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ANNUAL REPORT 2009-10
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CONTENTS
Chairman's Message
Board of Directors
Company at a Glance
Financial & Business Highlights
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Awards
Economic Environment
Industry and Segment Analysis
Company Performance
Financial Performance
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Environment Management
%:« Outreach Program
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Corporate Information
Directors' Report
\ Corporate Govenance Report
Auditors' Report
Balance Sheet
Profit & Loss Account
Cash Flow Statement
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TWO WHEELS OF
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In the year gone by, Hero Honda sold more than a record million
units of two-wheelers in each quarter and notched its highest-ever
annual revenues, operating income and earnings per share. All
figures indicate that the Company achieved a pole position in the
industry and continues to maintain its lead. Still, we at Hero Honda
consider these achievements as one amongst many milestones in our
long journey ahead, full of promises and further prosperity for everyone
associated with the Company. Today, we pause to ponder what sets us
apart from the rest. Where can a Company that has already been-there-
and-done-that go from here?
Dear Shareholders,
Over the two and a half decades since Hero Honda came into
being, automobile businesses around India have
diversified and expanded at breakneck speed: four
wheelers, tractors, commercial vehicles, financing and what
have you...
03
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Yuji Shiga
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Non-Executive Director
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Pradeep Dinodia
Non-Executive &
Meleveeti Damodaran
Non-Executive &
Ravi Nath
Non-Executive &
Independent Director Independent Director Independent Director
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Dr. Brijmohan Sumihisa Fukuda Toshiaki Nakagawa
Lall Munjal Technical Director Joint Managing Director
Chairman
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Pawan Munjal
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Managing Director & CEO
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Shobhana Bhartia Dr. Pritam Singh Analjit Singh
Non-Executive & Non-Executive & Non-Executive &
Independent Director Independent Director Independent Director
COMPLIANCE OFFICER
Ham C. Kamboj Sr. G.M. - Legal & Company Secretary
04
TWO WHEELS OF
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HERO HONDA MOTORS LIMITED
05
COMPANY AT A GLANCE
WE
BELIEVE IN
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PRODUCT
PORTFOLIO
Hero Honda offers best - in Deluxe, Splendor Plus, 150cc and above the regular sales channels,
- class motorcycles that set Splendor NXG, Passion Company offers premium the scooter is sold
performance and fuel and Passion Pro. The brands like Hunk, CBZ X- through special women
economy standards across s 125cc segment offers
various market segments. p Glamour, Super Splendor
In the 100 cc segment the o and Glamour Fl. The
Company offers a wide n Company also has single
spectrum of bikes starting s offering called Achiever in
from CD Dawn, CD or 135cc segment In the
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Daredevi
ls have
been the
recent OUR
associati
ons with BRAND
the most
The Company connects and sought disciplines of sports in the country. In addition to
engages with its customers after this, Hero Honda had been one of the main Global
through various initiatives Partners of the
and campaigns based on International Cricket
sports, music and Council (ICC) for flagship
entertainment platform. ODI championships
including the World Cup
MTV Roadies and Sa re ga cricket and the Champions
ma pa are some of the Trophy, and more recently
popular ones amongst the the T20 World Cup in
youth segment. Hero England.
Honda FIH Hockey World
Cup 2010, DLF Indian Hero Honda Indian Open Golf tournament is an
Premier League (IPL) annual event with
participation from
06
international marquee
"Just4her" injection
Karizma ZMR.
Besides,
Hero
Honda players. Besides, Hero at the highest level, the
offers a Honda has signed up Company has also been
100 cc -* many Indian sports stars, committed to the
scooter across multiple promotion of various
Pleasure. disciplines of sports, sports at the grass
Besides to promote the brand. root level.
the Other than promoting
sports and sportspersons
07
FINANCIAL & BUSINESS HIGHLIGHTS
Hero Honda notched a record financial performance in FY10 with the
highest ever annual revenues, operating income and earning per share.
Key financial highlights include:
i
Profit Before Tax N Profit After Tax
(Rs. Crores) g (Rs. Crores)
s/sss f/S/J
TWO WHEELS OF
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HtKOhCMiv m. roBsuMrriD ANNUAL REPORT 2009-10
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KEY
MILESTONES
>&&&&
World No. 1 Two Wheeler Company for the
ninth consecutive year
Sales landmark of 30 million two-wheelers
Accomplished production of 11 millionth
i
Splendor motorcycle
59% share in the domestic motorcycle market Net Cash Earning per share »
48 % share in the domestic two wheeler from Operations (Rs.) =
s/sss fffSS
Return on Average Economic
Capital Employed Value Added
(% ) (Rs. Crores)
aT /yyVV sssss
08
ANNUAL REPORT 2009-10 HERO tlONf>A MOTORS LIMITED
09
AWARDS
Brijmohan Lall
Chairman
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Lifetime Achievement Award by ACMA
PHD Lifetime Achievement Award 2009
MM, Lucknow Lakshmipat Singhania Leadership t
Award for 2009
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Pawan Munjal:
Managing Director
&CEO
NDTV Profit Car India Bike
India "Man of the Year"
2009 Award
TWO WHEELS OF
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HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009-10
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Products
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& Company
Awards
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Mr. Ravi Sud - Sr.Vice President & CFO
CNBC TV18 "Best CFO of the Year 2009" in Auto and
Auto Ancillaries category award to Mr. Ravi Sud
"Business Today Yes Bank Best CFO Award" for
X
Liquidity Management
10
ANNUAL REPORT 2009-10 HERO HONDA MOTORS LIMTTED
11
MQ&A
Economic Environment 14
Industry and Segment Analysis 16
Company Performance 18
Financial Performance 20
Manufacturing 22
Rural Marketing 24
Customer Relationship 26
Connecting Through Sports 28
Information Systems 30
Human Relations 32
Environment Management 34
Outreach Program 36
Corporate Information 40
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India's growth was powered by a robust performance by the
manufacturing sector and an improved performance
by the infrastructure sector.
ENVIRONMENT
TWO WHEELS OF
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ANNUAL REPORT 2009-10
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ANNUAI REPORT 2009-10
HERO HONDA MOTOR* LIMITED
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Management Discussion and Analysis
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17
Management Discussion and Analysis
COMPANY PERFORMANCE
Hero Honda consolidated its position further on the back of its
strong rural reach. The Company clocked the sales of
During 2008-09 Hero Honda was the only two wheeler 6.13 lacs units in the entry segment growing by 20 percent
Company that emerged strongly and successfully during and garnering 45 percent share of the segment.
the economic slowdown in India. During 2009-10, as
economic environment in India improved, Hero Honda The motorcycle deluxe segment, which accounted for 66
strengthened and consolidated its hold over the two percent of sales in the domestic motorcycle market, grew by
wheeler market. over 29 percent over last year. Hero Honda dominated the
segment cornering 71 percent of sales.
Hero Honda, despite having the highest base of 3.72
million units in the two wheeler industry, could manage a The motorcycle premium segment grew at a remarkable
remarkable growth of 23.6 percent and ended the year pace and contributed 11.23 lacs sales compared to 7.75 lacs
with sales of 4.6 million. The Company continues to lead last year. This segment now makes up 15 percent of the
both in the domestic two wheeler industry and motorcycle domestic motorcycle market, up from 13 percent in the
segment, with the shares of nearly 48 percent and 59 previous year.
percent respectively.
Hero Honda's performance in the premium segment was
Performance Across Key Segments mixed. Although sales grew at a healthy 29 percent, the
During the year under review, the motorcycle entry Company's share came down from 24 percent to 21
segment grew by only 5percent with volumes of 13.49 lacs. percent.
As a result of this modest growth, this segment accounted
for just 18 percent of the motorcycle industry compared to
22 percent in the previous year.
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HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009-10
The Company continues to lead both in the domestic two wheeler
industry and motorcycle segment, with the shares of nearly 48 %
and 59 % respectively.
To create a larger impact of its products overseas, Hero
In the scooter segment, Hero Honda's Pleasure has been Honda introduced a 20 day sales cum technical training
very well accepted. Sales were pegged at 2.08 lacs units, a module for all overseas training managers at the Hero
growth of 36 percent over last year. This resulted in a Honda National Learning Centre in Gurgaon. The overseas
13.9percent market share. training managers, in turn, are expected to replicate their
learnings in their country-specific locations. Training
In the Hero Honda family. Splendor continued to be the Centres for this have also been established in all expot
largest-selling two wheeler brand with sales of close to 2 markets.
million, followed by Passion with sales of over 1.2 million,
and CD Deluxe with sales of 5.7 lac units. These three Service networks were also strengthened in specific
products accounted for a large chunk of Hero Honda's countries. In Bangladesh, for instance, automated
overall sales. workshops are now in place.
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Management Discussion and Analysis
FINANCIAL PERFORMANCE
The Company spent Rs. 527.63 crores in investing activities.
Investments in production capacities lead to an outflow of Rs.
212.57 crores. The balance was deployed in financial
Sales assets. Financing activities accounted for an outflow of Rs.
The annual sales of the Company grew at 23.59 percent 2,109.31 crores attributable to dividend outflows.
Hero Honda clocked sales volume of 4,600,130 units in
2009-10 compared to 3,722,000 units in 2008-09. In value Capital Expenditure
terms total sales (net of excise duty) increased by 27.9 During the year the Company incurred a capital
percent to Rs.15,758 crores from Rs.12,319 crores in expenditure of Rs.211.57 crores. The funds went into
2008-09. expansion of operations.
14.10%
PAT = PROFIT AFTER TAX
10.40%
PAT/IFO% ^oOM9
PBT = PROFIT BEFORE TAX
7.90%
14.40% PBIT = PROFIT BEFORE
PBT/IFO% [~moS,'* INTEREST ANDTAX
2009-10 2008-09
Inventory Period 10.6 11.0
Operating Cycle 13.3 16.9
Cash Cycle -17.0 -13.1
Dividend Policy
Over the years, the Company has consistently followed a Current Ratio 0.45 0.51
policy of paying high dividends, keeping in mind the cash-
generating capacities, the expected capital needs of the Acid Test Ratio 0.26 0.30
business and strategic considerations. For 2009-10, the
board has recommended a dividend of 1,500 percent
higher than 1,000 percent declared in previous year and has Notes On Working Capital
maintained a payout ratio of 31.3 percent vis-a-vis 36.5 The average of inventory, receivables and payables has
percent in the previous year. Further, board has also been taken for calculations of inventory period,
declared 4,000 percent interim dividend on the occasion of operating and
25th year. cash cycle.
Working Capital management
Hero Honda has always sought to efficiently use the various
components of working capital cycle. The Company has
been able to effectively control the receivable and
inventories enabling it to continue to operate on negative
working capital.
ANNUAL REPORT
2009-10 HERO
HONDA MOTORS
LIMITED
21
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Hero Honda's manufactuing capacity remained under
pressure for the entire year for several reasons. Most
importantly, better than expected peformance of the
Indian economy pushed up the demand for two
wheelers. In addition, the introduction of several new
features and vaiants during the year and a surge in
demand for the Company's scooter Pleasure also
*» caused the manufacturing capacities to be tested.
The variability of the product mix, the production
upgrades and the unexpected surge in demand
provided the Company an oppotunity to optimise
2
heiped Hero Honda bring down overall variable domestic vendor network, as pat of a larger strategy of
manufacturing costs per vehicle during the year. making its supply chain more robust and eficient.
The hig hlight of the year was a doubling of H ero Securing sup plies r om Asian automotive suppliers and
Honda's capacities at its Haridwar plant In fact, the making better use of India's ree trade agreements are
ramp up rom 2008-09 levels was one of the fastest now an integral part of Hero Honda's sourcing plan.
r"fJB T / —ordeci in India's two wheeler history.
nd of the year in review, the Company had a
■tailed capacity of 5.2 million units.
city of this magnitude and robust domestic
To streamline its supply chain, especially at the ront
Hero Honda introduced a inished goods dispatch
automation (FNGD) system. This system has enabled
end,
real-
p
id growth in excess of 20 percent helped Hero time inventory management with the use of
>nda retain its position as the world's largest two- barcodes to identify and track motorcycles and
wheeler manufacturer for yet another year, for the ninth scooters. This level of minute tracking is expected to
time in a row. facilitate cost effective and scientific dispatch and
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encourage lean production.
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ANNUAL REPORT 2009-10 HERO HONDA MOTORS UMmTD
25
Management Discussion and Analysis
CUSTOMER RELATIONSHIP
Front end Experience
Hero Honda's visual identity program aims to give a
consistent, contemporary and youthful brand experience to
Goodlife Program its customers across all its touch points.
The customer has always been at the heat of Hero Honda's
success. While, the new visual identity concept has been designed
keeping in view the evolving customer needs and
Eight years ago. Hero Honda pioneered one of India's changing retail landscape, it symbolises the Company's brand
largest customer loyalty programs, the Passpot Program. values, technology leadership and customer centric focus.
Over the years customers and channel partners have shown The new age design ofers modularity to cater to diferent
immense faith in the program which has gone from space requirement.
strength to strength. Currently, more than ive million plus
customers are enrolled in the program. The new visual identity programme not only gives a fresh
new look to customer touch points, it also enhances and
During the year in review, Hero Honda sought to upgrade enriches their overall experience with Hero Honda.
this unique program and turn into a world class and
contemporary CRM property the Hero Honda Good Life. Learning and Innovation
To enhance the customer experience at all touch points
The new real-time program is magnetic card-based and Hero Honda has intensified focus on sensitising its
customers can connect to the program from anywhere in customer facing teams.
India. It ofers incremental points to members on workshop
and showroom spends. It provides additional avenues to Customised training programs for dealers and their staff
earn bonus points and make easy redemptions. It also has are being developed and deployed. The results have
special member privileges and will incorporate many value stated paying of.
ofers from associate patners in the months to come.
Over 20 new and customised programs were developed
For channel patners, end-to-end processes have been and shared with the dealers and their staf during the year.
provided. There is an exclusive interactive website in which
the channel patners and members are give individual id's
.The website provides all the information and analytics for
reviewing the performance of the program from time to
time. With all authorised outlets now fully upgraded and
operational on the Good Life inteface sotware, the
membership is expected to grow at a much faster pace.
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ANNUAL REPORT 2009-10
Management Discussion and Analysis
INFORMATION SYSTEMS
To fulfill the external and internal needs, Hero Honda constantly focuses on
all aspects of people, process and technology by giving thrust on
training and awareness, building more efficient support processes and
deploying and ensuring usage of the latest technology.
TWO WHEELS OF
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HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009-10
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Hero Honda's consistent efots at becoming a
technology-enabled organisation won it several
accolades during the year in review, including CIO Green t
Edge Award, Top 10 Green IT Enterprise Award, CIO 100
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Award and The India's Best ClOs 2010 Award. iM v**
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ANNUAL REPORT 2009-10 HERO HONDA MOTORS LIMITED
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■ \ talent development courses and e-learning modules
were introduced in line with the organisational needs
V to suppot the Company's mandate of being a world
^ class manufacturer.
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implementation, review and "Gemba-consulting" was
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improvements. The program is being c
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The entry-level induction for workers has been
< strengthened with the help of numerous technical
* training modules in each of the three plants. A new
- program was introduced for plant employees with an
emphasis on inculcating a spiritual mindset and
reinforcing Indian values.
7 Training programs for junior and mid-level
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management emphasised on function-wise
proficiency modules. Some of them were speciically
-/ targeted on leadership, strategic thinking, people
development, inteface management and positive
i •- f attitude across levels and locations.
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training program.
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Duing the year in review, the leadership team also
expeienced a spiritual journey through a tai"
program: 'Leadership through Indian l<
Employee relations at Hero Honda con
cordial even amidst turbul
industrial belt. Duing
election at the Gurgaon
harmoniously.
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TWO WHEELS OF
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ANNUAL REPORT 2009-10 HERO HONDA MOTORS LIMITED
33
Management Discussion and Analysis
ENVIRONMENT MANAGEMENT
Waste heat recovery units are installed to recover heat from
exhaust of DG sets. The recovered heat is used for heating
Hero Honda has always remained committed to clean water in the generator system.
environment, though its environment friendly products and
use of clean manufacturing processes. The green aspect of Efluent treatment plants across all the locations use
the business has been kept active with its energy managers sophisticated technology that treats the waste water,
continuously focusing on identifying new green initiatives. recycles the treated effluent and finally reuses the water.
During the year, Hero Honda enabled some of its key These plants have lead to a drastic reduction in the water
energy management processes. The Company has consumption for the manufacturing purpose over the years,
introduced an Energy Management System (EMS) which from 1.07 kilolitre per vehicle in 2000-01 to just 280 grams per
captures data from the machines for monitoring energy vehicle in 2008-09.
consumption and the data links to SAP. The system helps in
strategising to adapt to new-age energy norms and Over the years Hero Honda has been actively involved in
improves speed and accuracy of processes. rainwater harvesting projects to protect, preserve and
enhance the environment. Access to water is one of the
The Company has also deployed a modern and eficient way most challenging issues facing the world today and the
of managing hazardous and non hazardous solid waste with Company is doing its bit to mitigate the crisis in Haryana,
the introduction of incinerators at all the three plants. These which is one of the driest states of India.
incinerators each have a waste-disposal capacity of 250 kg/
hour and play a key role in preventing toxic Through a multi-layered ground water recharge program at
emissions and controlling land pollution. the factories, Hero Honda has met with considerable
success. For example, at the Dharuhera plant, the ground
A well planned and secured land fill site at the Gurgaon water has been recharged by more 25,000 cubic metres,
plant ensures safe disposal of hazardous waste. despite the fact that Dharuhera receives an average rainfall
of just 726mm per year. Similar recharge projects have been
Organic waste convenors at each plant convets organic executed at the other plants as well.
waste rom kitchen, green leaves and grass cuttings into
useful compost which is used for hoticulture. The Hero Honda Haridwar plant has a 'green roof covering an
area of approx. 45,000s. The Green Roof conserves
The paint shops have a new hanger cleaning system with energy by moderating the roof temperature and the
fluidised technology. This prevents uncontrolled temperature in the surrounding areas. It has also led to a
combustion of hangers, which in turn leads to air pollution. In dramatic reduction in the storm water runof. Equally
addition, Hero Honda's unique initiative of recycling impotant, the green roof has provided an additional bufer
primer from the waste paint sludge is recognised by TERI for the conventional rooing system, by doubling the
corporate award for environmental excellence. service life of the underlying waterproofing membrane.
The Company has switched from a solvent painting system to
a corrosion-resistant, water-based painting system. This
prevents the generation of volatile organic compounds in the
process which considerably reduces wastage of paints.
Moreover, this technology is safe and fire resistant.
TWO WHEELS OF
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HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009-10
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The green aspect of the business has been kept active with its
energy managers continuously focusing on identifying new
green initiatives.
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OUTREACH PROGRAM
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Hero Honda Motors takes considerable pride in its
community relationships, especially ones at the grassroots
that have evolved over time. The Company has played a
pivotal role in bringing an economically and socially
backward region in Dharuhera, Haryana, into the national
um
economic mainstream through direct interventions in
education, healthcare, vocational training, creation of social
and physical infrastructure and environment management. r**.
Many of these programs are the brainchild of the Raman
Kant Munjal Foundation, a trust set up in memory of Hero
Honda's irst managing director.
TWO WHEELS OF
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36
ANNUAL REPORT 2009 10 HEBO HONDA MOTORS LIMITED
37
Management Discussion and Analysis
literate and to get into the BPO industry. Till date, a total of
458 trainees have been trained and awarded Microsot's
In addition to these programs, a number of ongoing diploma certificates.
projects were executed by the Raman Kant Munjal
Foundation as pat of its long term social mandate in the "HAMARIASHA - A Group of Rural Friends", a new initiative by
region. RKMF, was introduced during the year in review. As part of a
pilot project, a group of 35 rural women are being
Over the last decade, the Foundation had established a trained in inancial empowerment with the objective of
vocational training centre to impart training on Tailoring, providing them the ability to sustain a livelihood with local
Embroidery and Carpet Weaving to local women. The recourses. The group is also being sensitised towards social
Centre was recently upgraded and expanded to allow the development issues such as dowry, female foeticide, girl child
training of upto 50 girls per batch. Till date, nearly 1000 girls education and mother and child health care.
have completed their courses at the centre. While most of
the trainees have been placed in the garment industry, a During the year, the women were trained to work on Diwali
number of girls are also self-employed in their respective dia designing, decoration, packaging and marketing work for
villages and neighboring towns. On an average, they have a month in the village of Gujjar Ghatal. RKMF plans to cascade
enhanced their income earning capacity by earning Rs. 3000- this project across diferent villages in the coming months and
10,000 per month. years.
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The Foundation also runs Asha, an educational programme f%#*~
for village children who are first generation learners and
attend to Government Schools. The objective is to provide
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educational standard and to achieve their overall
development.
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CORPORATE INFORMATION
Technical & Financial PLANT LOCATIONS
Collaborators Dharuhera Plant
Honda Motor Co., Limited 69 K.M. Stone,
Statutory Auditors 1-1,2, Chome, Minami Aoyama, Delhi-Jaipur Highway,
A.F. Ferguson & Co., Minato-ku, Tokyo, Dharuhera, Distt. Rewari 122 100,
Chatered Accountants 107-8556, Japan Haryana, India
9, Scindia House, www.world.honda.com Tel: 01274 264 000
Kasturba Gandhi Marg, Fax: 01274 267 018
New Delhi 110001 India Registered & Corporate Office
Tel: 011-2331 5884/2371 3899 34, Community Centre, Gurgaon Plant
Fax:011-23314561 Basant Lok, Vasant Vihar, 37 K.M. Stone Delhi-Jaipur Highway,
Email: afdelhi@vsnl.com New Delhi 110 057 India Sector 33, Gurgaon 122 001
Tel: 011-46044100,2614 2451 Haryana, India
Principal Bankers Fax: 011- 2614 3321,2614 3198 Tel: 0124 2894200/2372123
The Royal Bank of Scotland NV. www.herohonda.com Fax: 0124 237314142
Ba n k of America NT & SA
Canara Bank Registrar & Share Transfer Agents Haridwar Plant
Citibank N.A., Karvy Computershare Pvt.Ltd. Plot No. 3, Sector 10,
HDFC Bank Limited Plot No. 17-24, Vittal Rao Nagar, I.I.E, SIDCUL, Roshanabad,
HSBC Limited Madhapur, Hyderabad-500 081, Haridwar 249 403 Uttrakhand
ICICI Bank Limited Tel No:040-23420815-28, Tel: 01334 238500/239514-16
Punjab National Bank Fax: 040-2342 0814/2342 0859 Fax:01334 239512-13
Standard Chartered Bank E-mail: einward.ris@karvy.com
The Bank of Tokyo-Mitsubishi www.karvycomputershare.com
UFJ Ltd.
Cost Audiors
Ramanath Iyer & Co.,
Cost Accountants
BL-4, (Paschimi), Shalimar Bagh,
Delhi 110008 India
Tel: 011 - 2748 1904,4702 8048
Fax:011-27481904
Email: arrricon@gmail.com,
arrricon@redifmail.com
FINANCIAL RESULT
Directors' Report
Corporate Governance Report
Auditors' Report
Balance Sheet
Profit & Loss Account
Cash Flow Statement
US GAAP
ANNUAL REPORT 2009-10
TWO WHEELS OF
GROWTH
FINANCIAL HIGHLIGHTS AND KEY RATIO
Financial Highlights
(Rupees in crores)
2005-06
2006-07 2007-08 2008-09 2009-10
Sales (Nos.) 3,000,751
3,336,756 3,337,142 3,722,000 4600130
Growth in sales (nos.) - % 14.5
11.2 0.01 11.53 23.59
Total net income 8,870
10,090 10,517 12,565 16,099
Growth in Total inocme - % 17.4
13.7 4.2 19.5 28.1
Profit before tax 1,412
1,246 1,410 1,781 2,832
Profit after tax 971
858 968 1,282 2,232
Share capital 39.94
39.94 39.94 39.94 39.94
Reserves and Surplus 1969
2430 2946 3761 3425
Total debt 186
165 132 78 66
Net fixed assets 994
1,355 1,549 1,694 1,707
Total assets (net) 2,195
2,635 3,118 3,879 3,531
Market capitalisation 17,781
13,753 13,869 21,390 38,827
EVA 641
485 575 835 1723
Key Ratios
(Rupees in crores)
Paticulars 2005-06
2006-07 2007-08 2008-09 2009-10
Long term debt/Equity Nil
Nil Nil Nil Nil
OPBDITVIncomefrom operations-% 16.0
12.2 13.3 14.1 17.4
OPBT**/lncome from operations-% 14.6
10.8 11.8 12.7 16.2
Profit ater tax/ Income rom operations-% 11.1
8.6 9.3 10.4 14.1
Return on average equity- % 55.5
38.3 35.5 37.8 61.4
Return on average capital employed- % 72.3
51.6 49.0 50.9 76.4
EVA/Capital employed-% 32.9
20.1 20.0 23.9 46.5
Dividend per share (Rs.) 20.0
17.0 19.0 20.0 30.0
Dividend Payout- % 46.88
46.29 45.86 36.45 31.3
Earning per share (Rs.) 48.6
43.0 48.5 64.2 111.8
Market value/book value (times) 8.8
5.6 4.6 5.6 11.2
Notes:
* OPBDIT: Operating Profit before Depreciation, Interest and Tax **
OPBT: PBT before Other income
40 ANNUALREPO«T20O9 )0
HERO I lONDA MOTORS LIMfTcD
41
ECONOMIC VALUE ADDED [EVA] STATEMENT
(Rupees in crores)
i-IERO
HONDA
MOORS 2005-06 2006-07
LIMITED
1,945 2,415
EVA
50.0 35.6
Dear Members,
We the Directors of Hero Honda Motors Limited feel elated to present the 27* Annual Repot for the financial year 2009-10. The
Repot is being presented along with the Audited Statement of Accounts for the financial year ended March 31,2010.
FINANCIAL RESULTS
(Rupees in crores)
16,780.62 13,543.09
- Deferred 4.99
Appropriations
Dividend 1,597.50
3. that proper and sufficient care has been taken for the The Guidelines broadly outline a framework for corporate
maintenance of adequate accounting records in sector on important parameters like appointment of
accordance with the provisions of the Companies Act, Directors (including Independent Directors), guiding
1956 for safeguarding the assets of the Company and principles to remunerate Directors, responsibilities of the
for preventing and detecting fraud and other Board, risk management, the enhanced role of Audit
irregularities; Committee, rotation of audit patners and firms and conduct
of secretarial audit.
4. that the annual accounts for the financial year ended
March 31, 2010 have been prepared on a going The Board of Directors of the Company discussed and
concern basis. reviewed the same at its meeting held on April 19,2010. Your
Company while already complying with a major part of these
MANAGEMENT DISCUSSION & ANALYSIS various requirements has already initiated appropriate
Pursuant to Clause 49 of the Listing Agreement, a detailed actionfor compliance.
section on 'Management Discussion and Analysis' (MDA),
formsan integral partoftheAnnual Report. INTERNAL CONTROL SYSTEMS
Hero Honda has a proper, efficient & adequate system of
CORPORATE SOCIAL RESPONSIBILITY internal control. This ensures that all assets are safeguarded
At Hero Honda, Corporate Social Responsibility (CSR) and protected against loss from unauthorised use or
encompasses much more than social outreach programs disposition and the transactions are authorised, recorded
and is an integral pat of the way the Company conducts its and repoted correctly.
business. Detailed information on the initiatives of the
An extensive programme of internal audit and management
Company towards CSR activities is provided in the Corporate
review supplements the process of internal control. Properly
Social Responsibility section ofthe MDA.
documented policies, guidelines and procedures are laid
down for this purpose. The internal control system has been
CORPORATE GOVERNANCE
designed so as to ensure that the financial and other records
Hero Honda believes that the essence of Corporate
ofthe Company are reliable for preparing the financial and
Governance lies in the phrase 'Your Company'. It is 'Your'
other statements and for maintaining accountability of
Company because it belongs to 'You' - the shareholders. The
assets ofthe Company.
Chairman and the Directors are 'Your' fiduciaries and
trustees. Their objective is to take the business forward in
such a way that it maximises 'Your' long-term value.
44
ANNUALHEPORT20O9 10 HERO HONDA MOORS LIMfTcD
45
FIXED DEPOSITS
During the year under review, the Company has not
accepted any deposit under Sections 58A and 58AA ofthe
Companies Act, 1956 read with the Companies (Acceptance of
Deposits) Rules, 1975.
AUDITORS
The Company has also appointed an Audit Committee,
M/s. A. F. Ferguson & Co., Chatered Accountants, New Delhi,
comprising of four Independent, Non-Executive and
Auditors ofthe Company will retire at the conclusion ofthe
professionally qualified Directors, who regularly interact
ensuing Annual General Meeting and being eligible, ofer
with the Statutory Auditors, Internal Auditors, Cost Auditors
themselves for re-appointment. The Company has received a
and Auditees in dealing with matters specified within its
certificate from the auditors to the efect that their re-
terms of reference. The Committee mainly deals with
appointment, if made, at the ensuing Annual General
accounting matters, financial reporting and internal
Meeting would be in accordance with Section 224(1 B) ofthe
controls. During the year under review, the Committee met
Companies Act, 1956. Further, the Auditors have
seven times. A detailed synopsis ofthe functioning and role
represented that they hold a valid Peer Review Certificate
ofthe Audit Committee, its composition and the details of
issued by the 'Peer Review Board' of ICAI.
attendance of its members at various meetings of the
Committee held during the year has been substantiated in The Board accordingly recommends their re-appointment.
the Report on Corporate Governance annexed alongwith
this Report as Annexure-1. AUDITORS' REPORT
The observations of Auditors in their repot, read with the
AUDIT COMMITTEE RECOMMENDATION relevant notes to accounts are self explanatory and
During the year under review there was no such therefore do not require futher explanation.
recommendation of the Audit Committee which was not
accepted by the Board. Hence, there is no need for disclosure COST AUDITORS
ofthe same in this Report. The Board has re-appointed M/s. Ramanath Iyer & Co., Cost
Accountants, New Delhi, as the Cost Auditors of the
RISK MANAGEMENT SYSTEM Company under Section 233B ofthe Companies Act, 1956
Your Company follows a comprehensive & efective system of for the financial year 2010-11 and the necessary approval in
Risk Management. The Company has adopted a regard to appointment of M/s. Ramanath Iyer & Co. as the
procedure for risk assessment and its minimization. It Cost Auditors, has been granted by the Central Government
ensures that all the Risks are timely identified and mitigated in vide its letter dated May 26,2010. The Cost Auditors' Report
accordance with the well structured Risk Management for 2009-10 will be forwarded to the Central Government in
Process. The Board of Directors & the Audit Committee pursuance ofthe provisions ofthe Companies Act, 1956.
periodically review the Risk Management System.
CONSERVATION OF ENERGY, TECHNOLOGY
RATINGS ABSORPTION, FOREIGN EXCHANGE EARNINGS
ICRA Limited, a leading rating agency has reviewed and
AND OUTGO
reaffirmed the rating assigned to the Company for its Non-
Convertible Debenture Programme and Fund Based Limits Information required under Section 217 (1) (e) of the
rom Bankas "LAAA" [pronounced "L triple A"] indicating the Companies Act, 1956, read with Companies (Disclosure of
highest credit quality and "A1 +" [pronounced "A one Plus"] for Particulars in the Repot of the Board of Directors) Rules,
its Non-fund based facilities and "LAAA" [pronounced "L triple 1988 is given as per Annexure - II and forms an integral pat
A with"] to Fund based facilities indicating the highest of this Repot.
creditquality rating carrying lowest credit risk.
During the year under review, rating agency CRISIL assigned the
bank loan ratings of "AAA/Stable" and "P1 +" to the Cash Credit
Limit & Letter of Credit Limit Facility respectively to
yourCompany.
HERO HONDA MOORS LIMITED ANNUAL REPORT 2009 10
TWO WHEELS OF
GROWTH
PARTICULARS OF EMPLOYEES
n/Q
Particulars of Employees as required under Section 217(2A)
Brijmohan Lall Munjal
of the Companies Act, 1956 read with The Companies
Chairman
(Paticulars of Employees) Rules, 1975 forms an integral
pat of this Report. In terms ofthe proviso to Section 219(1) New Delhi
ofthe Companies Act, 1956 the Report and Accounts are July 29,2010
being sent to the shareholders of the Company excluding
the statement of particulars of employees under
Section 217(2A) ofthe Companies Act, 1956. Any member
46
ANNUALHEPOlT2009 10 HERO I lONDA MOTORS LIMfTcD
47
ANEXURE-I TO DIRECTORS' REPORT
Notes:
1. Mr. Sunil Bharti Mittal resigned from the Board of Directors w.e.f. April 21,2009.
2. Mr. Arun Nath Maira resigned from the Board of Directors w.e.f. July 23,2009.
3. Mr. Ravi Nath was appointed as an Additional Director on the Board w.e.f. October 14,2009.
4. Dr. Anand C. Burman was appointed as an Additional Director on the Board w.e.f. January 13,2010.
Mr. Brijmohan Lall Munjal is the father of Mr. Pawan Munjal and Mr. Sunil Kant Munjal and the brother of
Mr. Om Prakash Munjal
is not related to Promoters or persons occupying Quarterly and half yearly results of the Company;
management positions at the Board level or at one level Minutes of the Audit Committee, Shareholders'
below the Board; Grievance Committee, Remuneration Committee and
has not been an executive of the Company in the Committee of Directors' meetings;
immediately preceding three financial years;
is not a partner or an executive of the statutory audit firm
or the internal audit firm that is associated with the
Company and has not been a partner or an executive of
any such firm for the last three years and the legal firm(s)
and
consulting firm(s) that have a material association with
the Company;
HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009-10
TWO WHEELS OF
GROWTH
Risk Management
• Information on recruitment and remuneration of senior
We at Hero Honda have established effective risk
management just below the Board level including
assessment and minimization procedures, which are
appointment or removal of the Chief Financial Oficer
reviewed by the Board periodically. The procedures
and the Company Secretary;
comprises of an in-house exercise on Risk Management,
• Any material defaults in financial obligations to and by carried out periodically by the Company, including the
the Company or substantial non-payments for goods functioning of a structure to identify and mitigate various
sold by the Company; risks faced by the Company from time to time. The structure
also comprises of risk identification and assessment by the
• Fatal or serious accidents, dangerous occurrences, any
concerned departments, identification of controls in
material effluent or pollution problems;
place/mitigation process in place, updation of Risk registers
• Transactions that involve substantial payment towards by various departments and the consolidation and
goodwill, brand equity or intellectual property; presentation of the risk reports by the Chief Risk Officer
• Materially important show cause, demand, prosecution (CRO) before the Board of Directors of the Company.
and penalty notices;
BOARD LEVEL COMMITTEES
• Details of quaterly foreign exchange exposures and
steps taken by the management to limit the risks of
AUDIT COMMITTEE
adverse exchange rate movement; The genesis of Hero Honda's Audit Committee can be traced
back to the Audit Sub-Committee, constituted in 1987. Since
• Sale of material nature of investments and assets, which then it has been dealing with matters prescribed by the
are not in the normal course of business; Board of Directors on a case to case basis. In general, the
• Details of Joint Ventures and Agreements or variations primary role/objective ofthe Audit Committee is to review
thereof; the financial statements of the Company, strengthen
internal controls & look into all transactions that have
• Quaterly Statutory Compliance Report; monetary implications on the functioning ofthe Company.
• Non-compliance of any regulatory, statutory nature or The nomenclature, constitution and terms of reference of
listing requirements and shareholder's service such as the Committee were revised on January 16, 2001 and an
non-payment of dividend, delay in share transfer etc.; Audit Committee was set up in accordance with the
provisions of Section 292A ofthe Companies Act, 1956 and
• Investments strategy/plan;
clause49of the Listing Agreement of the StockExchange(s).
• Any issue which involves possible public or product
liability claims of substantial nature, including any As on March 31, 2010, the Committee comprised of four
judgment or order which may have passed strictures on the Non-Executive and Independent Directors in accordance
conduct of the Company or taken an adverse view with the prescribed guidelines. Mr. Pradeep Dinodia, a
regarding another enterprise that can have negative leading Chartered Accountant, is the Chairman of the
implications on the Company; and Committee. The other members are Dr. Pritam Singh,
Gen.(Retd.) V. P. Malik and Mr. M. Damodaran; all learned
• Significant labour problems and their proposed personalities in their respective fields. The members ofthe
solutions. Also, any significant development in Human Committee have adequate knowledge in the field of finance,
Resources/Industrial Relations front like signing of Wage accounting and law. The role and "terms of reference" ofthe
Agreement, implementation of Voluntary Retirement Audit Committee includes the following:
Schemes etc.
• Overseeing
Code of Conduct
- the Company's financial repoting process and
We at Hero Honda have laid down a code of conduct for all disclosure of its financial information to ensure that
Board members and senior management ofthe Company. the financial statements are correct, sufficient and
The code of conduct is available on the website of the credible.
Company i.e. www.herohonda.com. The code has been
50
circulated to all the members of the Board and senior
management and they have affirmed compliance with the
code of cond uct. A decla ration signed by the Ch ief Executive
ANNUALHEPORT2009 10 HERO I lONDA MOTORS LIMfTcD
51
• Approving
- the appointment ofthe CFO before finalization ofthe
same by the management. Futher while approving
the appointment, it shall assess the qualifications,
experiences background etc.of thecandidate.
52
ANNUALHEPORT20O9 10 HERO HONDA MOORS LIMITED
53
(Amount in Rs.)
Commission Total
25,93,750 29,07,250
18,25,000 20,56,000
TABLE 5: REMUNERATION TO NON-EXECUTIVE DIRECTORS 18,25,000 20,56,000
COMMITTEE OF DIRECTORS
Apart from these Committees, the Company also has a
Committee of Directors. As on March 31, 2010, the
SHAREHOLDERS' GRIEVANCE COMMITTEE
Committee comprised of Mr. Brijmohan Lall Munjal,
This Committee, constituted on January 16, 2001, Chairman; Mr. Pawan Munjal, Managing Director & CEO;
specifically looks into shareholders' and investors' Mr. Toshiaki Nakagawa, Joint Managing Director;
grievances arising out of issues regarding share transfers, Mr. Sumihisa Fukuda, Technical Director in the whole-time
dividends, dematerialisation and related matters and takes employment of the Company; Mr. Ravi Sud, Sr. Vice
requisite action(s) to redress the same. As on March 31, President & CFO and Mr. Ham C. Kamboj, Sr. G.M. Legal &
2010, the Committee had three Non-Executive and Company Secretary as its members.
Independent Directors as its members, in accordance with
the prescribed guidelines. Dr. Pritam Singh is the Chairman Constituted in 1985, the Committee deals with matters
ofthe Committee. The other members ofthe Committee are delegated by the Board from time to time.
Mr. Pradeep Dinodia and Mr M. Damodaran.
Mr. Ham C. Kamboj, Sr. G.M. Legal & Company Secretary, acts The meeting of the committee is convened as per
as the Secretary of the Committee. requirement. During the year under review 8 (eight)
meetings ofthe Committee were held.
The Company has an efficient system of dealing with
investors' grievances. The Chairman and the Managing SHARE TRANSFER COMMITTEE
Director & CEO ofthe Company take personal interest in all This Committee was constituted on January 31, 2007 as a
matters of concern for investors as and when necessary. The measure of Good Corporate Governance practice and to
Company Secretary, being the Compliance Oficer, carefully streamline the work related to share transfer etc. which was
looks into each issue and reports the same to the earlierapproved by theCommittee of Directors. Mr. Ravi Sud,
Shareholders' Grievance Committee. In the meetings ofthe Sr. Vice President & CFO and Mr. Ham C. Kamboj, Sr. G.M.
Committee the status of all shareholders' complaints, Legal & Company Secretary are its members. The meeting of
requests, queries etc. along with letters received from all the committee is convened as per requirement. During the
statutory authorities are reviewed. year under review 24 (twenty four) meetings of the
Committee were held.
During the year, 4 (four) meetings of the Shareholders'
Grievance Committee were held on May 4, 2009; July 29,
DISCLOSURES
2009; October 21,2009 and January 25,2010.
Related Party Transactions
Details of shareholders' complaints and their status are The Company follows the following policy in regard to
given in the section on "General Shareholders' disclosure of the related party transactions to the Audit
Information". The attendance record of members of the Committee:
Shareholders'Grievance Committee is given in Table 6.
a) A Statement in the Summary form of transactions with
TABLE 6: DETAILS OF SHAREHOLDERS'GRIEVANCE related parties in the ordinary course of business is
placed periodically before the Audit Committee.
COMMITTEE
b) There are no material individual transactions with
Name of Committee Position No. of No. of related paties, which are not in the normal course of
Member held meetings meetings business and which are not on an arm's length basis.
held during Attended
his tenure
Disclosures on materially significant related party
Dr. Pritam Singh Chairman 4 4 transactions that may have potential conflict with the
Mr. Pradeep Dinodia Member 4 4 interest ofthe company at large.
54
ANNUALHEPORT2009 10 HERO HONDA MOORS LIMITED
55
Further, since the last AGM, Mr. Ravi Nath, Dr. Anand C. Burman
and Mr. Suman Kant Munjal were appointed as Additional
Directors on the Board of the Company and have been
recommended by the Board of Directors to be appointed as
Directors of the Company at the ensuing AGM of
the Company.
There are no materially significant transactions made by the Brief resume of the said Directors proposed to be
Company with its Promoters, Directors or Management or appointed and re-appointed have been provided along
relatives etc. that may have potential conflict with the with the Notice of the AGM, annexed along with the
interest ofthe Company at large. Annual Report.
Location, date and time of general meetings held during the last three years and Ordinary and Special resolutions passed
thereat are given in Table 7.
There was no matter required to be dealt by the Company through postal ballot, as required pursuant to Section 192A ofthe
Companies Act, 1956,
Day: Monday
Time: 10:30 AM
Financial Calendar
Financial year: April 1 to March 31
For the financial year 2009 -10 results were announced on:
First quater ended June 30,2009 July 29,2009
Second quarter and half year ended September 30,2009 October 21,2009
Third quater & nine months ended December 31,2009 January 25,2010
Fouth quarter and year ended March 31,2010 April 19,2010
For the financial year 2010 -11, results are likely to be announced on:
(Tentative and subject to change)
First quater ending June 30,2010 July, 2010(3"* week)
Second quarter and half year ending September 30,2010 October, 2010 (3 rd week)
Third quater & nine months ending December 31,2010 January, 2011 (3rd week)
Fouth quarter and year ending March 31,2011 April, 2011 (3rd week)
TABLE 8: SHARE PRICE DATA FOR 2009-10 (SHARES OF THE PAID UP VALUE OF RS. 2 EACH)
National Stock Exchange of India Limited, Mumbai (NSE)
58
Apr May lun Jul Aug Sep Oct Nov Dec Jan Feb Mar
4250..00 £
4000.,00 z
3750..00
3500..00
3250..00
3000..00
2750..00
59
Bombay Stock Exchange Limited, Mumbai (BSE)
TABLE 9
Shareholding Pattern
No. of No. of No. of Shares Percentage
SI. No. CATEGORY Holders Shares Held Dematerialised
A PROMOTERS
67 5,78,30,555 5,25,27,445 28.96
1 Indian
1 5,19,18,750 0 26.00
2 Foreign
B PUBLIC SHAREHOLDING
139 42,21,004 41,48,889 02.11
1 Mutual Funds/UTI
22 43,921 25,216 00.02
2 Financial Institutions/Banks
53 91,96,924 91,96,924 04.61
3 Insurance Companies
517 5,98,19,423 5,97,81,223 29.96
4 Foreign Institutional Investors
1,065 9,29,225 8,95,824 00.47
5 Bodies Corporate
53,771 1,40,62,827 90,20,174 07.04
6 Indian Public
16 11,90,990 11,90,990 00.60
7 Trusts
170 2,67,285 2,67,285 00.13
8 Clearing Members
1008 2,06,596 2,06,526 00.10
9 Non Resident Indians
56,829 1,996,87,500 13,72,60/496 100.00
GrandTotal
Foreign Promoter
Mutual Funds/UTI
Financial
Institutions/Banks
Insurance Companies
/
Foreign Institutional
Investors
Bodies Corporate
Shareholding Pattern
Public Shareholding
Category No. of
Holder %to Total Shares %to
Total Holder Numbers Equity
Physical 8,761
15.42 62,427,004 31.26
NSDL 34/155
60.63 135,557,558 67.89
CDSL 13,613
23.95 1,702,938 00.85
TOTAL 56,829
100.00 199,687,500 100.00
PHYSICAL
62 description
6. Miscellaneous
2,897 2,897 0
Opening Received Cleared Pending
83 83 0
211 211 0
305 305 0 ANNUALHEPORT2009 10 HERO I lONDA MOTORS LIMITED
402
65
402
65
0
0
63
HERO HONDA MOTORS LIMITED
PLANT LOCATIONS
Gurgaon Plant
37 K.M. Stone Delhi-Jaipur Highway,
Sector 33, Gurgaon 122 001
Haryana
Tel: 0124 2894200,2372123
Fax:01242373141-42
Dharuhera Plant
69 K.M. Stone, Delhi-Jaipur Highway,
Dharuhera, Distt. Rewari 122100
Haryana
Tel:01274264000
Fax: 01274 267 018
Haridwar Plant
Plot No. 3, Sector 10,
I.I.E.,SIDCUL,Roshanabad,
Haridwar 249 403 Uttrakhand
Tel: 01334 238500,239514-16
Fax:01334239512-13
President & CFO,
e-mail: ravisud@herohonda.com
For and on behalf of the Board
h2
Brijmohan Lall Munjal
NON-MANDATORY REQUIREMENTS Chairman
The Company has not New Delhi
adopted the non- July 29,2010
mandatory
requirements as specified in
Annexure - ID of the Listing
We have examined the compliance of conditions of Corporate Governance by Hero Honda Motors Limited for the year ended
March 31,2010, as stipulated in clause 49 ofthe Listing Agreement ofthe said Company with stock exchanges.
The compliance of conditions of Corporate Governance is the responsibility ofthe management. Our examination was limited to
procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of
Corporate Governance. It is neither an audit nor an expression of opinion on thefinancial statements ofthe Company.
In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has
complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the future viability ofthe Company nor the efficiency or
effectiveness with which the management has conducted the affairs of theCompany.
Manjula Banerji
Partner
(Membership No. 86423)
New Delhi
July 29,2010
We, Pawan Munjal, Managing Director & Chief Executive Officer (CEO) and Ravi Sud, Sr. Vice President & Chief Financial Officer
(CFO) of Hero Honda Motors Limited, to the best of our knowledge and belief certify that:
1. We have reviewed the Balance Sheet and Profit and Loss Account ofthe Company for the year ended March 31,2010 and all
its schedule and notes to accounts, as well as the Cash Flow Statement.
a. these statements do not contain any materially untrue statement or omit to state a material fact or figures or contain
statement that might be misleading;
b. these statements together present a true and fair view of the Company's affairs and are in compliance with existing
accounting standards, applicable laws and regulations.
3. We also certify that based on our knowledge and the information provided to us, there are no transactions entered into by
the Company, which are fraudulent, illegal orviolatethecompany'scode of conduct.
4. We are responsible for establishing and maintaining internal controls and procedures for the Company, and we have
evaluated the effectiveness ofthe Company's internal controls and procedures.
5. We have disclosed, based on our most recent evaluation, wherever applicable, to the company's auditors and through
them to the Audit Committee ofthe Company's Board of Directors:
b. Any fraud, which we have become aware of and that involves Management or other employees who have a significant
role in the Company's internal control systems;
6. We furtherdeclarethatall board membersand senior management have affirmed compliance with the code of conductfor
the year 2009-10.
For Hero Honda Motors Limited For Hero Honda Motors Limited
i[oe a&S%5
New Delhi
Pawan Munjal Ravi Sud
April 19,2010
Managing Directors CEO Sr.Vice Presidents CFO
67
III. FOREIGN EXCHANGE EARNINGS AND OUTGO
(A) EXPORT ACTIVITIES / INITIATIVES TO INCREASE
EXPORTS/ DEVELOPMENT OF NEW EXPORT MARKETS/
EXPORTPLANS
♦ Tell tales, symbols & controls; ♦
EXPORT INITIATIVES DURING 2009-10
Safety Related Standards;
During the year under review, your Company exported
♦ E-10 Compliance (on-going); ♦ 97,699 Two Wheelers (20% growth over the previous year)
and Spare Parts worth Rs. 17.60 crores (23% growth). Further
SpraySuppression;
launched successfully New Models in Srilanka, Bangladesh &
♦ Brake GTR;& Columbia, which led to overall growth in the export
Business. Exhaustive Training on Sales and Technology was
♦ Noise. imparted to the Overseas Training Managers. The Company
has established training centres in all export markets. CD
4. ExpenditureonR&D Deluxe model has been supplied to SriLankan Army. The
(Rupees in crores)
after sale service concepts have been strengthened in
Year Ended Year Ended Bangladesh-with automated workshops.
March 31,2010 March 31,2009
EXPORT PLAN FOR 2010-11
i) Capital 3.15 8.59
• Launch new models in all Export markets successfully for
ii) Recurring 27.16 23.71 growth;
iii) Total R&D expenditure • Enhance Brand building efforts through more ground
as a percentage of sale level activities;
(as per P & L A/c) (%) 0.19 0.26
• Strengthen position in premium segment with ZMR;
B) TECHNOLOGY ABSORPTION, ADAPTATION AND • Training on Spare Parts Management and Safety for
INNOVATION overseas Managers; &
(a) Efforts, in brief, made towards technology absorption,
adaptation and innovation • Focus on After Sale Service.
Complianceto Latest Regulations. The foreign exchange outgo on account of Dividend was
Rs. 103.84 crores compared to Rs. 98.65 crores in the
Further, in last five years the Company, its ancillaries and
previous year.
Vendors have imported technologies regarding Digital
Speedometer, Gear Primary Driven (Forging), Cast Wheel, CV Foreign exchange outgo for import of components, spare
Carburetor, Fuel Injection, RTMI (Real Time Mileage
parts, raw materials and capital goods was Rs. 624.73 crores
Indicator), Non-Asbestos Brake Shoe & Gaskets, Migration
compared to Rs. 476.05 crores in the previousyear.
from Hexachrome to Trichrome, Low Friction High F.E
Engine Technology, LED Lighting Device, Self Sealing -
Puncture Resistance Wheel Tube, Rear Cushion with
Reservoir Tank, Emission Devices - Low Cost Catalytic
Converter, Rear Disk Brake, Oil Temp. Sensor / 02 Sensor,
Honda Intelligent Ignition System, MF Battery and Bank
Angle Sensor.
HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009 10
TWO WHEELS OF
GROWTH
TABLE A
TOTAL ENERGY CONSUMPTION AND ENERGY CONSUMPTION PER UNIT OF PRODUCTION AS PER FORM A
FOR GURGAON, DHARUHERA AND HARIDWAR PLANT(S) OF THE COMPANY.
Gen. (Retd.) V.P. Malik NEID L Hero Honda Motors Limited Audit
00006628 L Reliance Infrastructure Limited Audit
UL BSES Rajdhani Power Limited Audit
UL BSES Yamuna Power Limited Audit
(d) in our opinion, the Balance Sheet, the Profit and Loss
1. We have audited the attached Balance Sheet of Hero Account and the Cash Flow Statement dealt with by
Honda Motors Limited ("the Company") as at March 31, this report are in compliance with the Accounting
2010, the Profit and Loss Account and the Cash Flow Standards referred to in Section 211 (3C) of the
Statement of the Company for the year ended on that Companies Act, 1956;
date, both annexed thereto. These financial statements
(e) in our opinion and to the best of our information and
are the responsibility of the Company's Management.
according to the explanations given to us, the said
Our responsibility is to express an opinion on these
accounts give the information required by the
financial statements based on our audit.
Companies Act, 1956 in the manner so required and
2. We conducted our audit in accordance with the auditing give a true and fair view in conformity with the
standards generally accepted in India. Those Standards accounting principles generally accepted in India:
require that we plan and perform the audit to obtain (i) in the case of the Balance Sheet, of the state of
reasonable assurance about whether the financial affairs of the Company as at March 31,2010;
statements are free of material misstatements. An audit
(ii) in the case ofthe Profit and Loss Account, ofthe
includes examining, on a test basis, evidence supporting
profit ofthe Company forthe year ended on that
the amounts and the disclosures in the financial
date and;
statements. An audit also includes assessing the
accounting principles used and the significant estimates (iii) in the case of the Cash Flow Statement, of the
made by the Management, as well as evaluating the cash flows of the Company for the year ended on
overall financial statement presentation. We believe that that date.
ouraudit provides a reasonable basisforouropinion. On the basis ofthe written representations received from
the Directors as on March 31,2010 and taken on record
3. As required by the Companies (Auditor's Report) Order, by the Board of Directors, none of the Directors is
2003 issued by the Central Government in terms of disqualified as on March 31,2010 from being appointed
Section 227(4A) ofthe Companies Act, 1956, we enclose in as a director in terms of Section 274 (1 )(g) of the
the Annexure a statement on the matters specified in Companies Act, 1956.
paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in For A. F. Ferguson & Co.
paragraph 3 above, we reportasfollows: Chartered Accountants
(a) we have obtained all the information and (Registration No. 112066W)
explanations which to the best of our knowledge and
belief were necessary forthe purposes of ouraudit;
Manjula Banerji
(b) in our opinion, proper books of account as required Partner
by law have been kept by the Company so far as it (Membership No. 86423)
appears from our examination of those books;
Place: New Delhi
(c) the Balance Sheet, the Profit and Loss Account and Date : April 19,2010
the Cash Flow Statement dealt with bythisreportare in
agreement with the books of account;
HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009 10
TWO WHEELS OF
GROWTH
ANNEXURE TO THE AUDITORS* REPORT
[Referred to in paragraph 3 of our report of even date)
Having regard to the nature of the Company's business/
activities/result, clauses 4 (x) and (xiii) of Companies covered in the register maintained under Section
(Auditor's Report) Order, 2003 (hereinafter referred to as the 301 ofthe Companies Act, 1956. The maximum
Order) are not applicable. amount due during the year was Rs.35 crores and
the yearend balance of loansgranted was Rs. Nil.
(i) (a) The Company has maintained proper records (b) In our opinion and according to the information
showing full particulars, including quantitative and explanations given to us, the rate of interest
detailsand situation of the fixed assets. and other terms and conditions of the loans
(b) As explained to us, the Company has a granted by the Company, as referred to in
programme of physically verifying all of its fixed paragraph 4(iii) (a) above, are, prima-facie, not
assets over a period of three years and in prejudicial to the interest ofthe Company.
accordance therewith, physical verification of (c) According to the information and explanations
certain fixed assets ofthe Company was carried given to us, the party, to whom the loans have
out during the year. In our opinion, the frequency been granted by the Company, as referred to in
of physical verification is reasonable having paragraph 4(iii)(a) above, have been regular in
regard to the size ofthe Company and the nature repayment of principal amount as stipulated and
of its fixed assets. The discrepancies noticed on have been regular in payment of interest.
such verification were not material and have been
properly dealt with in the books of account. (d) According to the information and explanations
given to us, there are no overdue amounts in
(c) The fixed assets disposed off during the year, in respect of the loans granted as referred to in
our opinion, do not constitute a substantial part paragraph 4(iii)(a)aboveand interest thereon.
of the fixed assets of the Company and such
disposal has, in our opinion, not affected the (e) According to the information and explanations
going concern status ofthe Company. given to us, the Company has,duringtheyear, not
taken any loans, secured or unsecured, from
(ii) (a) During the year, the inventories have been companies, firms and other parties covered in the
physically verified by the management except for register maintained under Section 301 of the
inventory lying with third parties at the end ofthe Companies Act, 1956. Accordingly, paragraph
year for which confirmations have been obtained in 4 (iii) (f) and (g) ofthe Order are not applicable.
most ofthe cases. In our opinion, the frequency of
the verification is reasonable. (iv) In our opinion and according to the information and
explanations given to us, having regard to the
(b) In our opinion and according to the information
explanations that some ofthe items purchased are of
and explanations given to us, the procedures of special nature and suitable alternative sources are not
physical verification of inventories followed by readily available for obtaining comparable
the management are reasonable and adequate in
quotations, there is an adequate internal control
relation to the size of theCompany and the nature of
system commensurate with the size ofthe Company
its business.
and the nature of its business with regard to
(c) On the basis of our examination ofthe records of purchases of inventory and fixed assets and the sale of
inventories, we are of the opinion that, the goods and services. During the course of our audit, we
Company has maintained proper records of have not observed any major weakness in such
inventories. The discrepancies noticed on internal control system.
physical verification of inventories as compared to
(v) In respect of contracts or arrangements entered in the
book records were not material and have been
Register maintained in pursuance of Section 301 of
properly dealt with in the books of account.
the Companies Act, 1956, to the best of our
(iii) (a) According to the information and explanations knowledge and belief and according to the
given to us, the Company has, during the year, not information and explanations given to us:
granted any loan, secured or unsecured to
(a) The particulars of contracts or arrangements
companies, firms and other parties covered in the
referred to Section 301 that needed to be entered
register maintained under Section 301 of the
in the Register maintained under the said Section
Companies Act, 1956, other than unsecured loans
have been so entered.
aggregating Rs. 100 crores granted to a company
74
ANNUALREPORT2009 10 HERO I lONDA MOTORS LIMITED
75
(ix) (a) According to the information and explanations
given to us and the records of the Company
examined by us, the Company has been regular in
depositing undisputed statutory dues including
provident fund, investor education and protection
fund, employees' state insurance, income-tax,
(b) Where each of such transaction is in excess of Rs.5 sales tax, wealth tax, service tax, customs duty,
lakhs in respect of any party, the transactions excise duty, cess, value added tax, Haryana local
have been made at prices which are prima facie area development tax and other material statutory
reasonable having regard to the prevailing dues applicable to it with the appropriate
market prices at the relevant time except in authorities. We are informed that there are no
respect of certain purchases for which undisputed statutory dues as at the year end
comparable quotations are not available and in outstanding for a period of more than six months
respect ofwhich we are unable to comment. from the date they became payable.
(vi) The Company has not accepted any deposits from the (b) According to the information and explanations
public. given to us and the records of the Company
examined by us, there are no disputed dues in
(vii) In our opinion, the internal audit function carried out respect of sales tax, wealth tax, customs duty and
during the year by firms of Chartered Accountants cess, which have not been deposited. The
appointed by the Management have been following are the particulars of excise duty, service
commensurate with the size ofthe Company and the tax and income-tax dues not deposited/ deposited
nature of its business. under protest by the Company on account of
(viii) We have broadly reviewed the books of account disputes as at March 31,2010:-
maintained by the Company pursuant to the Rules
made by the Central Government for the maintenance
of cost records under section 209 (1) (d) of the
Companies Act, 1956 and are of the opinion that,
Amount paid Period to which Forum where
prima-facie, the prescribed accounts and records have under protest amount relates dispute is
been made and maintained. We have, however, not (Rs. in crores) pending
made a detailed examination ofthe records with a view
to determining whether they are accurate or complete. 1.05 2000-01 and CESTAT
2002 to 2008
2002-03 to 2005-06 Commissioner
Name of the statuteNature ofthe duesAmount* (Appeals)
(Rs. in crores)
0.45 2003-04 to 2005-06 CESTAT
The following matters have been decided in favour of the Company, although the department has preferred appeals at
higher levels:
76
ANNUALREPORT2009 10 HERO I lONDA MOTORS LIMITED
77
HERO HONDA MOTORS LIMITED
BALANCE SHEE
as at March 31, 2010
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital
Reserves and surplus
LOAN FUNDS
Unsecured
INVESTMENTS
DEFERRED TAX ASSETS
CURRENT ASSETS, LOANS AND ADVANCES
Inventories
Sundry debtors
Cash and bank balances
Other current assets
Loans and advances
MANJULABANERJI
Partner
Membership no. 86423
2,750.98 2516.27
HERO HONDA MOTORS 1,092.20 942.56
1,658.78 1573.71
LIMITED 48.14 120.54
1,706.92 1694.25
(R 5 3,925.71 3368.75
up
8 7.88 8.65
ee
s 6
in 436.40 326.83
cr 108.39 149.94
or 1,907.21 219.57
es) 24.82 5.89
Schedule As at March 405.76 311.26
As at March 2,882.58 1013.49
No. 31,2010
31,2009 3,805.06 1525.85
1,026.35 526.97
4,831.41 2052.82
39.94 (1,948.83) (1,039.33)
3,691.68 4032.32
39.94 12
3,425.08
153.08
3,691.68 ANNUAL REPORT 2009 10
TWO WHEELS OF
GROWTH
PROFIT AND LOSS ACCOUNT HERO HONDA MOTORS LIMITED
for the year ended March 31, 2010
(Rupees in crores)
2,831.73 1,781.46
A. CASH FLOW FROM OPERATING ACTIVITIES
Net profit before tax 191.47 180.66
Adjustments for: 6.18 3.57
Add: Depreciation 2.04 (0.64)
Loss on fixed assets sold/discarded 11.80 38.89
Exchange differences
Loss on sale of non-trade current investments 2.27 0.20
Provision for diminution in value of investment: 0.38 12.49
Current non trade investment 2.10 2.53
Long term non trade investment 2.16 (0.75)
Interest - others and financial charges 218.40 236.95
Provision for doubtful debts/written back 35.13 22.04
22.72 34.21
Less: Interest on long term non-trade investments 0.23 0.19
Interest received on loans, deposits etc.
Profit on sale of fixed assets 4.12 12.77
Dividend income 2.72 2.72
On current Investments - Non-trade 208.11 184.32
On long-term investments-Trade 273.03 256.25
Profit on sale of non-trade current investments 2,777.10 1,762.16
(Rupees in crores)
CAPITAL RESERVES #
On shares forfeited (#Rs. 4250)
Share premium account on forfeited ##
shares reissued(##Rs. 25500)
REVENUE RESERVES 1,053.53 225.00
General reserve
Surplus, being balance in profit 2,707.28
and loss account 3,760.81 225.00
2,946.30 814.51
Previous year
(Ruoees in crores)
As at March
31,2010
78.49
UNSECURED LOANS
Other loans and advances
78.49
Sales tax deferment from the State Government of Haryana 66.03
[Include Rs. 33.32 crores (previous year Rs. 12.46 crores) due within one year]
66.03
(Rupees in crores)
Net block
4) FIXED ASSETS
As at As at
March March
Gross block (at cost) Depreciation 31,2010 31,2009
As at AdditionsDeductions As at As at For the On As at
March March March year deductions March
31,2009 31,2010 31,2009 31,2010
84.65 83.95
Tangible assets
78.47 79.30
Land
379.10 367.66
- Freehold 83.95 0.70 84.65
956.85 915.48
- Leasehold # 81.80 81.80 2.50 0.83 3.33
Buildings ## 415.57 26.54 2.09 440.02 47.91 13.95 0.94 60.92 21.63 19.67
Plant and machinery 1,617.22 173.73 38.66 1,752.29 701.74 128.02 34.32 795.44 21.37 18.22
Furniture, fixtures and
office equipment 26.84 4.51 1.54 29.81 7.17 1.92 0.91 8.18
59.69 23.65
Vehicles 27.53 9.04 2.50 34.07 9.31 4.94 1.55 12.70
Computer and data
57.02 65.78
processing machines 56.82 44.25 4.47 96.60 33.17 7.85 4.11 36.91
1,658.78
Intangible assets
Model fee 206.54 25.20 231.74 140.76 33.96 174.72 1,573.71
Total 2,51627 283.97 49.26 2,750.98 942.56 191.47 41.83 1,092.20 48.14 120.54
Previous year 1,938.78 603.03 25.54 2,516.27 782.52 180.66 20.62 942.56 1.706.92 1.694.25
Capital work in progress (including capital advances Rs. 15.02 crores (previous year Rs. 37.21 crores)}
Note: A
# Include land at Haridwar pending registration in the name ofthe Company.
## Include office building at Nagpur pending registration in the name ofthe Company.
82
i_ l_
83
HERO HONDA MOTORS LIMITED
5) INVESTMENTS
Units as at Units as at
March 31,2010 March 31,2009
CURRENT INVESTMENTS
(Cost or fair value which ever is lower)
Non-trade
Unquoted
In Mutual fund units:
Debt fund
(Units of the face value of Rs. 10 each)
25.00
30.00
70.01
47.46 47.46
20.00
25.00
12.50 20.00
20.00
20.00 121.08 161.03
15.00
10.00 21.10
TWO WHEELS OF
GROWTH
A
5) INVESTMENTS (contd.)
Units as at Units as at
March 31,2010 March 31,2009
Tata Mutual Fund
Fixed Investment Plan -2 Scheme-A-
Institutional Plan -Growth 19173646
Fixed Maturity Plan Series 25 Scheme
A -Super High Invest Plan-Growth 25000000
84
15.00 15.00
70.00
(Rupees in crores)
20.00
As at March As at March
31,2010 31,2009
25.00
28.09
33.51
19.17 12.50
22.05
25.00
40.03 40.03
30.00
83.02
129.79 66.56
HERO I lONDA MOTORS LIMITED
15.00
85
HERO HONDA
MOTORS LIMITED
Units as at Units as at
March 31,2010 March 31,2009
41747895
20562256
5) INVESTMENTS (contd.) 13111108
20000000
20000000
Quarterly Interval Fund -Series Ill-
25000000
Institutional Growth Plan
Short Term Fund-Retail Plan-Growth Plan
Monthly Income Plan-Growth Plan 5000000
Religare Mutual Fund
FMP-14 Months -Series ll-lnstitutional Growth 20000000
FMP-14 Months -Series Ill-Institutional Growth
FMP-Series ll-Plan B (15 Months)
15267282
Fidelity Mutual Fund
Flexi Gilt Fund -Growth
20172298
Morgan Stanley Mutual Fund
Short Term Bond Fund Institutional Plus Growth
Axis Mutual Fund 20000000
Fixed Term Plan-Series 1 (384 days)-Retail Growth
10000000
DSP BlackRock Mutual Fund
FMP 13M Series 2-Growth
20542654
UTI Mutual Fund
Fixed Maturity Plan-Yearly Series(YFMP 11/09) 47845516
-Institutional Growth Plan
Fixed Term Income Fund Series VII-1 (428 Days)
-Growth Plan
10000000
Fixed Income Interval Fund -Quarterly Plan Series
Ill-Institutional -Growth Plan
Short Term Income Fund Institutional
-Growth Option 35853 68781
Taurus Mutual Fund
Fixed Maturity Plan 15Months Series 1 47174242
-Institutional Growth Plan
(Units of the face value of Rs. 100 each)
Reliance Mutual Fund
Gold ETF -Open Ended Scheme
6798280
ICICI Prudential Mutual Fund
Flexible Income Plan Premium -Growth
(Units of the face value of Rs. 1000 each)
Reliance Mutual Fund
Money Manager Fund-Institutional Option-
Growth Plan
Repurchase Price Rs. 3240.87 crores
ANNUAL REPORT 2009 10
(previous year Rs. 1555.16 crores)
20.00
25.00 50.00
5.00
10.00
20.00
As at March As at March
20.17 795.81
31,2010 31,2009
51.43
34.74 20.00
25.00 833.88
10.00
5) INVESTMENTS (contd.)
Units as at Units as at
March 31,2010 March 31,2009
Fund of Funds
(Units ofthe face value of Rs. 10 each)
DSP BlackRock Mutual Fund
World Gold Fund -Growth 3690582
AIG Mutual Fund
World Gold Fund Growth 5000000
86
14.49
25.35
21.46
(Rupees in crores)
5.00
275.13
5.00
10.00 15.00 279.50
(0.91)
9.09
102.00
39.97 31.16
1.50 2.50
2.00 2.00
87
HERO HONDA MOTORS
LIMITED
5) INVESTMENTS (contd.)
Units as at Units as at
March 31,2010 March 31,2009
HDFC Mutual Fund
Liquid Fund -Premium Plan -Growth 101578892
(Rupees in crores)
19.50 26.28
8.00
3.20
155.82
0.63
1.00
16.00 1,010.06
0.97
6.18
TWO WHEELS OF
GROWTH
A
5) INVESTMENTS (contd.)
Units as at Units as at
March 31,2010 March 31,2009
UTI Mutual Fund
Treasury Advantage Fund -Institutional Plan -Growth 7093
Liquid Fund
Debentures / Bonds
Face Value of Rs 10000000 each
125% Deccan Chronicle Holdings Limited NCD06JN12 10
Indian Infrastructure Equipment Receivables Trust,
July2009-SeriesA3B 53
Face Value of Rs 980000 each
88
30.19
9.00
(Rupees in crores)
17.15 76.54
As at March As at March
31,2010 31,2009
0.82 10.96
53.21
13.47 36.15
4.90
0.40 35.00
5.91
36.07
5.15
15.24
89
HERO HONDA MOTORS LIMITED
5) INVESTMENTS (contd.)
Units as at Units as at
March 31,2010 March 31,2009
8.60%SardarSarovarNarmadaNigamUmited 09MR15 150 -
8.60% SardarSarovarNarmadaNigam Limited 09MR15 100 -
8.60% SardarSarovarNarmadaNigam Limited 09MR15 10 -
Face Value of Rs 100000 each
Non Convertibile Debentures Emerald Wealth Management - 18300
Asset Linked Portolio -Accelerator-Seies 2 -5000 - Debentures
of Citi Financial Consumer Finance India Limited - 5000
Asset Linked Portfolio -Accelerator-Series 5 -1500
- Debentures of Barclays Investment & Loans
India Limited INR Equity Linked
Principal Protected Debentures - 1500
Asset Linked Potfolio -Accelerator-Series 2 -5000
Debentures of Citi Financial Consumer
Finance India Limited 5000 -
11.50% DamodarValley 11.5 BD20SP10 300 -
8.95% Gujarat Una VikasNigam Limited Sr-8 8.95 BD 21AP16 135 -
Face Value of Rs 65000 each
Tamil Nadu Electicity Board Sr5/03-04 8 Bd 15SP11 500 -
Face Value of Rs. 100 each
Reliance Blended Debt Plus -Hybrid Option
-Series VII-1000000 - Debentures of DSP
Merrill Lynch Capital Limited Series 2007/EQ - 1000000
Reliance Blended Debt Plus -Hybrid Option
-Series X-1000000 -Debentures of DSP
Merrill Lynch Capital Limited Series 2008/AM - 1000000
Reliance Blended Debt Plus -Hybrid Option
-Series XII-1000000 - Debentures of CitiFinancial
Consumer Finance India Limited Series 338 - 1000000
Reliance Blended Debt Plus -Hybrid Option
-Series XIIIB-1000000 - Debentures of
CitiFinancial Consumer Finance
India Limited Series 359 - 1000000
Reliance Blended Debt Plus -Hybrid Option
-Series XIVA-1000000 - Debentures of
CitiFinancial Consumer Finance
India Limited Series 394 - 1000000
8.55% IRFC NCD - 1000000
6.05%GOI2019 - 5000000
50.00
3.14
1.47
3.39
(Rupees in crores)
- 10.00
As at March As at March
31,2010 31,2009
15.23 - 10.00
10.19
1.02
- 10.00
- 183.00
- 50.00 - 10.00
- 15.00 - 10.00
- 9.97
- 48.43
TWO WHEELS OF
GROWTH
A
5) INVESTMENTS (contd.)
Units as at Units as at
March 31,2010 March 31,2009
90
16.89
9.51
(Rupees in crores) 26.40
(1.37)
As at March As at March
25.03
31,2010 31,2009
238.91 367.21
(0.90) (1.44)
238.01 365.77
8.98
4.54
4.50
16.42
4.47
50.02
13.51 75.42
268.63 491.97 (12.42)
63.00
91
HERO HONDA MOTORS LIMITED
5) INVESTMENTS (contd.)
Units as at Units as at
March 31,2010 March 31,2009
current investment into long term investment
and has provided for loss on reclassifiaction.
Unquoted
Face Value of Rs. 10 each
National Stock Exchange Limited 75000 75000
Face Value of Rs. 1 each
Bombay Stock Exchange Limited 140400 140400
Non-trade
Bonds/ Debentures
Quoted
Non-trade
Unquoted
5.36
24.74
13.85
(Rupees in crores)
20.15
5.94 5.94
32.20 32.20 25.70
15.03
273.21 0.63
(0.38) (0.02)
272.83 (0.61)
TWO WHEELS OF
GROWTH
(Rupees in crores)
Trade
Unquoted
2715000 2715000 3.46 3.46
Equity Shares 3,925.71 3,368.75
Equity shares of Rs. 10 each fully paid up of
Hero Honda Finlease Limited At Cost
The following investments were purchased and sold during the year (Rupees in crores)
Sold
Purchased Amount Units Amount
Units
Mutual Funds
Liquid Fund 9,805.47 7,446,026,558 10,644.72
Units ofthe face value of Rs.10 each 6,823,723,031 2,952.47 218,370,561 2,952.47
Units ofthe face value of Rs.100 each 218,370,561 1,215.07 9,819,892 1,369.88
Units ofthe face value of Rs.1000 each 8,867,310
Debt Fund 3,554.12 2,553,230,416 3,530.57
Units ofthe face value of Rs.10 each 2,624,101,856 795.81
Units ofthe face value of Rs.100 each 47,174,243 1,631.02 6,791,330 800.50
Units ofthe face value of Rs.1000 each 13,556,684
Fund of Funds 8,690,582 10.00
Units ofthe face value of Rs.10 each
Equity Fund 197.50 265,097,284 293.18
Units ofthe face value of Rs.10 each 173,856,184
92 ANNUALREPORT2009 10
HERO I lONDA MOTORS LIMITED
93
(Rupees in crores)
Purchased Sold
Units Amount Units Amount
52,201 5.36
247,377 24.74
Face Value of Rs. 1000 each
10.75% Shriram Transpot NCD -Maturity-26.08.2012
8.40% L&T Finance Limited-Maturity-08.03.2013 500 5.00
Face Value of Rs. 100000 each
Citi Financial Debentures -Redeemable Non Convetible 10,000 100.90
Secured NCD Issue Series-326 1,300 13.85
6.85% India Infrastructure Finance Company Limited 2014
Tax Free Bonds-Maturity 22.01.2014
1,000 47.40
12.00% Shriram Transpot NCD -Maturity-18.07.2014
Face Value of Rs. 500000 each
200 20.15
7.20% Fullerton India Credit Co. Limited-Maturity-10.11.2010
200 20.07
Face Value of Rs. 1000000 each 250 25.70
7.90% Rural Electrification Corporation -Maturity-06.10.2012 150 15.03
8.45% Rural Electrification Corporation -Maturity-19.02.2015 20,542.61 19,773.90
7.75% Indian Railway Finance Corporation Limited-Maturity-26.03.2011
7.65% HDFC Bonds-Maturity-15.12.2012
The following investments were purchased and sold during the year under Portfolio Management Scheme At Cost
(Rupees in crores)
Purchased Sold
Units Amount
Mutual Funds
Liquid Funds HERO HONDA MOTORS 177,470,408 250.09
LIMITED
Units ofthe face value of Rs.10 each 1,151,198 15.39
Units ofthe face value of Rs.100 each
Debentures / Bonds
(Rupees in crores)
Purchased Sold
5) INVESTMENTS (contd.)
Units Amount Units Amount
1,000,000 10.00
Reliance Blended Debt Plus -Hybrid Option -Series
Xll-Debentures of CitiFinancial Consumer Finance
India Limited Series 338 1,000,000 10.00
Reliance Blended Debt Plus -Hybrid Option -Series
XIIIB-Debentures of CitiFinancial Consumer Finance
India Limited Series 359 1,000,000 10.00
Reliance Blended Debt Plus -Hybrid Option -Series
XIVA-Debentures of CitiFinancial Consumer Finance
India Limited Series 394 1,000,000 10.00
Reliance Blended Debt Plus -Hybrid Option -Series
VII-1000000 - Debentures of DSP Merrill Lynch
Capital Limited Series 2007/EQ 1,000,000 10.00
Reliance Blended Debt Plus -Hybrid Option -Series X-
1000000- Debentures of DSP Merrill Lynch Capital
Limited Series 2008/AM
5,978 0.31 5,978 0.31
94
35.00 10.96
1.02 53.21
50 5.91
6.16 50 6.16
5.15
15.23
10.19
95
HERO HONDA MOTORS
LIMITED
Purchased
Units Amount
5) INVESTMENTS (contd.)
Commercial Papers
5,700 0.18
Shares of Face value of Rs 1 each
Hindustan Unilever Limited
Marico Limited 2,000 0.10
Motilal Oswal Financial Services Limited 800 0.03
Zee News Limited 1,900 0.08
18,414 0.37
Shares of Face value of Rs 2 each 10,000 0.50
Areva T & D India Limited 26,400 0.08
Shares of Face value of Rs 10 each 5,500 0.04
Asian Hotels Limited 5,150 0.07
Canara Bank 4,200 0.10
Corporation Bank 24,900 0.05
ETC Networks Limited 17,025 0.33
Great Offshore Limited 2,000 0.12
Gujarat NRE Coke Limited 7,200 0.11
Geecee Ventures Limited 1,550 0.06
Indraprastha Gas Limited 20 0.00
HSBC Investdirect (India) Limited 11,475 0.31
Ispat Industries Limited 1,850 0.03
Kalyani Steels Limited 2,592.17
Micro Inks Limited
Orientel Bank Of Commerce
Punjab National Bank As at March 31,2010
Religare Enterprises Limited Book Value Market Value
Surana Industries Limited
Union Bank Of India
25.03 25.03
3900.68
3,925.71
Aggregate value of
Quoted investments -Long Term
Quoted investments-Current
Unquoted investments
ANNUAL REPORT 2009 10
4,200 0.10
24,900 0.05
17,025 0.33
2,000 0.12
1,700 0.04
7,200 0.11
4,700 0.03
1,550 0.06
5,625 0.09
20 0.00
85,754 0.51
11,475 0.31
1,850 0.03
(Rupees in crores) 5,700 0.18 2,816.06
Sold
Units Amount 2,000 0.10
As at March 31,2009
800 0.03
Book Value Market Value
1,900 0.08
18,414 0.36
10,000 0.51 63.61 40.55
100 4.55
26/100 0.08
100 4.50 3305.14
5,500 0.05
100 4.47 3,368.75
5,150 0.07
TWO WHEELS OF
GROWTH
A
CURRENT ASSETS
INVENTORIES #
Stores and spares (at cost or under)
Loose tools (at cost or under)
Raw materials and components *
Finished goods *
Two wheelers
Spare parts
Work in progress *
96
7.41 5.26
108.39 149.94
0.26 0.20
(Ruoees in crores) 0.18
19.68 28.52
22.67 32.49 307.94 237.42
29.80 22.68 75.34 62.51
436.40 326.83 18.22 11.16
4.26 0.17
405.76 311.26
0.38 0.70
2.28 3.24
7.41 5.26
2.88 7.12
102.85 138.88
115.80 155.20 HERO I lONDA MOTORS LIMITED
97
(Rupees in crores)
As at March As at March
31,2010 31,2009
1,066.48 794.23
29.64 28.59
CURRENT LIABILITIES 1,597.50
Sundry creditors:* 3,805.06 1525.85
Total outstanding dues of creditors other
than micro and small enterprises 599.06 399.38
44.48 8.06
Other liabilities ##
341.00 67.87
Security deposits from dealers
4.14 6.73
Interim dividend payable
37.67 44.93
1,026.35 526.97
PROVISIONS
Proposed dividend
Provision for taxation less payments
Provision for tax on dividend
Employee benefit schemes
Warranties
# No due to micro and small enterprises (refer note -12 of Schedule -12)
## Other liabilities do not include any amount outstanding as on March 31,2010 which are required to be credited to the
Investor Education and Protection Fund (Fund)
As at March
As at March
31,2010
31,2009
1.38
2.29
6.50
6.36
AMNUALREPOin 20W-10
TWO WHEELS OF
GROWTH
(Rupees in crores)
4.12 12.77
2.72 2.72
Dividend income:
6.84 15.49
On current investments - Non trade
35.13 22.04
On long term investments - Trade
196.31 145.43
0.75
Interest on long term non trade investments
0.23 0.19
Profit on sale of non trade current investments*
63.81 38.20
Provision for doubtful debts written back
4.21
Profit on sale of fixed assets
34.08 23.99
Income from services rendered
340.61 246.09
Exchange difference
Miscellaneous income
f After adjusting loss on sale of current investments aggregating Rs. 11.80 crores (previous year Rs. 38.89 crores)
98
ANNUAL REPORT 2009-10 HERO HONDA MOTORS LIMITED
99
(Rupees in crores)
# Research and development expenses of Rs. 27.16 crores (previous year Rs. 23.71 crores) have been charged to respective heads.
HERO HONDA MOTORS LIMITED ANNUAL REPORT 2009-10
TWO WHEELS OF
GROWTH
(Rupees in crores)
* Income tax deducted at source Rs. 0.55 crore (previous year Rs. 1.87 crore)
100
ANNUAL REPORT 2009-10 HERO HONDA MOTORS LIMITED
101
vi) Employee benefits
a) Defined contribution plan
Provident fund, Superannuation fund and Employee' State Insurance Corporation (ESIC) are the defined
contribution schemes offered by the Company. The contributions to these schemes are charged to the profit and loss
account of the year in which contribution to such schemes becomes due.
b) Defined benefit plan and Long term Employee benefits
Gratuity liability and long term employee benefits, are provided on the basis of an actuarial valuation made at the end
of each financial year as per projected unit credit method. Actuarial gains or loss arising from such valuation are
charged to revenue in theyear in which they arise.
vii) Foreign currency transactions
Exchange differences are dealt with as follows:-
Transactions in foreign currency are recorded at the exchange rate prevailing at the time of the transaction. All loss or
gain on translation is charged to revenue in the year in which it is incurred.
Monetary assets and liabilities denominated inforeign currency are restated at the rate prevailing attheyearend and
resultant gain or loss is recognised.
In respect of forward contracts, the forward premium or discount is recognised as income or expense over the life of
contract in the profit and loss account and the exchange difference between the exchange rate prevailing at the year end
and the date ofthe inception ofthe forward exchange contract is recognised as income or expense in the profit and
loss account,
viii) Sales
Sale of goods is recognised at the point of despatch of finished goods to the customers. Gross sales are inclusive of
applicable excise duty and freight but are exclusive of sales tax. Services income is recognized when the services are
rendered.
Scrap is accounted for on sale basis.
ix) Warranty claims
Warranty costs are provided on accrual basis on the total sales of two wheelers during the year, which are based on past
experience of claims,
x) Research and development expenses
Research and development expenditure of a revenue nature is expensed out under the respective heads of account in the
yearin which itisincurred.
xi) Taxation
The provision for taxation is ascertained on the basis of assessable profits computed in accordance with the provisions
ofthe Income-tax Act, 1961.
Deferred tax is recognised, subject to the consideration of prudence, on timing differences, being the difference
between taxable income and accounting income that originate in one period and are capable of reversal in one or
more subsequent periods.
xii) Provisions and contingent liabilities
Provision involving substantial degree of estimation in measurement are recognized when there is a present
obligation as a result of past events and it is probable that there will be an out flow of resources. Contingent liabilities
are not recognized but are disclosed in the notes.
xiii) Derivatives
Foreign currency derivatives are used to hedge risk associated with foreign currency transactions. All open positions
as at the close of the year are valued by marking them to the market and provision is made for losses, if any.
2. CONTINGENT LIABILITIES: (Rupees in crores)
As at March As at March
31,2010 31,2009
i) In respect of excise matters 13.72 8.17
The above matters are subject to legal proceedings in the ordinary course of business. The legal proceedings when
ultimately concluded will not in the opinion of management, have a material effect on the result of operations or the
financial position ofthe Company.
3 Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 59.32 crores (previous
year Rs. 92.37 crores).
4 The Company has entered into operating lease agreements for motor vehicles, dies and data processing machines. These
lease arrangements are cancellable in natureand range between two to fouryears.The aggregate lease rentals underthese
arrangements amounting to Rs. 9.04 crores (previous year Rs. 10.51 crores) have been charged under "Lease rentals" in
Schedule 10.
5 As the Company's business activity falls within a single primary business segment viz. "Two wheelers and its parts" and is a
single geographical segment, the disclosure requirements of Accounting Standard (AS-17) "Segment Reporting", notified in
the Companies (Accounting Standards) Rules, 2006arenotapplicable.
6 Two wheeler sales are covered by a warranty period of two/three years. The details of provision for warranties are as under:
(Rupees in crores)
ii) AssociateoftheCompany
Managerial Remuneration
Mr. Brijmohan Lall Munjal Mr.
Pawan Munjal
Mr.Toshiaki Nakagawa
Mr. Yutaka Kudo (upto May 30,2008) Mr.
Sumihisa Fakuda (w.e.f June 1,2008)
Balance outstanding at the year end
-Payables (including commission)
This year Previous Year 100.00 495.50
100.00 545.50
519.19 98.65 0.08 3.63
416.36 324.01 10.49 8.82
15.91 11.67
15.91 32.54
0.44 0.38
34.39 15.36 (Rupees in crores)
c) Enterprises over which key management personnel and their relatives are able to exercise significant influence
(Rupees in crores)
8 Earnings pershare
The Company has entered into Discretionary Portfolio Management Agreements, administered through ICICI Prudential
Asset Management Company Limited-PMS, Escorts Securities Limited, Reliance Capital Asset Management Ltd, Fortis
Investment Management, Birla Sunlife Asset Management Company Private Limited collectively called Portfolio Managers. In
terms of the said agreements, the Portfolio Managers have dealt in mutual funds, debentures, bonds, government
securities, equity shares, equity stockfutures, equity stock options, equity index options and such other securities, made on
behalf of the Company. However, there are no outstanding derivative contracts as at March 31,2010.
Name ofthe Nature of Amount* Amount paid Period to which Forum where
statute the dues under protest amount relates dispute is pending
* Amount as per demand orders including interest and penalty wherever quantified in the order. **
Balance of unpaid amount has been stayed.
Thefollowing matters have been decided in tavourofthe Company,although thedepartment has preferred appeals at higher levels:
(Amount Rupees in crores)
Central excise laws Excise duty 2.57 1986-87 to 1990-91 Supreme Court
0.03 2005-06 to 2008-09 CESTAT
Service tax 0.03 2005 High Court
Income-tax Act Income-tax 8.39 1987-88,1989-90, High Court
1992-93,1993-94,
1995-96 to 1998-99,
2000-01
12.30 1999-00,2001-02 Income Tax
Appellate Tribunal
11 The Company's borrowing facilities, comprising fund based and non fund based limits from various bankers, are secured by
way of hypothecation of inventories, receivables, movable assets and other current assets.
12 The Company has identified parties covered under the "The Micro, Small and Medium Enterprises Development Act, 2006"
on the basis ofthe confirmation received. There is no outstanding balance payable as at the close ofthe financial year to
such parties. Further, no interest has been paid or payable to such parties under the said Act.
13 The categorywise derivative instruments outstanding as at March 31 are as under:
14 Employee Benefits
(Rupees in crores)
Defined contribution plans
This year Previous Year
Employer's Contribution to Provident Fund 15.20 11.67
Employer's Contribution to Superannuation Fund 6.64 5.17
Employer's Contribution to ESIC 0.69 0.49
Note:- The estimates of future salary increases considered in the actuarial valuation take into account inflation seniority
promotion and other relevant factors such as supply and demand in the employment market.
Motorised two wheelers upto Nos. 200000 200000 5400000 5200000 4596244 3721844
350CC engine capacity
* The Company's products are exempt from Licensing requirements under New Industrial Policy in terms of Notification no.
S.0.477(E) dated 25th July,1991.
** On multiple shift basis, as certified by the managementand relied on bytheauditors being a technical matter.
***lncludes218 (previous year 220) two wheelers produced and capitalised during the year.
b) Particulars in respect of opening stock, sales and closing stockfor each class of goods dealt with by
the Company:
(Value Rupees in crores)
* It is not practicable to furnish quantitative information in view of the considerable number of items diverse in size and
nature. These items in value individually account for less than 10% of the total value of the stocks and turnover of the
aforesaid spares.
+ Excluding218 (previousyear220) twowheelerscapitalised.
Excludes Rs. 0.62 crore (previous year Rs 0.55 crore) for two wheelers produced and capitalised during theyear.
Excludes imported items sold and purchased as indigenous components.
AMNUALREPOin KXW-10
Royalty
Technical guidance fee
Model fee
Export commission
Travel and other accounts
Advertisement and Publicity
h) Managerial remuneration:
(Rupees in crores)
Computation of net profit in accordance with section 198 ofthe Companies Act,1956.
(Rupees in crores)
Net profit as per section 349 ofthe Companies Act,1956 2,956.76 1,861.64
GROWTH
PART IV OF SCHEDULE VI HERO HONDA MOTORS LIMITED
TO THE COMPANIES ACT, 1956
Balance Sheet Abstract and Company's General Business Profile
I. Registration Details
Registration No. 17354
State Code 55
Balance Sheet Date 31.03.2010
V. Generic names of Three Principal Products/ Services of Company (as per monetary terms)
Item Code No. (ITC Code) 87112003
Product Description Motorised two wheelers upto
350cc engine capacity
2010
2009 2008 2007 2006
Net Profit after tax for the year as per audited accounts 22,318.30
Add / (Less): Profit / (Loss) of 12,817.60 9,678.80 8,578.90 9,713.40
- income from investments (unrealised gain/loss)
- affiliated company 15.13
- held to maturity securities 2.62 12.16 10.67 30.60
- Exchange fluctuations 22.90
- Depreciation effect of exchange fluctuations 2.41 11.30 (8.40)
- Depreciation on leased assets 0.68 0.68 5.37 18.26
- Lease rentals paid (76.60)
- Interest portion of lease rentals 135.58
- Provision for deferred tax (5.15) (9.90)
Net Income as per US GAAP 22,330.69 (151.18) 180.33 (167.24) (103.56)
12,669.72 9,871.97 8,439.00 9,722.28
CURRENT ASSETS
Cash and cash equivalents 19,072.12
Trade accounts receivables 1,083.88 2,195.72 1,310.92 357.82 1,587.22
Inventories 4,364.04 1,499.38 2,974.38 3,352.48 1,586.58
Pre-paid expenses and other current assets 4,605.78 3,268.34 3,171.04 2,755.84 2,265.54
3,171.48 1,911.49 2,666.58 2,773.08
Total current assets 29,125.82
Investment (held to maturity securities) 3,138.99 10,134.92 9,367.83 9,132.72 8,212.42
Inestment in mutual funds 37,126.22 416.79 1,599.99 1,612.79 1,595.18
Investment in affiliate, at equity 282.33 33,637.31 24,617.11 18,522.31 19,680.81
Property, plant and equipment 16,919.54 267.20 264.58 252.42 241.75
16,790.44 15,494.75 13,401.08 9,765.51
Total assets 86,592.90
61,246.66 51,344.26 42,921.32 39,495.67
LIABILITIES
(Rs. In millions)
Profit & Loss statement for the year ended March 31 (As per US GAAP)
(Rs. In millions)