTO LIMITED 2.95
3 TVS MOTORS LIMITED 1.80

5.89
COMPARISON OF RATIO
6

4
2.85
3
1.8
2

0
HERO HONDA BAJAJ AUTO TVS MOTORS

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 EXPLAINATION
This shows specific level of revenue by the amount of fixed assets. Hero Honda is a high level of
revenue in comparison with Bajaj auto limited and TVS motors limited. After hero Honda motors
limited, Bajaj auto limited has high level of revenue and then comes TVs motors limited at last.

 INTEREST COVERING RATIO

The interest cover ratio tells us the safety margin that the business has in terms of being able
to meet its interest obligations. That is, a high interest cover ratio means that the business is easily
able to meet its interest obligations from profits. Similarly, a low value for the interest cover ratio
means that the business is potentially in danger of not being able to meet its interest obligations.

Net profit before interest

Interest Cover =
Interest paid

RATIO AT 31-MARCH

Sr NAME OF COMPANIES PERCENTAGE

1 HERO HONDA MOTORS LIMITED 101.54

2 BAJAJ AUTO LIMITED 210.31
3 TVS MOTORS LIMITED 3.95

COMPARISON OF RATIO
250
210.31

200

150
101.54

100

50
3.95

0
HERO HONDA BAJAJ AUTO TVS MOTORS

35
 EXPLAINATION
A high interest cover ratio means that the business is easily able to meet its
interest obligations from profits. Here, Bajaj auto high interest cover ratio means that the Bajaj
auto‟s business is easily meet able to its interest obligations from profit

 LIQUIDITY RATIO

A class of financial metrics that is used to determine a company's ability to pay off its short-terms
debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the
company possesses to cover short-term debts.

Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio.
Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will
calculate only the sum of cash and equivalents divided by current liabilities because they feel
that they are the most liquid assets, and would be the most likely to be used to cover short-term
debts in an emergency.

A company's ability to turn short-term assets into cash to cover debts is of the utmost importance
when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use
the liquidity ratios to determine whether a company will be able to continue as a going concern.

 CURRENT RATIO

This ratio is a rough indication of a firm's ability to service its current obligations. Generally, the
higher the current ratio, the greater the "cushion" between current obligations and your Company's
ability to pay them. The composition and quality of current assets is a critical factor in the analysis
of your Company's liquidity.

It is calculated as Total current assets divided by total current liabilities.

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 RATIO AT 31-MARCH
Sr NAME OF COMPNIES PERCENTAGE

1 HERO HONDA MTORS LIMITED 0.48

2 BJAJ AUTO LIMITED 0.88
3 TVS MOTORS LIMITED 1.07

COMPARISON OF RATIO
1.2 1.07

1 0.88

0.8

0.6 0.48

0.4

0.2

0
HERO HONDA BAJAJ AUTO TVS MOTORS

 EXPLAINATION
Current ratio of TVs motors is high than hero Honda and Bajaj auto limited. Means TVs
motors has a high ability to pay for its liabilities, than secondly comes Bajaj auto and Herohonda
has a low ability to pay for liabilities in comparison with Bajaj auto limited and TVs motors.

 Inventory turnover ratio

Inventory turnover ratio is one of the accounting liquidity ratios, a financial ratio. This ratio
measures the number of time, on average; the inventory is sold during the period. It purposes is
measure the liquidity of the inventory. A popular variant of the inventory turnover ratio is
converting it into average days to sell the inventory in term of days. Remember that the inventory
turnover ratios figured as “turn times “and the average days to sell the inventory is in “days”.

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INVENTORY TURN OVER RATIO = COST OF GOODS SOLD
AVERAGE INVENTORY

 Average days to sell the inventory = 365 / Inventory Turnover Ratio.

RATIO AT 31-MARCH
Sr NAME OF COMPANIES PERCENTAGE

1 HERO HONDA MOTORS LIMITED 42.82

2 BAJAJ AUTO LIMITED 29.33
3 TVS MOTORS LIMITED 9.61

42.82 COMPARISON OF RATIO

45

40

35 29.33
30

25

20

15 9.61
10

0
HERO HONDA BAJAJ AUTO TVS MOTORS

 EXPLAINATION
. This ratio measures the number of time, on average; the inventory is sold
during the period. It purpose is measure the liquidity of the inventory.here,hero Honda motors
limited‟s this ratio high compare Bajaj auto limited and TVs motors limited.so,we can say that hero
Honda motors limited‟s liquidity of the inventory is high compare Bajaj auto limited and TVs
motors limited

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OBJECTIVE

39
OBJECTIVES

Analysis of financial statements is an attempt to assess the efficiency and performance of an

enterprise. For that there are some objectives which are described as under.

1. EARNING CAPACITY OR PROFITABILITY

The overall objective of a business is to earn a satisfactory return on the funds invested in it.
Financial analysis helps in ascertaining whether adequate profits are being earned on the capital
invested in the business or not. It also helps in knowing the capacity to pay the interest and
dividend.

2. COMPARATIVE POSITION IN RELATION TO OTHER FIRMS

The purpose of financial statements analysis is to help the management to make a comparative
study of the profitability of various firms engaged in similar business. Such comparision also helps
the management to study the position of their firm in respect of sales expenses, profitability and
using capital.etc.

3. EFFICIENCY OF MANAGEMENT
The purpose of financial statement analysis is to know that the financial policies adopted by the
management are efficient or not. Analysis also helps the management in preparing budgets by
forecasting next year‟s profit on the basis of past earnings. It also helps the management to find out
shortcomings of the business so that remedial measures can be taken to remove these shortcomings.

4. FINANCIAL STRENGTH
The purpose of financial analysis is to assess the financial potential of business. Analysis also helps
in taking decisions;
(a) Whether funds required for the purchase of new machinery and equipments are provided from
internal resources of business or not.
(b) How much funds have been raised from external source

5.SOLVECNY OF THE FIRM

The different tools of analysis tells us whether the firm has suffucient funds to meet its short-term
and long-term liabilities or not.

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IMPORTANCE

41
 IMPORTANCE

Ratio analysis is an important technique of financial analysis. It is a means for judging the financial
health of a business enterprise. It determines and interprets the liquidity,solvency,profitability,etc.
of a business enterprise.

 It becomes simple to understand various figures in the financial statements through the use of
different ratios. Financial ratios simplify, sumarise, and systemise the accounting figures presented
in financial statements.

 With the help of raito analysis, comparision of profitability and financial soundness can be made
between one industry and another. Similarly comparision of current year figures can also be made
with those of previous years with the help of ratio analysis and if some weak points are located,
remidial masures are taken to correct them.

 If accounting ratios are calculated for a number of years, they will reveal the trend of costs, sales,
profits and other important facts. Such trends are useful for planning.

 Financial ratios, based on a desired level of activities, can be set as standards for judging actual
performance of a business. For example, if owners of a business aim at earning profit @ 25% on the
capital which is the prevailing rate of return in the industry then this rate of 25% becomes the
standard. The rate of profit of each year is compared with this standard and the actual performance
of the business can be judged easily.

 Ratio analysis discloses the position of business with different viewpoint. It discloses the position of
business with liquidity viewpoint, solvency view point, profitability viewpoint, etc. with the help of
such a study, we can draw conclusion regardings the financial health of business enterprise.

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ADVANTAGES
&
LIMITATIONS

43
ADVANTAGES

Ratio analysis is an important and age-old technique of financial analysis. The following are some
of the advantages of ratio analysis:

1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios

tell the whole story of changes in the financial condition of the business.

2. Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight
the factors associated with successful and unsuccessful firm. They also reveal strong firms and
weak firms, overvalued and undervalued firms.

3. Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its
basic functions of forecasting. Planning, co-ordination, control and communications.

4. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the
performance of different divisions of the firm. The ratios are helpful in deciding about their
efficiency or otherwise in the past and likely performance in the future.

5. Help in investment decisions: It helps in investment decisions in the case of investors and
lending decisions in the case of bankers etc.

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LIMITATIONS

The ratios analysis is one of the most powerful tools of financial management. Though ratios are
simple to calculate and easy to understand, they suffer from serious limitations.

1. Limitations of financial statements: Ratios are based only on the information which has been
recorded in the financial statements. Financial statements themselves are subject to several
limitations. Thus ratios derived, there from, are also subject to those limitations. For example,
non-financial changes though important for the business are not relevant by the financial
statements. Financial statements are affected to a very great extent by accounting conventions
and concepts. Personal judgment plays a great part in determining the figures for financial
statements.
2. Comparative study required: Ratios are useful in judging the efficiency of the business only
when they are compared with past results of the business. However, such a comparison only
provide glimpse of the past performance and forecasts for future may not prove correct since
several other factors like market conditions, management policies, etc. may affect the future
operations.
3. Problems of price level changes: A change in price level can affect the validity of ratios
calculated for different time periods. In such a case the ratio analysis may not clearly indicate
the trend in solvency and profitability of the company. The financial statements, therefore, be
adjusted keeping in view the price level changes if a meaningful comparison is to be made
through accounting ratios.
4. Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no
well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders
interpretation of the ratios difficult.
5. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make
a better interpretation, a number of ratios have to be calculated which is likely to confuse the
analyst than help him in making any good decision.
6. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have
to interpret and different people may interpret the same ratio in different way.

7 Incomparable: Not only industries differ in their nature, but also the firms of the similar
business widely differ in their size and accounting procedures etc. It makes comparison of ratios
difficult and misleading

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CONCLUSION

From above discussion, it is clear that financial compararative study is very important for every
company, investors and govt. financial analysis plays very important role in every organisation

From the analysis it is found that Hero Honda motors Ltd.is good company as compare to Bajaj
Auto ltd. and TVS motors Ltd.Because its most of ratios are higher than Bajaj Auto ltd. And TVS
motors Ltd.and in addition to Hero Honda motors Ltd‟s sales, net profit and market capture is also
more compare to Bajaj Auto ltd. And TVS motors Ltd.

At the end of 2008, approximate comparisons between these companies are

Comparison between these companies

COMPANY MARKET CAP. Sales Turn Over Net Profit Total Assets
NAME (Rs. Cr.)
Hero Honda 17,681.33 10,331.80 967.88 3,118.24
Bajaj Auto 6,632.29 - - 2,921.93
TVS Motor 432.33 3,219.50 31.77 1,487.92

Hero Honda motors Ltd‟s profitability ratio and other most of financial ratios is higher than Bajaj
Auto ltd.& TVS motors ltd so, Hero Honda motors Ltd.is best two wheeler company in India.

46
BIBLIOGRAPHY

 Www .herohonda.com.

 Www. bajajauto.com.

 Www .tvsmotors.in.

 BASIC FANANCIAL MANAGEMENT(M.Y.KHAN, P.K.JAIN)

 FANANCIAL MANAGEMENT(PRASANA CHANDRA)

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