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Hero MotoCorp Ltd.

BSE: 500182 Sector: Auto
NSE: HEROMOTOCO ISIN Code: INE158A01026
BSE 00:00 | 24 Sep 3105.60 -60.10
(-1.90%)
OPEN

3196.40

HIGH

3196.40

LOW

3060.00

NSE 00:00 | 24 Sep 3110.20 -65.00
(-2.05%)
OPEN

3175.30

HIGH

3183.00

LOW

3080.05

OPEN 3196.40
PREVIOUS CLOSE 3165.70
VOLUME 15135
52-Week high 3895.00
52-Week low 3026.25
P/E 16.80
Mkt Cap.(Rs cr) 62,019
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 3196.40
CLOSE 3165.70
VOLUME 15135
52-Week high 3895.00
52-Week low 3026.25
P/E 16.80
Mkt Cap.(Rs cr) 62,019
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Hero MotoCorp Ltd. (HEROMOTOCO) - Chairman Speech

Company chairman speech

Dear Shareholders

We are living in a world of rapid socio-economic change driven bytechnology and innovation. The critical drivers of growth such as manufacturingcommunication and transportation etc. are undergoing phenomenal transformation thanks tothe advancement in modern science and technology.

Consequently our world has virtually turned into a global villagedriven by easy and convenient access to data and information breaking down geographicalbarriers.

Over the past few years all these have led to a growing awareness ofair quality sustainable environment carbon emission green house effects and similarconcerns. With increasing need to reduce carbon footprint across the globe electrictransportation has therefore become an environment-friendly alternative.

Governments around the world are trying to bring down the pollutionlevels by enforcing stricter emission norms levying heavier tax on the purchase ofautomobiles and providing special concessions or subsidies for the purchase of electricvehicles (EV). Continuous research and development by manufacturers is also drivingadvancement in battery technologies with longer life.

Amidst all the path-breaking changes across the globe our companyscaled new heights with ‘customer satisfaction' at the core of our philosophyand practice.

Thanks to the teeming millions of our satisfied customers HeroMotoCorp set a new global benchmark - 7.59 million unit sales of motorcycles and scootersin FY'18 – thereby consolidating our strong market leadership.

It was a great year for us with positive developments across functionswhich are aptly reflected in our profitability and topline growth during the year.

Future Ready

At Hero MotoCorp we are cognizant of the latest trends and constantlyequipping ourselves with new technologies to be able to stay ahead of the curve.

Deeply embedded in our culture is an intense desire to make adifference in the lives of our customers by staying sensitive towards their ever-changingneeds. Our engineers at the Centre of Innovation and Technology (CIT) – the R&Dcentre at Jaipur in the northern Indian state of Rajasthan – are accordinglyworking on multiple projects of future mobility solutions including a range ofmotorcycles with higher engine capacities scooters and Electric Vehicles (EVs).

In FY'18 we continued to augment our product portfolio with theintroduction of various new models across segments. We also showcased a range of newproducts – including motorcycles with higher engine capacities and new 125ccscooters at the Auto Expo – the Motor Show in Greater Noida near Delhi in the monthof February. Some of these products have already been introduced in the market and theothers will be launched in the coming months in FY'19.

As you may be aware we have made a substantial investment in aBangalore-based tech start-up called Ather Energy an e-vehicle manufacturing companywhich launched its first smart electric scooters and a public commercial charginginfrastructure.

Simultaneously our engineers at CIT are also working on electrictwo-wheelers and we would be ready to introduce these products at an appropriate time.

With Innovation and New-Technology as two pillars of our vision at HeroMotoCorp we have recently created an incubation center within our eco-system whichfunctions like a start-up with mentors from within and outside of Hero. Aptly named‘HeroHatch' the incubation centre aims to foster innovation from within theorganization.

The objective of creating an eco-system of innovative and disruptivethinking has been promoted throughout the organization with the ‘Idea Contest' -an open for all multi-tiered in-house competition allowing employees to think out of thebox beyond their routine tasks.

Our effort to drive a culture of innovation is not limited to ourinternal stakeholders. With an aim to stay ahead of the curve and advance our technologywe have adopted the concept of Open Innovation to tap into the global expertise network.

In addition to it the Hero Campus Challenge - an annual collegecompetition organized across the top engineering and management colleges of India - aimsto crowd-source solutions to real-time challenges from the best brains of India followingthe approach of Open Innovation.

An Expanding Global Footprint

This year Hero MotoCorp has expanded its global presence to 37countries across Asia Africa and South and Central America and is now gearing up to ridethe wave of ever-evolving global political dynamics as it continues to expand itsfootprint.

Amidst all the global political and economic upheavals we have chosento stay the course and kept our commitment to all our global markets. Our sustained brandbuilding across markets during the economic downturn has now begun to yield results withdouble-digit growth in our Global Business in FY'18.

We initiated a series of programs in the global sales and marketingoperations during FY'18 which included dealer sales processes sales-person trainingand channel restructuring in our global markets and we will continue to work on these.

I would like to acknowledge the efforts commitment and loyalty of ourglobal distributors who have stood by us and helped our Company wade through thechallenging times.

Building Capacity With Fiscal Prudence

It was over 30 years ago when we set up our first manufacturingfacility – at Dharuhera in the northern Indian state of Haryana.

We have recently commenced work at our eighth effectively averaging anew Hero plant every four years!!

We recently commenced construction of our new manufacturing facility -at Chitoor in the southern Indian state of Andhra Pradesh – that is our sixth plantin India in addition to the two facilities in global locations – in Colombia andBangladesh.

Once operational the Chitoor plant will take our overall installedcapacity to about 11 million units in the next two years. The new plant - our firstmanufacturing facility in South

India - will enable us to enhance our operational efficiencies inservicing the markets in the region.

This gives you a fair idea of the speed with which our organisaiton hasgrown! It goes to demonstrate how Hero MotoCorp has consistently driven the growth of thetwo-wheeler industry for the past three decades.

We are also venturing into new verticals of business to expand thebrand's operational and aspirational canvas. One such initiative in this direction isthe setting-up of a new line of merchandise and accessories. The development of thesebegan during the latter half of the year and we are working aggressively towards bringingthem into the market soon.

We have also been constantly rationalizing our costs. Our innovativeLEAP initiative completed five years of journey and over the years was able to achievesubstantial savings. LEAP has enabled our company to improve the gross margin to partiallymitigate the headwind effect of higher commodity costs.

Regulatory Changes

Even as we make our processes more robust efficient and digital theexternal environment continues to bring new challenges. The next two years will witnessnumerous changes being brought into effect by either regulations or technologyup-gradation. As a responsible OEM we have taken numerous steps to build capability inour entire ecosystem including our vendors and supply chain partners so that they arealso ready to meet these changes.

We are also including more automation in our processes and encouragingour vendors and suppliers to move to automation wherever appropriate to ensureworld-class quality and productivity.

The implementation of the stricter exhaust emission norms in India -Bharat Stage (BS) VI - in 2020 is a major milestone ahead for the entire industry. I amquite sure everyone within the Industry is seized of this and putting in the best ofefforts to deal with this challenge. At Hero MotoCorp we have been proactively preparingfor this major transition and will be ready with our BS VI vehicles before the due date ofimplementation - April 1 2020.

The implementation of Goods and Services Tax (GST) in the year gone bywas a landmark development – indeed one of the biggest transformations in the fieldof taxation ever undertaken anywhere in the world. It meant overhauling of the entirenation's bookkeeping. However we coped with it very well and ensured that there wasseamless transition to the new system without any hindrances to business. We alsosupported our entire value chain and partners for a smooth transition. This was truly anexample of our sound financial preparedness planning and on-ground execution.

An Inclusive & Diverse Family

During the year we continued to focus on diversification and inclusionin our work force which is rapidly transforming our Company into a truly global entitywith employees drawn from around the world. The Hero MotoCorp family today comprises ofpeople from various countries including Germany France Italy Austria Japan UK USColombia and Bangladesh.

I am personally driving the agenda of gender diversity and empowermentat Hero MotoCorp and consequently the number of women staff including on our shop - hasgone up considerably over the past few years.

A Responsible Citizen

We have always believed in giving back to the society and ourCorporate Social Responsibility (CSR) initiatives are built on this very principle. InFY'18 our CSR efforts continued to bring about noticeable improvements in the livesof hundreds of thousands of people across the country. We also launched many newinitiatives and built on the existing platforms to further our goals in the field of womenempowerment.

For example we partnered with police departments of eight states inIndia and provided them with scooters for their women police officers thereby enablingthem to discharge their duties more efficiently. We also started several trafic trainingparks and centres some of them in women ITIs which are again empowering women byproviding them mobility.

Protection of the environment and sustainability are the other focusareas of our CSR outreach. We also follow the same principles at our manufacturingfacilities where we maintain the highest ecological standards.

All of the Company's seven state-of-the-art manufacturingfacilities the CIT at Jaipur and the Global Parts Center (GPC) at Neemrana - in the stateof Rajasthan - demonstrate Hero's environmental aspirations.

The Company's manufacturing facility at Neemrana has been aptlycalled the ‘Garden Factory' for its various measures which have redefinedgreen manufacturing. Home to one of the largest roof-top solar projects in the countrythe Garden

Factory offsets 1600 tons of carbon dioxide per annum by producing 1460KW green energy through solar panels spread across 60000 sq. meters.

The Garden Factory and the GPC the CIT and the manufacturing facilityat Halol in the western Indian state of Gujarat also produce their own organic fruits andvegetables using advanced ‘hydroponic' technique which are used for internalconsumption at the canteens.

Other key measures spread across the facilities for Water and EnergyOptimization are - ‘Big Foot' air handlers which provide an optimal energyefficient operation Efficient Building envelope and orientation that ensures reduced loadon cooling systems rainwater harvesting and above all a ‘Green wall' togenerate oxygen equivalent to the daily requirement of 3700 people.

We have shared more details about our CSR initiatives in the relevantchapter in this Annual Report.

A ‘Sporting' Hero

In keeping with the larger objective of nation building our Companyremains committed to support and nurture multiple disciplines of sports around the world.

While our contribution to the growth of Football Golf Hockey andCricket is well documented our new association with Motor Sports is scripting a gloriouschapter.

In only our second year of participation at the famed Dakar Rally theHero MotoSports Team Rally made the entire country proud with a top-7 finish in the 2018edition. The

Team has truly become the flag-bearer of Indian motor sports in theglobal arena.

We will continue to keep scaling new heights of excellence in thecoming years.

The Year Ahead

As we move into FY'19 our clear focus will remain on growthespecially in segments such as scooters and premium motorcycles. A slew of new productlaunches in these segments will help us to meet that objective.

Simultaneously we will also focus on growing our market share inexisting global markets apart from further expanding our presence.

With our current installed capacity and expansion plans in place thecompany will continue to remain on sure footing and continue to lead the industry.

As the Indian auto industry continues to grow and its contribution tothe country's GDP expected to significantly go up to 12% by 2026 it finds itself atan inflection point. The industry will have to redefine itself with the next generationsof automotive technologies. This will hold the key to being future ready!

India will need to identify the next set of reforms that would push thegrowth agenda and hopefully leapfrog its growth especially beyond the auto and ITsectors. The environment is ripe for a constructive synergy between the existingindustrial set-ups and new age technology start-ups which can drive economic growth inthe future.

However there are several geo-political issues that can potentiallythrow the world economy into a tailspin - be it the deadlock over the Paris Climate treatyand the protectionist policies of global super economies or the ongoing upheavals in theMiddle East & North Africa.

The protection of environment will also remain a crucial concern areawhich will need a resolute stance from a united world. The industry will need to play aconscious and effective role in this process to ensure an equitable and hospitable future.

In these scenarios as we embark on our onwards journey we seek theblessings and support of our large and diverse Hero family. We will continue to work withfortitude towards our targets with our core value system firmly in place and pursuing thelarger agenda of a greener peaceful and economically stable society.

I thank all our stakeholders including all the channel partnersvendors and suppliers tech partners investors all associates and above all ourcustomers for their unwavering support.

Pawan Munjal