PRESENTATION ON THE

SUMMER INTERNSHIP
PROJECT AT HERO
CYCLES LIMITED
Presented by- Shruti Sharma

The Indian Cycle Industry

India

is the second largest manufacturer of Bicycles.

Bicycle Industry in India is largely organized.

In the recent past years; a decline in demand has been
seen because of Urbanization.
The Bicycle units are taking the help of
advertisements and packaging in order to increase
demand.

Challenges Faced by the Indian

Bicycle Industry

Intense
Competition

Decrease in
Demand

Easy
availability
of Loans

Urbanization

Major Players
Market Share (%)
Hero

TI

Atlas

Avon

Others

11%
10%

40%

17%

22%

Source- www.worldometers.com

The Hero Group

Established in 1956.
Has 21 companies under its head.
Is one of the leading business houses in India.
Sh. B.M.L. Munjal is the Chairman for the
group.
There are a total of 11 members in its Board of
Directors.
Is present in Cycles, Bikes, Financial Services,
Product Designing, Payment Services and IT
Services.

Hero Cycles Limited

VisionStrive for the synergy between technology,
systems
and human resources to provide the products
and services that meet the quality,
performance, and price aspirations of the
customers.
MissionTo strive for the fulfillment of the vision.

Achievements

BCG has ranked the Hero Cycles Limited as

one of the top ten business houses on
Economic Value.
Hero Group Management style has been
Internationally acknowledged.
Heros partnership with Honda Motors is 21
years old.
It is the worlds largest producer of bicycles
since 1986.
Sourcewww.listofcompanies.org

4 Ps of HCL

Organization Structure
(Finance)

Growth Chart
GROWTH CHART
Sales (In Crores)

PBT (In Crores)

1490

959.44

91.56
2002

895.87

67.9
2003

1094.48

1136.93

73.58

63.62

1330.87

1285

121.13

77.23

971.53

94.17
2004

2005

2006

2007

2008

102.89
2009

SWOT
Strengths

Customer Brand Loyalty

Up gradation of Technology

Weaknesses

Lack of Advertisement
JIT is not followed

Opportunities

Govt. recognized R&D

Enlargement of Customer Base

Threats

Local Cycle Manufacturers/

China

Trend Analysis of Sales

Trend Of Sales
Trend Of Sales

117.0582
100

2005

103.8786

2006

115.9681
96.55338

2007

2008

2009

Trend Analysis of EPS

Trend of EPS
Trend of EPS

130.1805

140.8209

100
85.43746
67.07365

2005

2006

2007

2008

2009

Trend Analysis of Net Profit

Trend of Net Profit
Trend of Net Profit

140.8192
100

103.1639
85.44203
67.08323

2005

2006

2007

2008

2009

Liquidity Ratios
Years

2008-09

2007-08

2006-07

Current Ratio

2.37

1.92

1.61

Quick Ratio

1.96

1.40

1.24

Absolute Liquid
Ratio

0.0805

0.0716

0.0101

Efficiency Ratios
Years

2008-09

2007-08

2006-07

ITR

13.25

11.75

14.71

DTR

6.81

6.12

6.51

Avg. Collection
Period

54 days

59 days

56 days

CTR

8.02

6.46

6.93

Avg. Payment
Period

46 days

56 days

53 days

Profitability Ratios
Years

2008-09

2007-08

2006-07

G.P Ratio

16.21

12.49

13.10

N.P Ratio

3.89

5.25

7.56

Operating Ratio

90.98

94.85

93.45

Solvency Ratios
Years

2008-09

2007-08

2006-07

Debt-Equity Ratio

37.006

42.35

32.29

Equity Ratio

77.68

56.58

88.16

Solvency Ratio

22.32

44

11.85

Title

Trends of Working
Capital Cycle- A Case
Study on Hero Cycles
Limited

Objectives

Research Methodology

1.
2.

1.
2.
3.

Research Design- Descriptive.

Data Collection and SourcesPrimary (Unstructured Interview)
Secondary (Annual Reports, Research
Papers)
Tools- Statistical techniques
Limitations ofData
Period
Area

Current Assets
Years

2004-05

2005-06

2006-07

2007-08

2008-09

Inventories

650,041,883

766,521,142

805,661,034

1,106,936,341

777,581,277

Sundry
Debtors

1,828,130,505

1,860,512,457

2,228,592,486

1,968,290,674

2,406,661,773

Cash
and 77,168,419
Bank
Balance

69,481,654

22,134,657

151,600,603

152,820,715

Loans and 391,097,916

Advances

337,661,837

457,780,835

851,293,187

1,163,110,437

Current
Assets

2,946,438,723

3,034,177,090

3,514,169,012

4,078,120,805

4,500,174,202

Indices

100

102.9778

119.2687

138.4089

152.733

Current Liabilities
Years
Acceptance
of
Bills
Payable
Sundry
Creditors
Security
Deposits
Advance
Against
Orders
Interest
Accrued but
not due
Other
Liabilities
Current
Liabilities
Other
Provisions

2004-05
102,955,677

2005-06
150,091,940

2006-07
157,411,551

2007-08
279,111,124

2008-09
355,000,124

1,084,407,168

1,354,212,056

1,644,148,925

1,538,854,031

1,245,759,409

33,108,985

33,033,817

33,074,813

28,356,723

28,291,870

20,905,270

34,797,274

28,065,885

32,385,116

30,372,756

7,201,337

33,978,467

68,013,967

12,261,309

52,930,939

21,625,843

34,312,313

47,873,984

51,619,677

24,283,631

1,270,204,280

1,640,425,867

1,978,589,143

1,942,587,980

1,736,638,729

164,026,142

223,706,638

195,750,077

174,692,064

161,268,726

Net Working Capital

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Current
Assets

2,946,438,723

3,034,177,090

3,514,169,012

4,078,120,805

4,500,174,202

Current
1,434,230,422
Liabilities

1,864,132,505

2,174,339,220

2,117,280,044

1,897,907,454

Net
Working
Capital

1,170,044,589

1,339,829,792

1,960,840,761

2,602,266,748

88.601

129.668

Indices

1,512,208,301

100

77.373

172.084

Changes in the Working Capital

Particulars

2008-09

2007-08

Increase

Decrease

Inventories
Sundry Debtors

777,581,277

1,106,936,341

2,406,661,773

1,968,290,674

438,371,099

Cash and Bank Balance

152,820,715

151,600,603

1,220,112

Loans and Advances

1,163,110,437

851,293,187

311,817,250

4,500,174,202

4,078,120,805

355,000,124

279,111,124

Sundry Creditors
Security Deposits
Advances Against Orders
Interest Accrued

1,245,759,409

1,538,854,031

293,094,622

28,291,870

28,356,723

64,853

30,372,756

32,385,116

2,012,360

52,930,939

12,261,309

Other Liabilities
Provisions
Total (B)
Net Working Capital (A-B)

24,283,631

51,619,677

27,336,046

161,268,726

174,692,064

13,423,338

1,897,907,454

2,117,280,044

2,602,266,748

1,960,840,761

Current Assets

Total

329,355,064

(A)
Current Liabilities
Bills Payable

641,425,987

75,889,000

40,669,630

Raw Material Storage Period

Years

2004-05

Average
of 307,279,428
Raw Material
Years

2004-05

Annual
8,395,203,214
Consumptio
n of Raw
Material

2005-06

2006-07

2007-08

2008-09

354,605,014

387,846,914

444,343,869

405,906,029

2005-06

2006-07

2007-08

8,466,639,105 10,371,148,825 10,193,568,544

2008-09
11,344,847,987

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Daily
Consumption

23,000,557

23,196,272

28,414,106

27,927,585

31,081,775

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Raw Material 13 days

Storage

15 days

14 days

15 days

13 days

WIP Storage Period

Years
Average
WIP

Years

2004-05
of 150,078,798

2004-05

Annual
9,373,267,120
Cost
of
Production
Years

2004-05

2005-06

2006-07

2007-08

2008-09

160,347,144

176,557,779

214,324,043

189,318,239

2005-06

2006-07

2007-08

2008-09

9,604,384,313

11,586,302,311

11,362,216,753

12,577,620,19
1

2005-06

2006-07

2007-08

2008-09

Average Daily 25,680,183

Cost

26,313,382

31,743,294

31,129,361

34,459,233

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Conversion
period

6 days

6 days

6 days

7 days

5 days

Finished Goods Conversion

Period
Years

2004-05

2005-06

2006-07

2007-08

2008-09

Average
Inventory

80,198,817

82,487,899

100,789,502

170,531,258

68,372,913

Years

2004-05

Annual
9,383,414,592
Cost
of
Sales
Years

2004-05

2005-06

2006-07

2007-08

2008-09

9,589,658,677

11,564,424,474

11,244,610,812

12,486,741,211

2005-06

2006-07

2007-08

2008-09

Average Daily 26,027,750

Cost of Sales

26,729,810

33,143,500

33,089,787

38,008,299

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Storage
Period

3 days

3 days

3 days

5 days

2 days

Average Collection Period

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Average
Debtors

1,742,763,235

1,844,321,481

2,044,552,471

2,098,441,580

2,187,476,224

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Annual
Sales

10,944,819,048

11,369,337,410

13,308,705,116

12,850,038,969

14,901,978,247

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Daily Sales

29,985,805

31,148,870

36,462,206

34,823,953

40,827,338

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Collection
Period

58 days

59 days

56 days

60 days

54 days

Average Payment Period

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Average
Creditors

1,089,953,298

1,219,309,612

1,499,180,491

1,591,501,478

1,392,306,720

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Annual
Purchases

8,408,147,399

8,522,140,258

10,382,131,472

10,295,577,808

11,165,961,043

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Daily
Purchases

23,036,020

23,348,329

28,444,196

28,207,062

30,591,674

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Payment
Period

47 days

52 days

53 days

56 days

46 days

Gross Operating Cycle

Gross Operating Cycle= Raw Material Conversion Period+ WIP
Conversion Period+ F.G Conversion Period+ Debtors
Collection Period

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Gross
Operating
Cycle(days
)

80

83

79

79

74

Net Operating Cycle

Years

2004-05

2005-06

2006-07

2007-08

2008-09

Gross
80
Operating
Cycle(Days
)

83

79

87

74

Average
47
Payment
period(day
s)

52

75

56

46

Net
33
Operating
Cycle(days
)

31

26

31

28

Receivables Management
Years

2005

Annual Net Sales

10,944,819,048 11,369,337,410 13,308,705,116

12,850,038,969 14,901,978,247

Average Debtors

1,742,763,236

1,844,321,481

2,044,552,471

2,098,441,580

2,187,476,224

DTR

6.28

6.16

6.51

6.12

6.81

59 days

56 days

59 days

54 days

Avg.
Period

Collection 58 days

2006

2007

2008

2009

Inventory Management
Years

2004-05

COGS

9,383,414,592 9,589,658,67 11,564,424,47 11,244,610,81 12,486,741,21

7
4
2
1
626,374,391
708,281,513 786,091,088
956,298,688
942,258,809

Avg. Inv.

2005-06

2006-07

2007-08

2008-09

Inv.
Turnover 14.98
Ratio(in times)

13.54

14.71

11.75

13.25

Inv.
Holding 24
Period(in days)

27

25

31

28

Raw
Material 13 days
Holding Period

15 days

14 days

15 days

13 days

Conclusion

Working Capital is increasing and showing

positive working capital per year.
Working Capital increased because of
increment in the current assets.
Companys current assets have positive effect
on the profitability.
Current assets are more than the current
liabilities.
Operating cycle reveals that it became
unmanageable in 2007-08 due to recession.

Recommendations

Company should raise funds through shortterm sources.

Company should take control on debtors
collection period.
Company has to take control on cash balance
because cash is a non-earning assets and
increase cost of funds.
Company should reduce the inventory holding
period with the use of zero inventory concepts.

Thank You