Bajaj Auto Case Final

8/9/2019 Bajaj Auto Case Final

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Introduction

In 2003 Bajaj became one of Indias largest

manufacturer of two and three wheelers.

Recorded a revenue of Rs. 5125.73 Cr. In 1999 market share declined from 49.3% to

38.9%


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The Indian Two Wheeler Industry

Started by API in 1950

Bajaj soon emerged as a leader in the scooter

industry In mid 80s foreign players were allowed to

enter the market

Witnessed remarkable growth since 2000


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Contd.

Mopeds Motorcycles Scooters

Three Segments

From 1990 demand for motorcycles started

increasing


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Contd.

Condition worsened as demand for

motorcycles picked up in early 1990

Did not take the segment seriously Launched 100cc bike Boxer with support from

Kawasaki

Was aggressively priced High level of backward integration helped

keep raw material prices low


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Contd.

Shift in preference from geared to non geared

scooters

Significant market share in the three wheelermarket

Bajaj gained market share in motorcycle

segment through its models like pulsar and

boxer


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7

20012001 20022002 20032003

Total RevenueTotal Revenue

SalesSales 3628.743628.74 4172.14172.1 4829.374829.37

Other IncomeOther Income 244.19244.19 190.61190.61 179.85179.85

Change in stocksChange in stocks 14.1314.13 --30.430.4 32.5832.58

Non recurring incomeNon recurring income 63.6663.66 189.21189.21 83.9183.91

ExpenditureExpenditure

Raw materialsRaw materials 2085.472085.47 2323.712323.71 2708.232708.23

Wages and SalariesWages and Salaries 245.14245.14 231.48231.48 239.05239.05

EnergyEnergy 71.0371.03 63.6463.64 61.1261.12

Indirect TaxesIndirect Taxes 575.8575.8 533.48533.48 601.22601.22

Advertising and Marketing expensesAdvertising and Marketing expenses 204.94204.94 200.41200.41 233.29233.29

Distribution expensesDistribution expenses 35.4635.46 37.0237.02 44.2344.23

OthersOthers 194.82194.82 238.62238.62 179.61179.61

Non recurring expensesNon recurring expenses 112.59112.59 31.2531.25 83.783.7

Profit/LossProfit/Loss

PBDITPBDIT 425.47425.47 861.9861.9 975.28975.28

PATPAT 249.95249.95 518.16518.16 534.64534.64

DividendsDividends 89.2189.21 141.66141.66 159.81159.81Retained EarningsRetained Earnings 160.74160.74 376.5376.5 374.83374.83

COMPARATIVE INCOME

STATEMENT


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HERO HONDA

2001 2002 2003

PAT 246.87 462.93 580.76

Dividends 66.01 349.67 405.49

Retained

Earnings

180.86 113.26 175.27


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WHAT WENT WRONG??

Complacency Complacency

Motorcycle Market

not realised

Change inpreferences and

trends

Technical Flaws


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Contd.

No technologicalupgradation of

products

High Disposableideal cash

Risk averseinvestment

portfolio

44% in Long terminvestments


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INVESTMENT IN SURPLUS FUNDS

inAs at 31March 2003

%to Total As at 31

March 2002

% to Total

Govt. Securities &

Bank Deposits

8,653 29.7 5,797 25.6

Mutual Funds including UTI 1,739 6.0 510 2.3

Debentures & Bonds 8,698 29.4 4,040 17.9

Preferences Shares 854 2.9 917 4.1

Inter Corporate

Deposits

1,651 5.7 2,609 11.6

Loan to Bajaj auto holding Ltd 140 0.5 184 0.8

Fixed income investments 21,735 74.7 14,057 62.3

Equity Shares based on

Mutual Funds

7,355 25.3 8,499 37.7

Total Cost 29,090 100.0 22,556 100.0

Market Value 29,433 21,235


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ENTRY OF NEW PRODUCTS

BOXER

o support of Kawasakio 100cc motorcycle

o Cheaper & cost saving

PULSARo Big Hit

o Volumes surpassed expectations


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Strengths

1) Market leader in economy segmentand premium segment

2) Monopoly in the three wheelermarket

3) Able to keep raw material cost lowerthan the industry average

4) Widespread distribution network

5) Unchallenged leader in scooter

market

Weaknesses

1) Delay in realizing the potential ofmotorcycle market

2) Highly centralized and paternalisticmanagement style

3) Lack of models in ungeared scootersegment

4) Low ROCE because of huge cashreserves

Opportunities

1) Expected growth in two wheeler

industry2) Increase market share in theexecutive segment

3) Opportunity markets outside India

4) High demand for ungeared scooters

5) Penetration was low

Threats

1) Technologically sound and cash richforeign players

2) High prices of raw materials like steeland plastic

3) Cheap imported motorcycles fromchina

4) Threat from low cost cars in the

future


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MOTORCYCLE SALES: THE INDUSTRY

AND BAJAJ AUTO


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SALE OF TWO WHEELERS(million units)


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DOMESTIC SALES


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ANALYSIS OF CURRENT POSITION

MARCH07 MARCH08 MARCH09

CURRENT RATIO 0.8813 0.8787 0.9539

QUICK RATIO 0.8098 0.6925 0.8149

DEBT EQUITY RATIO 0.2937 0.8404 0.8397

INTEREST

COVERAGE RATIO

283.62 201.04 48.18

PBDIT AS A % OF

SALES

20.13 14.22 12.50

PBIT AS A % OFSALES

18.11 12.25 11.01

PAT AS A % OF

SALES

13.14 8.56 7.54

RETURN ON

CAPITAL EMPLOYED

20.9 39.71 32.75


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THANK YOU

Bajaj Auto Case Final

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