IOSR Journal Of Humanities And Social Science (IOSR-JHSS)

Volume 23, Issue 1, Ver. 5 (January. 2018) PP 32-37

e-ISSN: 2279-0837, p-ISSN: 2279-0845.
www.iosrjournals.org

A Study on Finanacial Analysis of Hero Motocorp Limited.

Dr.V. Uma, Head, Dr. Kavitha Asst.Prof., Dr.A.Ramya.,Asst Prof.,
Department of Business Administration, Sankara College of Science and Commerce, Coimbatore.
Department of Business Administration, Sankara College of Science and Commerce, Coimbatore.
Department of Commerce (CA), Sankara College of Science and Commerce, Coimbatore.
Corresponding Author: Dr.V. Uma

ABSTARCT: “Hero” is the brand name used by the Munjal brothers for their flagship company Hero Cycles
Ltd. A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero
Honda Motors Limited At Dharuhera India. Munjal family and Honda group both own 26% stake in the
Company. In 2010, it was reported that Honda planned to sell its stake in the venture to the Munjal family. Hero
MotoCorp Ltd., formally Hero Honda Motor Ltd is the world’s largest manufacturer of two wheeler based in
India. In 2001 the company achieved the coveted position of being the largest two wheeler manufacturer in
India and also the worlds No.1 two wheeler company in terms of unit volume sales in a calendar year. Company
continues to lead the domestic motor cycle market with 54.6% share.

Key Words: Financial analysis, Profitability Ratios, Liquidity ratio.

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Date of Submission: 03-01-2018 Date of acceptance: 16-01-2018
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I. INTRODUCTION
Hero MotoCorp Ltd., formally Hero Honda Motor Ltd is the world’s largest manufacturer of two
wheeler based in India. In 2001 the company achieved the coveted position of being the largest two wheeler
manufacturer in India and also the worlds No.1 two wheeler company in terms of unit volume sales in a
calendar year. Company continues to lead the domestic motor cycle market with 54.6% share.
During the fiscal year 2008-09 the company sold 3.7 million bikes, a growth of 12% over last year. In
the same year, the company had a market share of 57% in the Indian market. Hero Honda sells more two
wheelers than the second, third and fourth placed two wheeler companies put together .hero Hondas bike hero
Honda splendor sells more than one million units per year. On 1st june 2012, hero motocorp reported its highest
every monthly sales at 5,56,644 units in May, registered a growth of 11.28%.
During the fiscal year 2008-09, the company sold 3.7 million bikes, a growth of 12% over last year. In
the same year, the company had a market share of 57% in the Indian market.[18] Hero Honda sells more two
wheelers than the second, third and fourth placed two-wheeler companies put together.[11] Hero Honda's bike
Hero Honda Splendor sells more than one million units per year.[19]On 1st June 2012, Hero MotoCorp reported
its highest ever monthly sales at 5,56,644 units in May, registering a growth of 11.28%.[20]
Vision :-The story of Hero Honda began with a simple vision - the vision of a mobile and an
empowered India, powered by its bikes. Hero MotoCorp Ltd., company's new identity, reflects its commitment
towards providing world class mobility solutions with renewed focus on expanding company's footprint in the
global arena.
Mission :-Hero MotoCorp's mission is to become a global enterprise fulfilling its customers' needs and
aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts its customers
into its brand advocates. The company will provide an engaging environment for its people to perform to their
true potential. It will continue its focus on value creation and enduring relationships with its partners.
Strategy:- Hero MotoCorp's key strategies are to build a robust product portfolio across categories,
explore growth opportunities globally, continuously improve its operational efficiency, aggressively expand its
reach to customers, continue to invest in brand building activities and ensure customer and shareholder delight.

1.2. Need for the Study

“Hero” is the brand name used by the Munjal brothers for their flagship company Hero Cycles Ltd. A
joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero Honda
Motors Limited At Dharuhera India. Munjal family and Honda group both own 26% stake in the Company. In
2010, it was reported that Honda planned to sell its stake in the venture to the Munjal family.

DOI: 10.9790/0837-2301053237 www.iosrjournals.org 32 | Page

 A Study On Finanacial Analysis Of Hero Motocorp Limited.

The company has a stated aim of achieving revenues of $10 billion and volumes of 10 million two-
wheelers by 2016-17. This in conjunction with new countries where they can now market their two-wheelers
following the disengagement from Honda, Hero MotoCorp hopes to achieve 10 per cent of their revenues from
international markets, and they expected to launch sales in Nigeria by end-2011 or early-2012. This is the main
stream to study about the Hero Motocorp Limited.

1.3. Objective of the Study:

1. To study the financial performance of “Hero Motocorp Ldt.”
2. To know the financial strength of the company
3. To know the Profitability of the company.

1.4. Methodology:
It is well known fact that the most important step in marking research process is to define the problem.
Choose for investigation because a problem well defined is half solved. That was the reason that at most care
was taken while defining various parameters of the problem. After giving through brain storming session,
objectives were selected and the set on the base of these objectives. A questionnaire was designed major
emphasis of which was gathering new ideas or insight so as to determine and bind out solution to the problems.

1.4.1.Sources:
The investigation replied on books, documents, annual report, financial assessment, literature, files and personal
observation to have an idea about the organizational setup, function of financial department and other groups.
1.4.2.Period of the Study
The present study covers a period of five years from 2012-13 to 2016-17.
1.4.3.Limitation of the Study
This study has been based on only secondary data collected from various magazines, web sites and its studying
only about the financial ratios so the ratios having their own limitations.

II. REVIEW OF LITERATURE

Pai, Vadivel & Kamala (1995) have studied about the diversified companies and financial performance. Main
purpose of research was found out the relationship between diversified firms and their financial performance.
For the purpose of research, they have selected seven large firms and analysed those firm which having different
products-both related and otherwise-in their portfolio and operating in diverse industries. In this study, a set of
performance measures / ratios was employed to determine the level of financial performance and variation in
performance from one firm to another has been observed and statistically established. They revealed that the
diversified firms studied have been healthy financial performance.
Samuel & Vanniarajan (2007) discussed about financial performance of bank by applying Du-Pont analysis.
They concluded that the liberalization of the finance sector in India has divulged Indian banks to a new
economic environment that is considered by increased competition and new regulatory requirements. They also
revealed that Indian and foreign banks need to explore development opportunities in India by initiating new
products for different customer segment, and many of which were not conservatively viewed as customer for the
banking industry. They suggested all banks should to evaluate their performance and compare with the others.
In the last they depicted from the analysis the performance of the banks may be viewed on the base of three
dimensions like structural, functioning and efficiency factors which was suggested by the India Bank
Association.
Bhunia, Mukhuti & Roy (2011) have discussed about “Financial Performance Analysis-A Case Study”. The
main aim of study was to identify the financial strengths and weaknesses by covering two public sector drug &
pharmaceutical enterprises listed on BSE. For study purpose, they have been selected twelve years from 1997-
98 to 2008-09. They analysed the data by using ratios, and statistical tools like A.M., S.D., C.V., linear multiple
regression analysis and test of hypothesis t-test. They used SWOT analysis to overcome the weakness and grab
the opportunities available in public sector drug & pharmaceutical enterprises in consideration of strengths and
threats. They concluded that growth during last decade was noteworthy and market trend was growing at a faster
rate. They suggested that the opportunities can be grabbed through the diversification of export basket in
untouched foreign destinations. They also revealed that strict quality standards, services and use of latest
technology can provide an edge over competitors across the globe.
Bhunia, Mukhuti & Roy (2011) “Financial Performance Analysis-A Case Study” Current Research Journal of
Social Sciences 3(3): 269-275, 2011
Dr Pratibha Jain & Prof. Megha Mehta (2013) In their study on financial performance of automobile
companies finds that Hero Honda company performed well because of its usage of latest technology and Tata

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 A Study On Finanacial Analysis Of Hero Motocorp Limited.

motors weak performance due to increased manufacturing overheads and company’s inability to face
competition
Tariq Zafar & Khalid (2012) have discussed about “A Comparative Evaluation of Financial Performance and
Market Value of Maruti& Tata Company”. For the purpose of analysis, they have been selected two most
preferred companies like Maruti Suzuki Ltd. and Tata Motors Ltd., and for the using period of 2006-2010. They
tried to analyse qualitative and quantitative performance of both companies and to investigated their risk and
returns factors, their market position, their collective impact on profitability and to come up with the best and
worst performing company by using modern performance evaluating techniques and later ranking them
according to their achieved performance. They concluded from the ratio analysis there was a lack authenticity in
data, in calculation which may manipulating presentation by the promoters. They have also found that different
firms follow different accounting policies like depreciation allowance; valuation of inventory etc. and often
management ignore these differences while making inter-firm comparison. They revealed that the change in
price levels due to inflation is also not properly considered by management.

III. FINANCIAL ANALYSIS OF HERO MOTOCORP LTD

PROFITABILITY RATIOS:
The Profitability ratios measures the overall performance and effectiveness of the firm.
GROSS PROFIT RATIO
Gross profit ratio is the ratio of gross profit to net sales i.e. sales less sales returns. The ratio thus reflects the
margin of profit that a concern is able to earn on its trading and manufacturing activity. It is the most commonly
calculated ratio. It is employed for inter-firm and inter-firm comparison of trading results.
Gross profit is what is revealed by the trading account. It results from the difference between net sales and cost
of goods sold without taking into account expenses generally charged to the profit and loss account. The larger
the gap, the greater is the scope for absorbing various expenses on administration, maintenance, arranging
finance, selling and distribution and yet leaving net profit for the proprietors or shareholders.

3.1. GROSS PROFIT RATIO

Gross profit = Gross profit / (Net sales × 100)
Year Gross Profit Sales Ratio
2012-2013 3284.48 23768.11 13.81
2013-2014 3540.06 25275.47 14.07
2014-2015 3542.18 27585.30 12.84
2015-2016 4447.10 28599.30 15.54
2016-2017 4634.81 28474.99 16.27
Source: Computed

INFERENCE:
The above table shows the Gross Profit Ratio position of the Hero MotoCorp Ltd., The Gross Profit Ratio was
ranges from 13.81 to 16.27 during the study period 2012-13 to 2016-17.

GROSS PROFIT RATIO

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 A Study On Finanacial Analysis Of Hero Motocorp Limited.

3.2.NET PROFIT RATIO

Net profit ratio (NP ratio) expresses the relationship between net profit after taxes and sales. This ratio is a
measure of the overall profitability net profit is arrived at after taking into account both the operating and non-
operating items of incomes and expenses. The ratio indicates what portion of the net sales is left for the owners
after all expenses have been met.

3.2. Net profit ratio

Net profit = Net profit / sales * 100
Year Net Profit Sales Ratio
2012-2013 2118.16 23768.11 8.91
2013-2014 2109.08 25275.47 8.34
2014-2015 2385.64 27585.30 8.64
2015-2016 3132.37 28599.30 10.95
2016-2017 3377.12 28474.99 11.85
Source: Computed

INFERENCE:
The above table shows the Net profit ratio of the Hero MotoCorp Ltd., The Net profit ratio was ranges from
8.91 to 11.85 during the study period 2012-13 to 2016-17.

3.3.PROPRIETARY RATIO
The proprietary ratio (also known as the equity ratio) is the proportion of shareholders' equity to total
assets, and as such provides a rough estimate of the amount of capitalization currently used to support a
business. If the ratio is high, this indicates that a company has a sufficient amount of equity to support the
functions of the business, and probably has room in its financial structure to take on additional debt, if
necessary. Conversely, a low ratio indicates that a business may be making use of too much debt or trade
payables, rather than equity, to support operations (which may place the company at risk of bankruptcy).

PROPRIETORY RATIO
Proprietary ratio = Shareholders fund / Total tangible assets

Year Shareholders’ funds Total Tangible Assets Ratio

2012-2013 5308.40 3070.98 1.73
2013-2014 5599.87 2243.25 2.50
2014-2015 6541.33 2912.69 2.25
2015-2016 7944.75 3836.74 2.07
2016-2017 10111.29 4395.59 2.30
Source: Computed
DOI: 10.9790/0837-2301053237 www.iosrjournals.org 35 | Page
 A Study On Finanacial Analysis Of Hero Motocorp Limited.

INFERENCE:
The above table shows the proprietary ratio position of the Hero MotoCorp Ltd., The proprietary ratio was
ranges from 1.73 to 2.30 during the study period 2012-13 to 2016-17.

PROPRIETORY RATIO
3
2.5
2.5 2.25 2.3
2.07
2
1.73
RATIO

1.5

0.5

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

LIQUIDITY RATIO
3.4. CURRENT RATIO
The current ratio is a measure of the firms short term solvency. It indicates the availability of current
assets in rupees for every one rupee of current liability. A ratio of greater than one means that the firm has more
current assets than current claims against them. The current ratio represents a margin of safety for creditors. The
higher the current ratio, the greater the margin of safety. As a conventional rule, a current ratio of 2 to 1 or more
is consider satisfactory.

CURRENT RATIO
CURRENT RATIO = Current assets / Current liabilities
Year Current Assets Current Liabilities Ratio
2012-2013 2884.75 4333.25 0.66
2013-2014 2911.17 4497.43 0.64
2014-2015 3742.35 3980.37 0.94
2015-2016 3632.18 4395.94 0.82
2016-2017 3943.77 4582.97 0.86
Source: Computed

INFERENCE:
The above table shows the Current ratio position of the Hero MotoCorp Ltd., The proprietary ratio was ranges
from 0.66 to 0.86 during the study period 2012-13 to 2016-17.

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 A Study On Finanacial Analysis Of Hero Motocorp Limited.

CURRENT RATIO
1 0.94
0.9 0.86
0.82
0.8
0.7 0.66 0.64
0.6
RATIO

0.5
0.4
0.3
0.2
0.1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
YEAR

IV. SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSIONS

Performance of a company measured in financial terms, the success of the firm depends on how it is
perceived by and reacts to the external economics markets. The field of managing fiancé is much more
complicated and faster faces today. Financial managers need to know how effective decisions can be made and
ineffective ones be avoided.
The present study is concerned with financial analysis of Hero MotoCorp Limited for a period of five
years during 2012-13 to 2016-17. This chapter optimizes the major findings, suggestions and conclusions for
efficient utilization with respect to Hero MotoCorp Limited Company.

V. FINDINGS
 The Gross Profit Ratio was increased the ratio of 16.27 in the year 2016-17 and decreased 12.84 in the year
2014-15.
 The Net Profit Ratio was increased in the ratio of 11.85 in the year 2016-17 and decreased 8.34 in the year
2013-14.
 Proprietary ratio was increased the ratio of 2.30 in the year 2016-17 and the decreased 1.73 in the year
2012-13.
 Current ratio was increased 0.94 in the year 2014-15 and decreased 064 in the year 2013-14.

REFERENCES
[1]. Pai V.S, Vadivel.V and Kamala K.H. (Dec 1995). Diversified companies and financial performance: A
study, Finance India, Vol.IX, No.4, pp. 977-988.
[2]. Vanniarajan T and Samuel Joseph.C (2007) An Applica tion of DuPont control chart in analyzing the
financial performance of banks, the management accountant, pp-614-617.
[3]. Dr. Pratibha Jain and Prof. Megha Mehta(2013), an analytical study of profitability position of the
selected automobile companies in India, Journal of Finance Vol No 1 No. 1 December 2013 pp. 1-12.
[4]. Tariq Zafar, S. M., & Khalid, S. M. (2012, September). A Comparative Evaluation of Financial
Performance And Market Value Of Maruti And Tata Company. Bookman
[5]. International Journal of Accounts, Economics & Business Management, 1(1), 7-16
[6]. www.Moneycontrol.com.
[7]. Financial Management – I.M.Pandey .

Dr.V. Uma "A Study on Finanacial Analysis of Hero Motocorp Limited..” IOSR Journal of
Humanities and Social Science (IOSR-JHSS),vol. 23, no. 1, 2018, pp. 32-37.

DOI: 10.9790/0837-2301053237 www.iosrjournals.org 37 | Page