Hero Motors Annual Report

Hero Motors Limited (Hero Motors) Return Comparision with Primex 40 Index

Periods	1 Week	1 Month	3 Months	6 Months	1 Year	3 Years	All Time
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Hero Motors Limited

Hero Motors Limited Balance Sheet (Rs in Lakhs)

Particulars	31-03-2024	31-03-2023
Non-Current Assets
Property, plant and equipment	36,029.92	25,712.55
Right-of-use assets	3,547.56	1,869.95
Capital work-in-progress	6,218.27	6,863.64
Goodwill	797.25	797.25
Other intangible assets	525.21	394.75
Intangible assets under development	1,542.74	-
Investments	156.20	118.16
Loans	131.07	2.32
Other financial assets	739.13	397.14
Deferred tax assets (net)	41.59	36.94
Non current tax assets (net)	904.59	94.99
Other non-current assets	1,741.70	1,095.49
Current Assets
Inventories	17,989.79	19,579.29
Investment	667.56	1,530.26
Trade receivables	19,478.69	25,100.98
Cash and cash equivalents	4,226.09	755.79
Bank balances other than Cash and cash equivalents	4,600.00	8,555.18
Loans	60.19	33.57
Other financial assets	2,017.55	4,145.10
Other current assets	4,569.61	2,117.71
Total assets	1,05,984.71	99,201.06
Equity
Equity share capital	35,357.84	35,357.84
Other equity	3,226.09	-494.18
Non-controllable Interest	-1,102.33	-1,131.41
Non-current liabilities
Borrowings	8,175.29	7,167.51
Lease Liabilities	2,333.00	1,024.70
Other financial liabilities	470.70	413.40
Provisions	7,364.66	6,802.33
Deferred tax liabilities (net)	1,059.91	428.54
Current liabilities
Borrowings	22,224.34	19,793.43
Lease Liabilities	666.28	477.84
Trade payables
total outstanding dues of micro and small enterprises	1,717.06	1,599.08
total outstanding dues other than above	11,907.22	13,252.35
Other financial liabilities	10,195.33	12,673.36
Other current liabilities	2,185.26	1,526.40
Provisions	204.06	309.87
Total equity and liabilities	1,05,984.71	99,201.06

Hero Motors Limited Profit & Loss Statement (Rs in Lakhs)

Particulars	31-03-2024	31-03-2023
Revenue from operations	1,06,438.59	1,05,462.27
Other income	1,903.27	1536.97
Total income	1,08,341.86	1,06,999.24
Cost of materials consumed	64,044.80	75,629.38
Changes in inventories of finished goods, work-in-progress and stock-in-trade	456.77	-3774.39
Employee benefit expense	18,083.45	9,331.01
Finance costs	2,994.42	2693.16
Depreciation and amortisation expense	2,855.14	1828.46
Other expenses	17,475.87	15,915.57
Total expenses	1,05,910.45	1,01,623.19
Profit /(Loss) before share of net profit/ (loss) of associates, exceptional items and tax	2,431.41	5,376.05
Add: Share of Net Profit/ (loss) of associates	-	-162.48
Profit /(Loss) before tax	2,431.41	5,213.57
Current tax	124.68	1,737.13
Deferred tax	603.10	-574.37
Profit for the year	1,703.63	4,050.81
Other comprehensive income / (expenses)
Items that will not be reclassified to profit or (loss)
Re -measurement gains /(losses)on defined benefit plans	-488.09	-645.87
Share of gains /(losses )related to associate	-	-531.49
Income tax on items that will not be reclassified to profit or loss	-23.62	162.02
Items that will be reclassified to of profit or loss
Exchange differences in translating the financial statements of foreign operations	-423.71	256.52
Other comprehensive Income for the year, net of tax	-935.42	-758.82
Total comprehensive income/ (loss) for the year	768.21	3,291.99
Earning Per Equity Share
Basic	0.36	3.13
Diluted	0.36	3.13
Profit for the year attributable to:
Equity holder of parent	1,341.84	4061.48
Non-controlling interest	361.79	-10.67
Other comprehensive Income for the year attributable to:
Equity holder of parent	-602.71	-758.82
Non-controlling interest	-332.71	-
Total comprehensive income for the year attributable to:
Equity holder of parent	739.13	3302.66
Non-controlling interest	29.08	-10.67

Hero Motors Limited Consolidated Cash Flow Statement (Rs in Lakhs)

Particulars	31-03-2024	31-03-2023
Cash flow from operating activities
Profit / (Loss) before income tax	2,431.41	5,213.57
Adjustments for:
Depreciation and amortization	2,855.14	1,828.46
Interest Paid	2,115.96	1,943.22
Other borrowing Cost	878.46	749.94
Foreign currency translation reserve	-423.71	256.52
Provision/ sundry balances written off	-300.08	-3.28
Unrealized foreign exchange loss gain	87.79	8.58
Loss/ (Profit) on sale of property plant and equipment	-10.84	17.89
Employee stock option	3,946.17	1,334.99
Rental Income	-2.35	-5.66
Gain on derecognition of right of use asset and lease liability	-105.12	-
Profit on sale/fair valuation	-87.29	-143.56
Other non-operating income	-2.99	-59.26
Share in loss of associates	-	-693.97
Interest Income	-967.58	-671.29
Operating Profit before working capital changes	10,414.97	9,776.15
Working capital adjustments
Adjustments for Increase/ (decrease) in operating assets:
(Increase)/Decrease inTrade receivables	5,555.30	-3,469.68
(Increase)/Decrease in Inventories	1,589.50	-1,895.99
(Increase)/Decrease in Other financial assets	1,901.67	258.64
(Increase)/Decrease in Other assets	-2,345.49	1,933.21
(Increase)/Decrease in Trade payables	-926.24	-2,235.89
(Increase)/Decrease in other financial liabilities	-3,050.02	1,952.81
Decrease in provisions	-31.57	-282.67
Increase in other liabilities	675.78	65.88
Cash generated from operations	13,783.90	6,102.46
Income taxes paid (net of refunds)	-934.28	-1,891.70
Net cash inflow from operating activities	12,849.62	4,210.76
Cash flows from investing activities
Capital Expenditure on PPE (including capital advances)	-13,283.43	-13,772.25
Proceeds from sale of property, plant and equipment	25.07	69.17
Investment in debentures/shares	-38.04	-113.16
Sale of mutual fund	949.99	1,059.82
Loan granted	-155.37	-18.25
Interest received	854.46	621.11
Rent received	2.35	5.66
Bank balance not considered as cash & cash equivalents	3,955.18	-8,518.59
Net cash outflow from investing activities	-7,689.79	-20,666.49
Cash flows from financing activities
Proceeds from non-current borrowings	4,825.00	9,063.77
Repayments of non-current borrowings	-2,253.14	-13,020.70
Proceeds from / repayment of current borrowings	823.23	4,292.50
Proceeds from isuue non-cumulative compulsory covertible preference shares	-	14,500.00
Payment of interim dividend	-935.70	-
Share issue expenses	-29.33	-345.07
Payment of lease liabilities	-865.79	-149.99
Other borrowing Cost	-878.46	-749.94
Interest Paid	-2,375.34	-1,799.48
Net cash inflow (outflow) from financing activities	-1,689.53	11,791.09
Net increase (decrease) in cash and cash equivalents	3,470.30	-4,664.64
Cash and cash equivalents at the beginning of the financial year	755.79	5,420.45
Total cash and cash equivalents	4,226.09	755.79
Components of cash and cash equivalents
Cash on hand	0.26	3.20
With banks- current account	2,225.83	752.59
With banks- Deposit account	2,000.00	-
Total cash and cash equivalents	4,226.09	755.79

Here is a summary of the Cash Flow Statement for the years 2024 and 2023:

Cash Flow from Operating Activities

In 2024, the company generated a net cash inflow from operating activities of ₹12,849.62 lakhs, which is a significant improvement over the ₹4,210.76 lakhs generated in 2023.

Profit Before Taxes: The profit before income tax dropped from ₹5,213.57 lakhs in 2023 to ₹2,431.41 lakhs in 2024. Despite this reduction, positive cash flow was maintained due to adjustments for non-cash items and working capital changes.

Adjustments for Non-Cash Items: Key adjustments included high depreciation and amortization expenses, increasing from ₹1,828.46 lakhs in 2023 to ₹2,855.14 lakhs in 2024, which indicates more investment in long-term assets. The company also recognized substantial employee stock option expenses of ₹3,946.17 lakhs in 2024, up from ₹1,334.99 lakhs in 2023, indicating a large equity-based compensation expense.

Working Capital Changes: Positive working capital adjustments contributed significantly to operating cash flows. Trade receivables decreased by ₹5,555.30 lakhs, suggesting improved collections, while inventories decreased by ₹1,589.50 lakhs, reflecting better inventory management. However, trade payables decreased by ₹926.24 lakhs, which would have reduced cash inflow as it suggests lower credit from suppliers.

Income Taxes Paid: The income taxes paid decreased slightly from ₹1,891.70 lakhs in 2023 to ₹934.28 lakhs in 2024, helping retain more cash from operations.

Cash Flow from Investing Activities

The company saw a significant cash outflow from investing activities, with a net outflow of ₹7,689.79 lakhs in 2024, though this was less severe than the outflow of ₹20,666.49 lakhs in 2023.

Capital Expenditure: Capital expenditure on property, plant, and equipment (PPE) was ₹13,283.43 lakhs in 2024, relatively stable compared to ₹13,772.25 lakhs in 2023. This consistent spending on PPE suggests ongoing investments in fixed assets.

Bank Balances and Term Deposits: The company saw a net cash inflow of ₹3,955.18 lakhs from bank balances and deposits not considered cash equivalents, compared to a significant outflow of ₹8,518.59 lakhs in 2023. This shift suggests that the company used previously held deposits to improve liquidity in 2024.

Interest and Rental Income: The company received ₹854.46 lakhs in interest income in 2024, an increase from ₹621.11 lakhs in 2023. Rental income was a minor inflow, remaining fairly stable.

Cash Flow from Financing Activities

The cash flows from financing activities in 2024 showed a net outflow of ₹1,689.53 lakhs, a notable decline from the inflow of ₹11,791.09 lakhs in 2023.

Borrowings: There were net borrowings of ₹4,825.00 lakhs in non-current borrowings, offset by repayments of ₹2,253.14 lakhs. Current borrowings also increased by ₹823.23 lakhs, indicating the company utilized short-term debt to manage liquidity.

Dividend and Share Issue: The company paid an interim dividend of ₹935.70 lakhs in 2024, with no comparable payment in 2023. Additionally, share issue expenses were lower in 2024 at ₹29.33 lakhs, down from ₹345.07 lakhs in 2023, indicating a reduction in equity-raising activities.

Interest and Lease Payments: Interest paid increased to ₹2,375.34 lakhs in 2024 from ₹1,799.48 lakhs in 2023, while lease payments increased to ₹865.79 lakhs, which shows rising financing costs.

Net Increase in Cash and Cash Equivalents

The net increase in cash and cash equivalents for 2024 was ₹3,470.30 lakhs, compared to a decrease of ₹4,664.64 lakhs in 2023. This improvement in cash reserves reflects effective cash flow management across all activities.

Closing Cash Position: By the end of 2024, cash and cash equivalents increased to ₹4,226.09 lakhs from ₹755.79 lakhs at the start of the year. The main components were current account balances with banks and a deposit account totaling ₹4,226.09 lakhs, showing a stronger liquidity position.

Financial Ratios of Hero Motors Limited

Particulars	2024	2023
Current ratio	1.06	1.24
Debt-Equity ratio	0.72	0.68
Debt service coverage ratio	2.42	0.69
Return on equity ratio	5%	18.97%
Inventory turnover ratio	6.06	7.12
Trade receivables turnover ratio	4.41	5.04
Trade Payables turnover ratio	4.81	4.58
Net Capital turnover ratio	33.32	10.19
Net Profit ratio	2.13%	4.61%
Return on capital employed	7.03%	14.26%

Here is a summary of the financial and operational metrics for Hero Motors Limited for the year 2024 and 2023:

Current Ratio

The current ratio indicates a company 's ability to pay its short-term liabilities with its short-term assets. A current ratio above 1 implies that the company has more current assets than current liabilities, but a decline from 1.24 to 1.06 shows reduced liquidity. This suggests the company may have less cushion in its current assets to cover immediate obligations in 2024 compared to 2023.

Debt-Equity Ratio

The debt-equity ratio reflects the proportion of debt used in financing the company 's assets relative to shareholders ' equity. A ratio of 0.72 in 2024, up from 0.68 in 2023, indicates slightly increased reliance on debt financing. Although this increase is minimal, it suggests a slight shift towards higher leverage, which may impact financial risk if debt levels continue to grow.

Debt Service Coverage Ratio (DSCR)

The DSCR measures a company 's ability to service its debt obligations from its operating income. A DSCR above 1 means the company can cover its debt obligations comfortably. The significant improvement in DSCR from 0.69 to 2.42 in 2024 shows the company’s increased capability to cover debt payments, possibly due to higher operating income or lower debt servicing costs, which strengthens its financial stability.

Return on Equity (ROE)

ROE indicates how effectively a company generates profit from shareholders ' equity. A drop from 18.97% to 5% suggests a substantial decrease in profitability, meaning the company is generating less profit for each rupee of equity in 2024. This decline could be due to lower net income, increased equity, or a combination of both.

Inventory Turnover Ratio

The inventory turnover ratio indicates how many times the company sold and replaced its inventory within the period. A decrease from 7.12 to 6.06 suggests slower inventory movement in 2024, which may imply reduced demand or inefficiencies in inventory management. Lower turnover can lead to increased holding costs and risks of obsolete stock.

Trade Receivables Turnover Ratio

This ratio measures how efficiently a company collects receivables from its customers. The decrease from 5.04 to 4.41 indicates that the company is collecting payments from customers more slowly in 2024 compared to 2023. Lower turnover can affect cash flow and may suggest lenient credit policies or issues with collection processes.

Trade Payables Turnover Ratio

This ratio shows the rate at which the company pays its suppliers. A slight increase from 4.58 to 4.81 means the company is paying its suppliers more quickly in 2024 than in 2023. While timely payments can improve supplier relationships, faster payables turnover might also reduce available cash for other uses.

Net Capital Turnover Ratio

The net capital turnover ratio indicates the company’s sales efficiency relative to its working capital. A significant increase from 10.19 to 33.32 suggests that the company is generating more sales per unit of working capital in 2024. This improvement could be due to better working capital management or increased sales volume.

Net Profit Ratio

The net profit ratio measures how much profit a company generates as a percentage of its sales. A decrease from 4.61% to 2.13% implies that the company’s profitability has weakened, which may result from higher expenses, reduced revenue, or both. Lower profitability can impact the company’s ability to generate returns for shareholders.

Return on Capital Employed (ROCE)

ROCE measures the efficiency of capital employed in generating profits. A decline from 14.26% to 7.03% indicates reduced efficiency in using capital to generate returns. This may be due to lower earnings before interest and taxes (EBIT) or increased capital employed without a corresponding increase in profitability.