'Bajaj Case Study\r'

' m maventary watchfulness at Bajaj gondola Bajaj gondola Limited is single of Indias largest two- bicycler constructrs. As the dominating player until the archean 1990s, Bajajs merchandise place share declined from 49. 3% in 1994, to 38. 9% in 1999 with the entry of major(ip)(ip) competitors like admirer Honda. Bajaj has initiated several measures to convalesce its market share and strengthen its competitive position. The case discusses the fiscal dodge pursued by Bajaj. financial counselling at Bajaj elevator car We want to get merelyt the attractionship position in the two-wheeler surgical incision and willing use the cash if required to do so.However, in current volatile market conditions (not to forget the Nipponese and their huge cash militia), we would sooner have the shelter of cash any day. We are competing not besides with Indian companies, but also with large extraneous two-wheeler companies, many of whom have much deeper pockets than ours. While our excess cash will assist us in future ontogeny, it also acts as a incumbrance to others from indulging in predatory pricing simu previous(a)d military operation †Sanjiv Bajaj, Vice-President Finance, Bajaj auto Limited. 1 IntroductionIn 2003, Bajaj cable car Limited (Bajaj) was one of India’s largest manufacturers of both two and triad-wheelers. The three-wheelers, also know as autorickshaws, were unique to the South Asian region. The high society recorded revenue of Rs. 5cxxv. 73 crores representing a 13% accession everyplace the previous year 2. one time the unchallenged market attracter, Bajaj trailed wizard Honda in the previous(a) 1990s. Bajaj’s market share declined from 49. 3% in 1994, to 38. 9% in 1999. 3 There later(a)r, Bajaj had initiated several measures to re gain ground its market share and strengthened its competitive position.In 2003, Bajaj had a campaignforce of 12,000 employees and a network of 422 dealers and over 1,300 authoriz ed service c tucks. 4 The Indian Two-Wheeler Industry Two-wheelers had expire the standard mode of transportation in many of India’s large urban centers. Use of two-wheelers in the rural areas had also change magnitude significantly in the 1990s. The birth of the Indian two-wheeler industry could be traced to the primal 1950s, when gondolamobile Products of India (API) started manufacturing sea scooters in the country.While API initially dominated the scooter market with its Lambrettas, it was Bajaj which rapidly emerged as the unchallenged leader in the scooter industry. A number of presidency and private enterp matures who entered the scooter section, had disappeared from the market by the charm of the century. The License Raj that existed prior to economic liberalization (1940s-1980s) in India, did not allow unknown players to enter the market, making it an ideal breeding ground for local players. still the Raj also hurt the growth of the industry by imposing var ious restrictions.In the mid-80s, the presidential term started permitting foreign companies to enter the Indian market, through minority spliff ventures. During this graspment, the twowheeler market witnessed a boom with Japanese players like Honda, Suzuki, Yamaha and Kawasaki, submission the market through joystick ventures. 1 2 3 4 M. Anand, ? Is Munjal Being to a fault overgenerous?? strainworld, 19th whitethorn 2003. B1 base: courage Database. Gita Piramal, Sumantra Goshal and Sudeep Budhiraja, ? interlingual rendition of Bajaj railroad car Ltd,? Lessons in Excellence Case Contest, www. thesmartmanager. om, February- manifest, 2003. microbe: Bajaj Auto Limited Annual promulgate 2003. 109 fiscal Insights cipher (i) Indian cycle grocery store line: Honda Annual account 2003. Foreign players quickly changed the rules of the game. From a supplier’s market, it became a buyer’s market. Companies tried to outdo each other in terms of style, hurt and fuel efficiency. The technological expertise that the foreign collaborators brought to the market place helped increase the boilersuit quality of the products instead significantly. In the former(a) 2000s, the controversy intensified further.In 2000, Honda announced its headings to set up a 100% subsidiary to manufacture scooters and pedals. demo I relative Valuation of the Leading Companies opening: Motilal Oswal, faithfulness Research, February 2003. The Indian two-wheeler industry witnessed remarkable growth grade since 2000, due to a host of factors like pass along in interest rates, availability of finance and cheap prices relative to the growing purchasing power. Despite the astounding growth rate of the last few years, two-wheeler perceptivity still remained low in the country.Analysts believed, increasing urbanization, expanding cities, need of other modes of transportation and favourable demographics would support double-digit growth in the coming decade. The Indian two-wheeler industry could be broadly classified into three major segments†scooters, motorbikes and mopeds5. Until the early 1990s, locally manufactured scooters with gears dominated the markets. unless in recent times, assume 5 Mopeds were small bikes, with slight engine power which were priced low and were aimed at the low-income market. cx Financial anxiety at Bajaj Auto or scooters had tapered moody, while that for motorcycles looked buoyant. The motorcycle market in India had about tripled in coat over the preceding(a) 10 years 6. In 2002, the two-wheeler industry demand thoroughed 5 billion units, making India the split hour largest market in the world after(prenominal) china 7. Exhibit II Two Wheelers Industry: ever-changing Dynamics Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 positive Two wheelers (unit interchange) 1,503,172 1,763,210 2,208,231 2,660,005 2,965,474 3,042,347 3,403,471 3,776,719 3,745,516 4,318,531 5,053,562 pit ch scooters 41. 8% 43. 3% 42. 6% 40. 6% 38. 4% 35. 4% 32. % 25. 9% 16. 0% 12. 3% 6. 7% Un geared scooters 9. 4% 7. 9% 8. 6% 9. 1% 8. 9% 8. 8% 8. 3% 10. 0% 10. 9% 9. 5% 10. 5% drivecycles 20. 2% 21. 6% 23. 9% 24. 8% 27. 1% 30. 0% 34. 6% 42. 7% 54. 1% 66. 2% 74. 4% Mopeds 20. 0% 17. 6% 15. 1% 16. 8% 16. 5% 15. 5% 14. 6% 14. 1% 12. 9% 8. 7% 6. 2% Stepthrus 8. 6% 9. 6% 9. 8% 8. 7% 9. 1% 10. 3% 9. 8% 7. 3% 6. 1% 3. 3% 2. 2% Source: Bajaj Auto Annual Report 2002-03. orbit tint The Bajaj group was founded by Jamnalal Bajaj in the 1930s. His first son Kamalnayan established Bajaj Auto, the flagship of the Bajaj group, in 1945, as a private limited company.From 1948 to 1959, Bajaj imported scooters and three wheelers from Italy and sold them in India. In 1959, the company obtained a emancipation to manufacture scooters and motorized three wheeler vehicles. In 1960, it entered into a technical collaboration with Piaggio of Italy and got the right to manufacture and market Piaggio’ s Vespa brand scooters and three wheelers in India. The same year, it went public. Bajaj’s first full-fledged manufacturing facility at Akurdi (Bombay-Pune Road) was inaugurated in 1960. Scooter proceeds commenced in 1961, followed by three wheeler output signal in 1962.Bajaj’s scooters and three wheelers started selling on a lower floor the Bajaj brand name only in 1971, when the arrangement with Piaggio expired. Till the 1980s, Bajaj scooters were so popular that the basic strategy was long production runs along with a perpetual focus on be. In 1984, Bajaj established its second plant (1000-acre plant) at Waluj, Aurangabad. Scooter production at this plant started in 1986, followed by three wheeler production in 1987 and scooterettes and motorcycle production in 1990 & 1991, respectively. 6 7 Source: Honda Annual Report 2003.China was number one with an annual production and gross revenue of over 10 million. 111 Financial Insights As Bajaj’s product s were in great demand, the company did not feeling the need to introduce new products or encourage its old ideals. The Chetak, which accounted for 60% of Bajaj’s scooter gross gross revenue, did not even have an electronic ignition. The model’s 2stroke engine also had an emission problem that was quite serious by international standards. As argument became intense and the market was flooded with increasing add up of models, Bajaj’s market share declined.During this period, Bajaj also followed a highly centralized, paternalistic management style. In the early 1990s, as the motorcycle market began to expand and became an good-natured proposition, Bajaj lost ground. Though Bajaj had a posture in the motorcycle segment with its KB100 and 4S lead, it did not take the segment seriously enough. Bajaj believed, motorcycles were a temporary aberration and multitude would return to scooters. But the scooter market unplowed shrinking and Bajaj was relegated to fourth place in the motorcycle market. Exhibit III comparative Analysis: drivecycle Sales (Number)Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Bajaj Auto 32,028 34,672 42,080 75,067 89,675 129,263 137,717 200,132 255,129 421,966 670,117 % plow 10 14 14 17 16 18 17 19 17 22 23 submarine sandwich Honda 134,801 127,803 one hundred fifty,456 183,131 230,194 168,936 407,563 530,607 761,700 1,029,391 1,425,302 % dower 44 51 50 42 40 38 50 50 50 53 50 TVS rides 33,744 30,085 42,080 53,120 125,286 164,083 211,667 268,099 326,357 354,497 450,113 % piece of ground 11 12 18 20 22 23 26 25 21 18 16 others 108,601 59,066 56,894 89,643 132,922 146,625 60,674 64,529 177,704 123,472 312,547 entirety 309,174 251,626 302,550 435,053 578,077 708,907 817,621 1,063,367 1,520,890 1,929,326 2,858,079Source: Society of Indian Automobile Manufacturers. In the late 1990s, Bajaj with the support of Kawasaki, started producing motorcycles. The result was an aggressively priced pugilis t 100cc motorcycle in 1997, about Rs. 8000 cheaper than gun for hire Honda. As Bajaj’s volumes increased, it started pushing prices raze by survey engineering, mend and better capacity utilization that cut its costs by Rs. 4000 per vehicle. Exhibit IV Bajaj: study Models kinsfolk Motorcycle Wind BYK Pulsar Eliminator 112 Products Year of Introduction 2003 2003 2002 2001 Financial focussing at Bajaj Auto Category bore-hole Products bagger CT Boxer AT 4S Champion KB 100 LegendYear of Introduction 1998 1997 1997 1991 1987 1998 1976 1972 2000 1998 1990 1986 1987 Geared Scooters crack Chetak Saffire Ungeared Scooters Spirit Sunny M80 Major M80 Major 4S Step-Thrus Source: www. bajajauto. com In early 1998, Bajaj established a new plant (Rs. 3. 15 billion investiture in 200-acre plot) at Chakan practiced Pune for its future propagation vehicles. The new plant modifiedized in pliant bodied and tubular structure scooters. Bajaj’s comparatively high level of scree ningward integration helped it to foreclose raw fabric costs well downstairs the industry average. For example, the company bought raw materials in mint for itself as well as for its suppliers.For just about of the two-wheeler companies, material costs accounted for about 70% of operate income, but for Bajaj it was only 57% in 1998, the lowest in the industry. In 1998, Bajaj was ranked India’s fifth most valuable company 8. Internationally, it was the world’s largest scooter producer and the fourth largest two-wheeler manufacturer after hacek Honda, Yamaha and Suzuki. But the delay in realizing the potential of motorcycle segment by Bajaj, allowed Hero Honda to race ahead to become the market leader in 2001. During 2000-01, Bajaj entered into non- sustenance and life insurance business along with Allianz AG of Germany, one of the largest insurance companies in the world. Two companies were set up: Bajaj Allianz General policy telephoner Ltd and Allianz Bajaj L ife insurance policy Company Limited.Bajaj and Allianz signed two separate joint venture agreements for these two businesses and respectively committed 74% and 26% of the initial share capital of Rs110 crore in case of the general insurance venture and Rs150 crore in case of the life insurance venture. Bajaj get Rs. 1. 17 billion from Allianz as goodwill. In 2001-02, Bajaj Allianz General Insurance issued the largest number of policies among all private players in the non-life segment, and became the leader in this line of business. Allianz Bajaj Life Insurance commenced trading operations in October 2001. 8 ?The BT 500,? Business Today, 7th phratry 1998. 113 Financial Insights Exhibit V Bajaj vs. Competitors: Major Models in Different Segments in 2003 Segments BYK Economy (Priced Rs. 27,000 †Rs. 37,000) Executive (Priced Rs. 38,000 †Rs. 5,000) reward (Priced Rs. 45,000 †Rs. 75,000) Style (Priced higher up Rs. 75,000) Boxer AT Boxer AR (K-Tec) Boxer CT Delux (KT ec) eagre (K-Tec) Caliber Croma Caliber one hundred fifteen Pulsar 150 Pulsar 150 (self-start) Pulsar one hundred eighty CD100 SS Dawn Splendor Passion Ambition phonograph record CBZ Disc CBZ (selfstart) Bajaj Auto Hero Honda TVS Motors No aspiration Samurai Max 100R Max DLX Victor Fiero Fiero DLX Fiero ES crux Crux R Libero Enticer Yamaha Eliminator No Competition Note: List is not exhaustive. Source: Compiled from various sources by ICFAI Knowledge Center. The shift in preference from geared to nongeared scooters keep in 2002, resulting in a 35% decline in yearly deals.The company’s market share in the ungeared scooter market declined due to lack of models. Both LML and Honda Motorcycles strengthened their foothold in 2002 after the launch of ‘Nova and ‘Dio respectively. Bajaj Autos ‘Spirit, the ungeared scooter, commanded about 25% market share in the below 100 cc category. Bajaj was one of the genuinely few companies manufacturing three-wheelers in the world. It commanded a monopoly in the home(prenominal) market with a market share of above 80%. The rest was shared by Bajaj Tempo, crackling Ltd and Scooters India. The company saw a sharp rise in three-wheeler demand. In early 2002, the market grew by 23%. Bajaj had also commenced the commercial production of goods carriers.In 2002, this segment generated 22% of the company’s simoleons. The profit per three-wheeler was betd to be 2. 5-3 times that of a motorcycle. Bajaj gained market share in the motorcycle segment through its models like ‘Pulsar and ‘Boxer AR. Boxer virtually created the four-stroke economy segment and Pulsar expand the lifestyle segment. Pulsar’s volumes surpassed the most optimistic expectations in terms of volumes. In February 2003, Bajaj launched ‘Caliber 115 and steadied its presence in the executive motorcycle segment. The new model registered gross revenue of 25,706 units in butt on 2003. 114 Financial focus at Bajaj Auto Financial ManagementBajaj gain mint of its revenue from the self-propelled business. In 2003, motorcycles dominated the automotive segment, accounting for 55 % of its revenues. In 2002-03, Bajaj achieved a overturn of Rs. 5071 crore and earning before interest, taxation, derogation and amortization (EBITDA) of Rs. 817 crore. EBITDA as a percentage of net sales and other operational income increased from 16. 8 % in 2001-02 to 19 % in 2002-03. Return on direct capital, which had dipped to a low of 14% in 2000-01, increased to 60% in 2002-03. Bajaj continued its efforts to drive give-line growth, improve practicable efficiency, cut costs and improve economies of scale. running(a) corking Bajaj continued to minimize its overall working capital. Debtors declined from Rs. 198 crores on thirty-first March 2002, to Rs. 167 crore on 31st March 2003 †a reduction of 16%. Bajaj succeeded in reducing line levels by using the direct on-line pitch of materials from vendo rs. Inventory of raw materials and components declined from seven old age as on 31st March 2002, to six days as on 31st March 2003, and senseless parts for replacement market from 42 days to 31 days. The inventory of finished goods however increased from six days to nine days because of the trifling market. 9 Exhibit VI Bajaj: Operating Working Capital (Rs Million)Source: Bajaj Auto Annual Report 2002-03. damage Structure raw(a) materials, publicise and marketing, and indirect taxes (excise, etc. were the major cost heads for Bajaj. During 2002-03, through its continuous efforts in value engineering and improving relations with the vendors, Bajaj was able to deoxidise its 9 Bajaj Auto Annual Report 2002-03. 115 Financial Insights material costs. The share of materials to net sales and other operating income reduced from 63. 3 % in 2001-02 to 62 % in 2002-03, while the share of stores and tools was contained at 1. 5 % of net sales and other operating income. 10 Labor costs f or 2002-03 included a sum of Rs. 461 million (Rs. 3 million in 2001-02) towards compensation paid to employees under the voluntary loneliness scheme. A total of 1,106 employees opted for the scheme, which had a payback period of two years. Bajaj’s labor costs make up 4. 66% of its total revenue in 2002-03. 11 Despite a 16. 5% increase in net sales and other operating income †from Rs. 36. 96 billion in 2001-02 to Rs. 43. 06 billion in 2002-03, factory and administration costs had come down from 5. 3% of net sales and operating income to 4. 3%. This was the result of a thorough review of persistent costs with each plant head. Sales and after sales expenses were around 6. 7 % of net sales and other operating income. In 2003, Bajaj’s advertising and marketing expenditures were Rs 233. 9 crore (8. 61% of its total revenue), whereas Hero Honda’s expenditures were Rs. 147. 01 crore (4. 16% of total revenue) and TVS’ were Rs. 212. 49 crore (11. 06% of tot al revenue). Bajaj’s total indirect tax expenses were Rs. 601. 22 crore in comparison to Hero Honda’s Rs. 9. 75 crore and TVS’ Rs. 435. 77 crore in 2003. 12 Investments Bajaj invested its overabundance currency in secured and frigid investment securities like G-Secs, T-Bills, etc. The return earned by Bajaj on its exchequer portfolio was comparable with the return earned by the top mutual descents. During 2002-03, Bajaj reduced its honor investments and concentrated more than on the G-Sec and bond market.Thus, the market value of the portfolio changed from a diminution in value to cost in 2002, to an appreciation in value to cost of Rs. 343 million in March 2003. During 2002-03, Bajaj provided Rs. 26. 7 million towards mischief in the carrying costs of its investment portfolio. In addition, move its efforts to liquidate non-performing assets, Bajaj booked a total evil of Rs. 853 million. This loss was set off against gains on sale of assets of Rs. 1, 06 7 million that resulted in a net gain of Rs. 214 million. 13 Figure (ii) Bajaj: Liability Structure, 2003 Source: art Database. 10 11 12 13 Bajaj Auto Annual Report, 2002-03. Source: artwork Database.Source: artistic creation Database. Bajaj Auto Annual Report, 2002-03. 116 Financial Management at Bajaj Auto Exhibit VII Bajaj: Investment of Surplus funds (Rs. million) Source: Bajaj Auto Annual Report, 2002-03. Exhibit: octette Income from Investments (Rs Million) 2002-2003 Dividends rice beer on debentures and bonds Interest on government securities Interest on inter-corporate deposits and other loans Income from mutual fund units Lease rent and equalization Profit on sale of investments Interest on fixed deposits former(a)s jibe Interest on tax refunds thoroughgoing non-operating income Non-operating expenses web non-operating income Source: Bajaj Auto Annual Report, 2002-03. 17 127 408 405 239 44 214 2 11 1,450 1,450 274 1,176 2001-2002 592 291 18 364 79 234 6 1,584 18 1, 602 436 1,166 Financial Insights Return on Capital In early 2003, Bajaj maintained a part with cash reserve of Rs 2,700 crore. The management had no intention of reducing that cash pile in the near future. Meanwhile, analysts argued14 that retaining surplus cash would only dilute a companys Return on Capital Employed (ROCE) and, over a period of time, destroy shareholder value. Bajaj had a capital employed of Rs 4,000 crore, of which only Rs 1,300 crore was deployed in its two-wheeler operations. This generated an smooth ROCE of 60%. But the remaining Rs 2,700 crore of idle cash, earned a return of only 17%.As a result, Bajaj Autos overall ROCE was 31%, far lower than Hero Hondas 95%. Exhibit IX Return on Operating Capital (Rs. Million) As at 31, March 2003 Fixed assets Technical know-how Working capital Total Operating profit after interest and wear and tear Pre-tax return on operating capital exmployed Source: Bajaj Auto Annual Report, 2002-03. As at 31, March 2002 10,910 128 699 11,737 4,834 41% 10,502 107 638 11,247 6,744 60% Exhibit X Dividend Payouts (%) Company Bajaj Hero Honda TVS 1999 19. 18 22. 89 21. 96 2000 20. 88 23. 08 23. 92 2001 35. 69 26. 74 32. 54 2002 27. 34 75. 53 42. 47 Source: Businessworld, 19th May 2003. Capital Structure Bajaj’s debt- rightfulness ratio was 0. 6 and interest coverage was 717. 76 times in 2003. Bajaj mostly relied on internal generation rather than external funding. In 2003, Bajaj had Rs. 3139. 42 crore of reserve & surplus (49% of it total assets), where as Hero Honda and TVS had only Rs. 821. 09 crore and Rs. 399. 85 crore respectively. Bajaj deployed bulk of its funds in investments (44. 02% of total assets) and fixed assets (20. 57% of total assets). 14 M. Anand, ? Is Munjal Being Too open-handed?? Businessworld, 19th May 2003. 118 Financial Management at Bajaj Auto Exhibit XI Bajaj: paleness Holding, December 2003 right Holding Indian promoters rough-cut funds and UTI Banks, FIs, Insurance Cos.F IIs Private corporate bodies Indian public NRIs/OCBs Any other Total equity holding Source: Prowess Database. No of Shares 29516461 1612731 3829868 19318255 13264490 29054237 401776 4185692 101183510 % of Total Shares 29. 17 1. 59 3. 79 19. 09 13. 11 28. 71 0. 40 4. 14 100 In kinsfolk 2000, Bajaj had spent about Rs 720 crore to buy back 15% of its equity. The offer was announced at a price of Rs 400 per share when the prevailing price was around Rs 320. Though prices fell to Rs 200 immediately after the buyback, it had later recovered to about Rs 500. Bajaj believed buy back was a better way to distribute pelf to shareholders than dividends.Bajaj had a cash reserve of $ 575 million and paid a concluding dividend of 120% and a special dividend of 20% in 2002 (paid on account of the one-time premia received from Allianz AG, Germany, the companys partner in the two insurance joint ventures)15 and a final dividend of 140% in 2003. The core of dividend and the tax aggregated to Rs. 1 ,598 million. The company’s dividend get i. e. , (dividend per share by the market price) showed that Bajaj had a pass of 2. 7%. 16 Looking Ahead In the motorcycles segment, ‘Boxer had performed well and had increased its market share to 45% in the entry-level market, which was estimated at 102,000 units (35% of total motorcycle sales). But growth was primarily led by ‘Pulsar, the premium-end motorcycle. Against the companys estimate of 10,000 units per month at the beginning of 2002, the model toothed sales of around 17,000 units per month in late 2002.Encouraged by the success, Bajaj planned to ramp up sales to 25,000 units per month by early 2004 and evaluate to achieve total leadership in the motorcycle segment, aiming at a growth rate of 15%. Bajaj expected to improve its relationships with customers by expanding its product range and outturn its dealer network. It planned to launch a 125 cc motorcycle with Kawasaki Heavy Industries Ltd, which was in the final stage of development. A rear engine diesel goods carrier was in the testing stage 15 16 Source: Prowess Database. Chetan Soni & Nandini Sen Gupta, ? Rolling rootage: Payouts put auto investors in top gear,? propagation News clear upwork, 4th June 2003. 119 Financial Insights and would be launched in 2004. Bajaj also planned to broaden its vision and work towards being a truly global player.Effective management of the company’s finances would play an burning(prenominal) role in this regard. Figure (iii) Bajaj: Closing Share Price & Traded Quantity Source: Prowess Database. Figure (iv) Bajaj: Traded Quantity Source: Prowess Database. Figure (v) Bajaj: Dividend open & Earning Per Share Dividend Yield 6 5 4 3 2 1 0 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Earning Per Share 80 60 40 20 0 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Source: Prowess Database. 12 0 Financial Management at Bajaj Auto Figure (vi) Bajaj: Assets Structure Source: Prowess Database. Exhibit: XIIBajaj: Capital History discern Month Issue fictional character Face care for (Rs. ) 10 10 Security Amount (Rs. Crore) 0 0 Additional Increased Paid up Paid up Capital Capital (Rs. Crore) (Rs. Crore) 18. 81 37. 63 37. 63 75. 25 Security Type Sep-91 Bonus Jun-94 Bonus Euro Oct-94 Issue Sep-97 Bonus comeliness Equity Global Depository Receipts Equity 10 10 10 345. 07 0 0 4. 34 39. 8 0 79. 59 119. 39 101. 18 getbac Sep-00 k Equity Source: Prowess Database. Exhibit XIII Bajaj: Ratios Bajaj Auto Ratios Liquidity Ratios on-line(prenominal) ratio Quick ratio Solvency Ratios Debt-equity ratio Interest coverage 0. 26 0. 22 0. 20 45. 04 0. 16 33. 85 0. 17 21. 23 0. 11 11. 83 0. 29 18. 43 0. 52 5. 63 0. 6 4. 58 2. 07 1. 20 1. 88 1. 01 1. 69 0. 69 1. 11 0. 16 1. 20 0. 25 1. 44 0. 81 1. 01 0. 34 1. 12 0. 47 1. 16 0. 36 2003 2002 2001 Hero Honda 2003 2002 2001 T V S Motor 2003 2002 2001 717. 76 161. 91 121 Financial Insights Bajaj Auto Ratios 2003 2002 2001 Hero Honda 2003 2002 2001 T V S Motor 2003 2002 2001 Efficiency Ratios (in Days) Average days of finished goods air Average days of debtors Average days of creditors Net working capital cycle Profitability Ratios PBDIT (NNRT) as % of sales PBIT (NNRT) as % of sales PAT (NNRT) as % of sales Return on net value Return on capital employed 20. 19 16. 65 11. 07 17. 50 21. 47 16. 87 13. 12 8. 63 13. 3 16. 74 13. 07 9. 18 8. 24 10. 26 9. 98 17. 59 16. 45 10. 02 67. 10 94. 64 16. 77 15. 63 9. 72 67. 67 95. 27 14. 46 13. 07 7. 87 47. 52 70. 98 9. 23 6. 66 3. 94 32. 89 42. 10 6. 79 4. 57 2. 47 8. 18 5. 78 3. 47 9. 90 13. 80 42. 40 -5. 68 10. 27 13. 95 43. 47 0. 69 11. 38 15. 42 49. 54 6. 61 3. 91 8. 62 35. 57 -7. 47 3. 53 5. 80 32. 71 -4. 79 3. 93 4. 28 31. 10 14. 09 8. 14 52. 96 14. 97 13. 13 15. 95 19. 82 52. 05 44. 89 -1. 24 7. 54 2. 05 -14. 15 16. 05 18. 80 20. 86 20. 74 90. 00 80. 00 Dividend rate (sum of inte rim and final) 140. 00 140. 00 Market Ratios P/E P/B 16. 61 3. 19 9. 54 1. 63 80. 00 900. 00 850. 00 150. 00 120. 00 9. 25 1. 32 3. 46 7. 63 9. 27 5. 62 13. 66 6. 21 18. 41 5. 02 10. 35 10. 39 3. 08 0. 99 Source: Prowess Database. Exhibit XIV plebeian size Income statement Commonsize Income didactics 2003 Total tax income Sales some other income Change in armorys Non-recurring income Bajaj Auto 2002 2001 Hero Honda 2003 2002 2001 2003 TVS 2002 2001 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 94. 22 3. 51 0. 64 1. 64 92. 27 4. 22 -0. 67 4. 18 91. 85 6. 18 0. 36 1. 61 97. 76 0. 44 0. 40 1. 40 98. 24 1. 04 -0. 13 0. 85 98. 75 0. 33 0. 56 0. 35 97. 76 0. 67 1. 25 0. 31 98. 96 0. 89 0. 15 0. 01 98. 04 1. 05 0. 90 0. 01 122 Financial Management at Bajaj AutoCommonsize Income Statement 2003 Expenditure stabbing materials, stores, etc. reward & salaries aptitude (power & fuel) Indirect taxes (excise, etc. ) Advertising & marketing expenses Distribution expenses differents Non-recurring expenses Profits / losses PBDIT Financial charges (incl. convey rent) PBDT Depreciation PBT tax proviso PAT Bajaj Auto 2002 2001 Hero Honda 2003 2002 2001 2003 TVS 2002 2001 52. 84 4. 66 1. 19 11. 73 51. 39 5. 12 1. 41 11. 80 52. 79 6. 20 1. 80 14. 57 67. 59 3. 86 0. 49 0. 19 68. 80 3. 71 0. 56 0. 12 72. 87 3. 67 0. 73 0. 19 60. 37 3. 27 0. 66 13. 69 63. 29 3. 37 0. 69 13. 86 73. 20 3. 46 0. 90 1. 72 8. 61 0. 86 3. 50 1. 63 19. 3 8. 62 0. 82 5. 28 0. 69 19. 06 9. 83 0. 90 4. 93 2. 85 10. 77 4. 16 1. 89 4. 57 0. 07 18. 51 2. 99 1. 88 5. 55 0. 22 17. 10 2. 74 1. 81 4. 12 0. 46 14. 18 11. 06 2. 08 3. 92 0. 10 9. 23 8. 37 2. 12 4. 65 0. 04 6. 69 8. 76 1. 60 4. 69 0. 04 7. 99 0. 02 19. 01 3. 34 15. 67 5. 24 10. 43 0. 07 18. 99 3. 47 15. 52 4. 06 11. 46 0. 19 10. 58 3. 57 7. 01 0. 68 6. 33 0. 48 18. 04 1. 11 16. 93 5. 81 11. 12 0. 72 16. 38 1. 12 15. 26 5. 08 10. 17 1. 09 13. 09 1. 38 11. 72 4. 04 7. 67 0. 35 8. 88 2. 51 6. 36 2. 30 4. 06 0. 80 5. 89 2. 20 3. 69 1. 28 2. 41 1. 24 6. 75 2. 35 4. 40 1. 03 3. 37 Source: Prowess Database. Exhibit XV Common size sleep SheetCommon size rest period Sheet 2003 Total assets staring(a) fixed assets Land & building Plant & machinery other fixed assets Capital WIP Bajaj Auto 2002 2001 Hero Honda 2003 2002 2001 2003 TVS 2002 2001 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 41. 62 4. 02 35. 09 2. 45 0. 06 46. 97 4. 65 39. 56 2. 69 0. 07 53. 65 5. 30 44. 99 2. 88 0. 48 35. 60 5. 77 28. 21 1. 20 0. 42 40. 72 6. 96 31. 96 1. 25 0. 55 54. 82 7. 93 43. 57 1. 68 1. 64 77. 80 12. 72 58. 45 4. 01 2. 63 78. 81 10. 14 63. 09 4. 22 1. 35 77. 23 10. 39 59. 41 4. 40 3. 04 123 Financial Insights Common size balance Sheet 2003 Less: cumulative depreciation Net fixed assets Investments In group / fellow traveller cos.In mutual funds other(a) investments Inventory Raw materials Stores and spares Finished goods Semi-finished goods Sundry debtors Accrued income Advances / loans to Group / dude cos. Advances / loans to Other cos. Deposits with govt. / agencies Advance payment of tax Other receivables Cash & bank balance Deferred tax assets intangible assets & deferred revenue expenditure not create verbally off Bajaj Auto 2002 2001 Hero Honda 2003 2002 2001 2003 TVS 2002 2001 21. 05 20. 57 44. 02 4. 13 3. 50 36. 39 3. 30 0. 89 0. 34 1. 82 0. 25 2. 65 0. 32 21. 67 25. 30 36. 82 4. 75 2. 29 29. 78 3. 31 1. 00 0. 57 1. 44 0. 30 3. 66 0. 47 24. 30 29. 35 25. 89 1. 46 2. 64 21. 79 5. 46 1. 96 0. 91 2. 23 0. 36 2. 60 0. 71 12. 47 23. 13 54. 3 0. 16 54. 37 0. 00 9. 18 5. 10 1. 14 2. 51 0. 43 6. 46 0. 00 12. 74 27. 98 41. 41 0. 20 41. 21 0. 00 10. 17 6. 17 1. 54 1. 94 0. 52 5. 69 0. 00 15. 55 39. 27 26. 18 0. 30 25. 88 0. 00 17. 18 10. 62 2. 32 3. 16 1. 08 3. 66 0. 00 28. 15 49. 65 8. 19 5. 60 2. 57 0. 02 19. 95 3. 89 4. 13 10. 36 1. 58 4. 87 0. 00 28. 18 50. 63 1. 66 1. 60 0. 00 0. 05 17. 15 4. 24 2. 50 8. 44 1. 97 9. 97 0. 00 24. 69 52. 54 1. 79 1. 68 0. 00 0. 12 18. 32 5. 49 2. 13 8. 46 2. 25 12. 89 0. 00 1. 68 3. 56 0. 11 0. 00 0. 00 0. 00 0. 00 0. 00 0. 00 1. 16 1. 60 8. 21 0. 00 0. 00 0. 00 1. 43 4. 49 1. 86 0. 06 0. 40 0. 41 0. 01 0. 01 0. 11 0. 08 0. 02 3. 93 21. 99 2. 52 0. 8 1. 08 21. 04 2. 28 0. 47 0. 84 21. 71 4. 74 0. 46 0. 00 0. 52 4. 48 1. 11 0. 04 0. 59 7. 31 6. 21 0. 05 0. 88 7. 08 3. 90 0. 00 0. 00 7. 59 7. 69 0. 55 0. 59 6. 48 8. 56 0. 41 0. 77 5. 93 1. 92 0. 00 0. 17 0. 24 0. 35 0. 53 0. 58 1. 75 0. 00 0. 03 0. 05 124 Financial Management at Bajaj Auto Common size Balance Sheet 2003 Total liabilities Net worth pay up equity capital militia & surplus Secured borrowings unsecured borrowings Deferred tax liabilities trustworthy liabilities Sundry creditors Interest accrued / due Other current liabilities nutrition Tax provision Dividend provision Dividend tax provision Other provisions Bajaj Auto 2002 2001Hero Honda 2003 2002 2001 2003 TVS 2002 2001 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 100. 00 51. 36 1. 60 49. 75 0. 85 12. 46 3. 81 7. 21 6. 56 0. 00 0. 65 24. 30 21. 01 2. 25 0. 29 0. 76 52. 99 1. 87 51. 12 0. 59 10. 99 4. 36 8. 41 7. 60 0. 00 0. 81 22. 65 19. 56 2. 62 0. 00 0. 47 56. 80 2. 18 54. 62 1. 21 9. 86 0. 00 10. 07 7. 70 0. 00 2. 37 22. 06 19. 77 1. 74 0. 18 0. 37 39. 34 1. 82 37. 52 0. 00 6. 14 3. 53 31. 14 18. 73 0. 00 12. 41 19. 86 0. 50 16. 42 2. 10 0. 84 39. 10 2. 28 36. 82 0. 00 6. 64 4. 07 34. 97 22. 73 0. 00 12. 24 15. 22 0. 48 13. 66 0. 00 1. 08 54. 44 3. 46 50. 98 0. 00 5. 75 0. 00 31. 63 22. 03 0. 00 9. 60 8. 18 0. 82 5. 18 0. 3 1. 64 39. 42 2. 15 37. 27 3. 82 7. 54 8. 27 37. 87 37. 81 0. 00 0. 06 3. 08 0. 00 1. 51 0. 19 1. 38 37. 27 2. 66 34. 61 10. 50 8. 74 9. 14 33. 31 33. 08 0. 00 0. 24 1. 04 0. 00 0. 00 0. 00 1. 04 43. 06 2. 78 40. 28 19. 09 9. 09 0. 00 25. 55 25. 51 0. 00 0. 05 3. 20 0. 00 2. 23 0. 23 0. 75 Source: Prowess Database. Exhibit XVI Comparative Income Statement Comparative Income Statement 2001 Total revenue Sales Other income Change in stocks Non-recurring income 3628. 74 4172. 1 4829. 37 3177. 2 4471. 87 5107. 7 1820. 98 2213. 59 3111. 28 244. 19 190. 61 179. 85 14. 13 -30. 4 32. 58 83. 93 10. 63 18. 17 11. 42 47. 21 -5. 81 38. 54 23. 24 21. 08 72. 8 19. 57 16. 65 0. 27 19. 8 3. 27 0. 23 21. 4 39. 82 9. 94 Bajaj Auto 2002 2003 Hero Honda 2001 2002 2003 2001 TVS 2002 2003 63. 66 189. 21 125 Financial Insights Comparative Income Statement 2001 Expenditure Raw materials, stores, etc. Wages & salaries Energy (power & fuel) Indirect taxes (excise, etc. ) Bajaj Auto 2002 2003 Hero Honda 2001 2002 2003 2001 TVS 2002 2003 2085. 47 2323. 71 2708. 23 2344. 39 3131. 72 3531. 81 1359. 65 1415. 78 1921. 32 245. 14 231. 48 239. 05 117. 96 168. 94 201. 63 64. 26 75. 37 104. 05 71. 03 63. 64 61. 12 23. 4 5. 98 25. 61 5. 39 25. 82 9. 75 16. 63 15. 44 20. 85 575. 8 533. 48 601. 22 31. 88 309. 94 435. 77Advertising & marketing expenses 204. 94 200. 41 233. 29 Distribution expenses Others 35. 46 37. 02 44. 23 64. 17 58. 1 93. 73 147. 01 119. 04 118. 49 212. 49 85. 39 98. 92 29. 64 47. 36 66. 27 194. 82 238. 63 179. 61 132. 45 252. 48 238. 84 31. 25 83. 7 14. 65 10. 24 3. 86 87. 15 103. 91 124. 72 0. 83 0. 86 3. 28 Non-recurring expenses 112. 59 Profits / losses PBDIT Financial charges (incl. rent rent) PBDT Depreciation PBT Tax provision PAT ppropriation of profits Dividends Retained earnings 425. 47 861. 9 975. 28 456. 32 778. 31 967. 36 148. 39 149. 74 293. 69 7. 4 3. 38 1. 12 35. 1 44. 27 32. 92 51. 01 24. 82 57. 98 303. 8 22. 97 43. 73 81. 69 19. 12 62. 7 17. 96 49. 22 28. 61 11. 24 79. 91 73. 19 418. 07 858. 52 974. 16 421. 22 745. 39 942. 54 125. 42 131. 78 282. 45 141. 12 156. 68 171. 16 276. 95 701. 84 803 376. 95 694. 38 884. 56 82. 56 202. 54 53. 95 129. 35 27 183. 68 268. 36 130. 08 231. 45 249. 95 518. 16 534. 64 246. 87 462. 93 580. 76 89. 21 141. 66 159. 81 160. 74 66. 01 349. 67 405. 49 20. 36 42. 21 22. 91 31. 04 29. 79 99. 56 376. 5 374. 83 180. 86 113. 26 175. 27 Source: Prowess Database. Exhibit XVII Comparative Balance Sheet Comparative Balance Sheet (Rs Crore) Assets Gross fixed assets 2001 Bajaj 2002 2003 Hero Honda 2001 633. 61 2002 714. 21 2003 779. 25 TVS Motor 2001 641. 3 2002 683. 85 2003 834. 7 2490. 26 2540. 08 2626. 18 126 Financial Management at Bajaj Auto Comparative Balance Sheet (Rs Crore) Land & building Plant & machinery Other fixed assets Capital WIP Less: cumulative depreciation Net fixed assets Investments In group / touch on cos. In mutual funds Other investments Inventories Raw materials Stores and spares Finished goods Semi-finished goods Receivables Sundry debtors Accrued income Advances / loans to Group / ally cos. Advances / loans to Other cos. Deposits with govt. / agencies Advance payment of tax Other receivables Cash & bank balance Deferred tax assets nonphysical assets (goodwill, etc. Deferred revenue expenditure not scripted off 245. 85 Bajaj 251. 53 Hero Honda 253. 42 Mar-00 May-00 May-00 503. 59 19. 45 18. 95 179. 76 453. 85 302. 59 3. 46 299. 13 0 198. 54 122. 79 26. 81 36. 47 12. 47 135. 54 42. 29 0 560. 54 21. 89 9. 69 223. 47 490. 74 617. 32 26. 37 9. 19 273. 01 506. 24 TVS Motor 86. 24 493. 09 36. 49 25. 21 204. 92 436. 11 14. 89 13. 92 0 0. 97 152. 03 45. 53 17. 65 70. 2 18. 65 210. 64 106. 95 0. 04 88. 03 547. 47 36. 66 11. 69 244. 54 439. 31 14. 39 13. 92 0 0. 47 148. 79 36. 76 21. 73 73. 23 17. 07 187. 09 86. 52 0 136. 47 627. 07 42. 97 28. 19 302. 03 532. 67 87. 92 60. 08 27. 58 0. 26 214. 07 41. 71 44. 32 111. 1 16. 94 149. 87 52. 21 0 088. 17 2139. 11 2214. 16 133. 81 22. 43 1127. 91 145. 48 3. 96 154. 59 4. 01 1171. 8 1327. 95 1362. 35 1368. 28 1298. 23 1201. 65 1991. 42 2777. 68 67. 62 122. 77 257. 02 123. 99 260. 88 220. 77 726. 29 1193. 52 3. 46 3. 46 722. 83 1190. 06 0 178. 36 108. 27 26. 96 34. 02 9. 11 238. 52 99. 72 0 0 200. 92 111. 67 25. 04 54. 84 9. 37 251. 26 141. 49 0 1011. 26 1610. 41 2296. 03 253. 43 91 42. 17 103. 49 16. 77 179. 1 54. 32 30. 57 77. 95 16. 26 207. 98 56. 16 21. 15 114. 63 16. 04 1786. 88 1785. 53 1917. 13 120. 72 33. 01 198. 17 25. 34 167. 04 20. 24 5. 3 380. 88 19. 24 192. 75 86. 6 21. 73 106 73. 11 3. 87 1387. 8 159. 07 30. 03 68. 06 10. 68 0 1. 26 10. 14 81. 85 45. 09 0 0 0 0 0. 21 10. 34 128. 25 108. 96 0. 81 0 0 0 0. 32 11. 31 98. 14 24. 33 0. 89 0 0 15. 43 32. 66 6. 38 49. 18 15. 91 0 0 0 39 0. 14 5. 16 56. 27 74. 27 3. 57 0 0 15. 3 0. 86 0. 03 81. 47 82. 46 5. 9 0 1007. 75 1137. 62 219. 98 21. 32 0 0 123. 32 25. 2 45. 48 12. 8 16. 03 0 0 20. 2 10. 22 11. 52 0. 44 0. 3 0 127 Financial Insights Comparative Balance Sheet (Rs Crore) Share issue expenses not written off VRS expenses not written off Other misc. expenses not written off Total assets Net worth classical capital Issued equity capital Paid-up equity capital Bonus equity capital Buy back amount Buy back shares (nos. Reserves & surplus Free reserves Specific reserves Borrowings Bank borrowings Short ter m bank borrowings spacious term bank borrowings Govt. / sales tax deferral borrowings Debentures / bonds Fixed deposits Other borrowings Secured borrowings Unsecured borrowings Bajaj Hero Honda TVS Motor 0 0 0 0 0 0 0 0 0 0 0 0 0. 44 0 0. 3 0 0 0 16. 03 0 0 20. 2 10. 22 11. 52 0 830. 02 357. 41 25 23. 1 23. 1 0 0 0 334. 31 291. 81 42. 5 233. 95 107. 37 76. 12 31. 25 0 0 4641. 66 5407. 81 6309. 79 1155. 81 2636. 53 2865. 79 3240. 61 150 101. 18 101. 18 114. 17 18. 21 1820730 4 2535. 35 150 101. 19 101. 19 114. 17 0 0 150 101. 19 101. 19 114. 17 0 0 629. 19 50 39. 94 39. 94 23. 96 0 0 589. 25 589. 25 0 66. 48 0 0 0 1753. 9 2188. 68 685. 76 50 39. 94 39. 94 23. 96 0 0 645. 82 645. 2 0 116. 44 0 0 0 861. 03 50 39. 94 39. 94 23. 96 0 0 821. 09 821. 09 0 134. 28 0 0 0 867. 72 1072. 89 323. 39 25 23. 1 23. 1 0 0 0 300. 29 270. 59 29. 7 166. 94 53. 64 34. 89 18. 75 422. 95 25 23. 1 23. 1 0 0 0 399. 85 380. 05 19. 8 121. 89 16. 13 16. 13 0 2764. 6 3139. 42 2515. 39 2744. 64 3121. 21 19. 96 513. 71 55. 97 55. 97 0 19. 96 626. 09 31. 83 31. 83 0 18. 21 840. 23 53. 91 53. 91 0 451. 64 0 6. 1 0 55. 97 457. 74 588. 96 0 5. 3 0 31. 83 594. 26 781. 9 0 4. 42 0 53. 91 786. 32 66. 48 0 0 0 0 66. 48 116. 44 0 0 0 0 116. 44 134. 28 0 0 0 0 134. 28 0 85 0 41. 58 158. 49 75. 46 0 59. 4 0 53. 9 91. 11 75. 83 0 39. 6 0 66. 16 41. 03 80. 86 128Financial Management at Bajaj Auto Comparative Balance Sheet (Rs Crore) reliable portion of long term debt Total foreign currency borrowings Deferred tax liabilities Current liabilities & provisions Current liabilities Sundry creditors Interest accrued / due Other current liabilities Share application money Provisions Tax provision Dividend provision Dividend tax provision Other provisions Total liabilities Bajaj Hero Honda TVS Motor 0 0 0 0 0 0 65. 38 36 11. 48 0 0 0 236. 05 0 240. 47 0 0 0 0 71. 47 77. 16 0 0 0 79. 35 0 88. 72 1491. 42 1679. 88 1988. 48 467. 55 357. 29 0. 11 110. 15 454. 93 411. 13 0. 1 43. 7 454. 9 413. 86 0. 08 40. 9 6 460. 14 365. 62 254. 61 0 111. 01 880. 3 1116. 21 613. 32 398. 61 0 214. 71 681. 52 409. 94 0 271. 58 238. 66 212. 1 211. 71 0 0. 39 298. 04 289. 05 287 0 2. 05 439. 33 406. 26 405. 65 0 0. 61 0 0 0 0. 02 94. 52 9. 51 59. 9 6. 11 19 0. 02 266. 91 8. 34 239. 64 0 18. 93 0 434. 69 10. 9 359. 44 46. 05 18. 3 0 26. 56 0 18. 48 1. 88 6. 2 830. 02 0 8. 99 0 0 0 8. 99 0 33. 07 0 16. 17 2. 07 14. 83 1023. 87 1224. 95 1533. 58 917. 58 1057. 94 1325. 98 80. 95 8. 26 17. 08 141. 66 0 25. 35 141. 66 18. 15 47. 79 4641. 66 5407. 81 6309. 79 1155. 81 1753. 9 2188. 68 867. 72 1072. 89 Source: Prowess Database. 129 Financial Insights Bibliography 1. 2. ?The BT 500,? 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