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Heromotocorp valuation

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This document is a business valuation project report submitted by Group 5 to Dr. Girish Jain. It summarizes information about Hero MotoCorp Limited, the largest two-wheeler manufacturer in India. It provides details about the company's history, market share, revenues, expansion plans, industry projections, and assumptions used in the business valuation model.

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SUBMITTED TO DR. GIRISH JAIN GROUP 5 JOYDEEP KAUR -20DM092 KARTIK BALAJI -20DM098 MANISH JINDAL -20DM114 MANUJ NANGIA -20DM117 MIHIR MANCHANDA -20DM120 PIYUSH HIRWANI -20DM151 BUSINESS VALUATION PROJECT
Hero MotoCorp Limited, formerly Hero Honda, is an Indian multinational motorcycle and scooter manufacturer based in New Delhi, India. The company is the largest two-wheeler manufacturer in the world, and in India, where it has a market share of about 37.04% in the two- wheeler industry. As of 27 May 2021, the market capitalization of the company was 59,600 crore (US$8.4 billion). Hero Motocorp to enter EV market in 2022. 2 ABOUT THE COMPANY
3 Hero Honda started its operations in 1984 as a joint venture between Hero of India and Honda of Japan. In June 2012, Hero MotoCorp approved a proposal to merge the investment arm of its parent Hero Investment Pvt. Ltd. with the automaker and decision came 18 months after its split from Hero Honda. The name of the company was changed from Hero Honda Motors Limited to Hero MotoCorp Limited on 29 July 2011. In December 2010, the board of directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. Hero MotoCorps extensive sales and service network now spans over to 5000 customer touch points.
4 India 2-wheeler sales volume would reach 25.6 million units in 2025 from 21.2 million units in 2019, growing at a CAGR of 2.6% over the forecast period The total number of Motorcycles, scooters, and mopeds are expected to increase to 63 million units by 2025 and at a CAGR growth of 3.7%. The sales of the Indian two-wheeler industry experienced a decline of 18% over the previous year in FY 2020. The overall sales volume was 17.5 million units. GOVERNMENT INITIATIVE Amma Bikes Scheme, the government initiative to entail working women in Tamil Nadu, a subsidy of 50% (up to Rs. 25,000) on the purchase of a two-wheeler. And owing to this the two-wheeler sale in the state has gone up considerably.
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6 Growth perpetuity 5% Revenue from operations 6.5% increase S&D expenses 7.8% of sales (average) Depreciation - 10.5% of NET PPE of PY Net intangible assets 10% increase NPPE 10% increase COGS 67% of sales (average) Tax regime 34% Non current liability 10% reduction ( Excess cash) Risk free rate 6% ( based on 10 years govt bonds) Market risk premium 7.5% (10 years volatility)
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  • 1. SUBMITTED TO DR. GIRISH JAIN GROUP 5 JOYDEEP KAUR -20DM092 KARTIK BALAJI -20DM098 MANISH JINDAL -20DM114 MANUJ NANGIA -20DM117 MIHIR MANCHANDA -20DM120 PIYUSH HIRWANI -20DM151 BUSINESS VALUATION PROJECT
  • 2. Hero MotoCorp Limited, formerly Hero Honda, is an Indian multinational motorcycle and scooter manufacturer based in New Delhi, India. The company is the largest two-wheeler manufacturer in the world, and in India, where it has a market share of about 37.04% in the two- wheeler industry. As of 27 May 2021, the market capitalization of the company was 59,600 crore (US$8.4 billion). Hero Motocorp to enter EV market in 2022. 2 ABOUT THE COMPANY
  • 3. 3 Hero Honda started its operations in 1984 as a joint venture between Hero of India and Honda of Japan. In June 2012, Hero MotoCorp approved a proposal to merge the investment arm of its parent Hero Investment Pvt. Ltd. with the automaker and decision came 18 months after its split from Hero Honda. The name of the company was changed from Hero Honda Motors Limited to Hero MotoCorp Limited on 29 July 2011. In December 2010, the board of directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. Hero MotoCorps extensive sales and service network now spans over to 5000 customer touch points.
  • 4. 4 India 2-wheeler sales volume would reach 25.6 million units in 2025 from 21.2 million units in 2019, growing at a CAGR of 2.6% over the forecast period The total number of Motorcycles, scooters, and mopeds are expected to increase to 63 million units by 2025 and at a CAGR growth of 3.7%. The sales of the Indian two-wheeler industry experienced a decline of 18% over the previous year in FY 2020. The overall sales volume was 17.5 million units. GOVERNMENT INITIATIVE Amma Bikes Scheme, the government initiative to entail working women in Tamil Nadu, a subsidy of 50% (up to Rs. 25,000) on the purchase of a two-wheeler. And owing to this the two-wheeler sale in the state has gone up considerably.
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  • 6. 6 Growth perpetuity 5% Revenue from operations 6.5% increase S&D expenses 7.8% of sales (average) Depreciation - 10.5% of NET PPE of PY Net intangible assets 10% increase NPPE 10% increase COGS 67% of sales (average) Tax regime 34% Non current liability 10% reduction ( Excess cash) Risk free rate 6% ( based on 10 years govt bonds) Market risk premium 7.5% (10 years volatility)
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