Roll No. :- E-25
Name:- Hitesh Kumar
Company:- Hero Motor Corp Limited
Topic:- Analyse the change in sales turnover. Do you find any relation between sales and raw material. Is the change in reported net profit positive? Comment on the overall financial position of the company.
Hero Motocorp. Ltd. previously branded as Hero Honda, is an Indian scooter and motorcycle manufacturing company founded by Brijmohan lall munjal, headquartered at New Delhi, India. The company is the largest two wheeler maker in India. It holds a market share of approximately 46% in 2-wheeler category. It has been ranked 108 out of 200 in Forbes magazine ( march,2013) for the most respected company in world.
In the 1980s, the company started with manufacturing of motorcycles that became popular in the country due to their low cost and fuel economic 2-wheelers. A popular marketing campaign with the slogan “Fill it, Shut it and Forget it” emphasized that the motorcycle has a high fuel efficiency which helped the company develop at a double-digit since origin. The company emerged as the largest two-wheeler manufacturing company in 2001( India and globally). It continues the trend till date and maintains global industry leadership.
Termination of Honda joint venture
Hero Honda initiated its operation in 1984 as a joint venture(JV) between Hero Group of India and Honda of Japan .In December 2010, the board members of the Hero Honda Group decided to come to an end of the joint venture between Hero Group(India) and Honda(Japan) in a phased manner. It was eventually decided that the Hero Group would acquire the 26% stake of the Honda group in JV Hero Honda. But in 2010, Honda made a decision to move out of the JV and subsequently Hero Group bought the shares held by Honda(26%) as per the terms and conditions put forth by Honda .Later in Aug 2011 the corporation was renamed Hero MotoCorp.
Differences between the two had been increasing for past few years before the split over a range of issues, starting from Honda's reluctance to freely share technology with Hero (even after a 10-year tie-up of technology ). An extra irritation for Honda was the denial of Hero Honda (largely managed by the Munjal family) to merge the spare parts industry with Honda's new-fangled fully owned auxiliary Honda Motorcycle and Scooter India (HMSI). This led to the end of partnership between two.
With the termination of JV, Hero could now export its product which was not possible earlier. The company sold more than 66,31,814 - 2-wheelers since its inception in 1984 till March 2015. It sold 6.63 million 2-wheelers in 2015. Hero Motocorp. sells more two wheelers than the 2nd,3rd and 4th two-wheeler companies all together. Hero Honda Splendor is the most popular bike in India and more than one million units are sold every year.
In 2013 Hero MotoCorp was named as the best company in the calendar year with performance of added 6.1 million unit of sales.With the sales of more than 6.25 lacs units in October, it became the first producer to crossed landmark of 6 lacs unit sales in a month.
What is Sales Turnover
“Sales turnover is the sum amount of revenue generated by a business unit during the calculation period (usually one year)”. The revenue incorporated in this estimate is from both cash sales and credit sales. It can also be calculated by no. of units sold, by geographic region, by subsidiary etc. It is mostly restricted to revenue generated from operations and it does not include profits from financial or other activities, such as gains on the sale of fixed assets, interest income or the receipt of payments related to insurance claims.
The main components for determining net sales include revenues, sales returns, allowances and discounts.Net sales is the entire quantity of sales earned by a corporation after factoring all revenues related to its products or services and also include discounts applied to the sale of its products or services.
Net sales is represented by :-
Net sales = Revenues - sales returns - allowances - discounts
Significance of sales turnover:-
In layman terms it is the sum total of funds that a business receives from the sale of products or services in a particular period of time. It decides the business the company is doing. If the sales turnover is high ,that means the company is producing well. If it is low it means it need to produce more in order to be in market.
Based on the sales turnover the company decides whether to invest more in manufacturing or not i.e. the production to be increased or not.
Current sales turnover of the company:-
Changes in sales turnover:- Over the past 5 years the sales of the company has gone up.
As it can be seen in the annual report of Hero motorCorp Ltd.(2014-15),the sales(in terms of products sold) in 2011-12 were 5402,444 which improved amazingly in 2012-13(15.4%).But in 2013-14 it decreased marginally upto 60,75,583(-2.6%).In next financial year it improved gradually(2.8%) and has maintained the growth.
2) Do you find any relation between sales and raw material.
As it can be seen from the graph,the purchase of raw material was advancing till 2013 but in 2014 it rapidly declined as the sales turnover/operating income went down,even though the sales were increasing.One more factor contributing to the declining was the opening and closing of stock market. In 2014-15 the stock market value of Hero group went down which reduced the capital and hence less production and hence less sales and sales/operating income.
Year 2010 2011 2012 2013 2014
Opening stock 7.46 8.71 12.96 11.22 13.33
Closing stock 8.71 12.96 11.22 13.33 11.28
As it can be
3) Is the change in reported net profit positive ?
No, the change in reported net profit over the year has become negative. During the FY 2010 to 2013 ,it was positive but in FY 2014 it became negative due to the fall in sales/operating income.
4) Comment on the overall financial position of the company.
The financial report states that the sales in 2011-12 were 19,401 Cr which went upto 23,579Cr in 2012-13, a growth of 21.5% and profit of 2,378 Cr.The profit went down in the next financial year(2013-14) with only 2,118 Cr and growth of 0.8%.In FY 2014-15 ,the company saw a impact on sales with net profit 2,103 Cr. In next FY 2015-16 it earned a profit of 8.6%(2,365Cr.).
3)Annual report 2014-15 and 2013-14 of Hero Motor Corp Ltd
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