Hero Motors Ltd Management Discussions

HERO MOTORS LIMITED ANNUAL REPORT 2008-2009 MANAGEMENT DISCUSSION AND ANALYSIS OPERATIONS: The company has felt the brunt of global recession with consequential decline in export volume during the year. With fall in export volume, foreign exchange fluctuation impact clubbed with short delivery of forex has resulted in loss of Rs. 1097.47 lac, due to short delivery of export receivables. Though, the domestic sales continued to be better with increasing volumes from Hero Honda and LG Electronics. The Company achieved a turnover of Rs. 18174.20 lacs during the year under review comprising of sale of vehicles, components, spares etc. as compared to Previous Year turnover of Rs. 30201.37 lacs. NEW Project: The company has successfully implemented installation of Gear Plant at its Ghaziabad facility and commenced commercial supplies. The gears manufactured from this plant are being produced for recreational vehicles and motor cycles for the export markets. The company has also set up one more machining line for making cylinder blocks of refrigerator compressors for LG Electronics. With installation of this line, the overall capacity of cylinder blocks machining has now reached to 3 mn nos p.a. The company has backward integrated the manufacturing of swing arms by acquisition of ready facility to make child parts, thereby enhancing the value addition and margins. During the current year, the company acquired running assembly facility from M/s Delphi for making chassis systems (Rear Axle Assembly and Front Corner Module) for General Motors. The unit is located at Halol, inside General Motors Plant. Subsequent to this acquisition, another facility has been set up for the chassis assembly at Talegaon, Maharashtra. This unit is also catering to assembly and supplies to General Motors. After acquision from Delphi, a number of supply orders have been received from GM for assembly of front corner modules and rear axle assembles. The chassis system division has been further hived off into a separate legal entity Hero Chassis System Pvt Ltd. TRANSFER TO GENERAL RESERVE: Your board does not recommend to transfer any amount to the general reserve of the company. FUTURE PROSPECTS: The global recession also impacted the company in the current year. However, the downward trend seems to have bottomed out, as the export schedules have started to improve. New products are being developed across business divisions to include transmission/gears, fitness and chassis system. With start up of gear plant, the company has been able to go to the next level of technology upgradation.