Hero Honda's Dividend Policy ( Page 2)

Abstract

Hero Honda is India's largest two-wheeler manufacturer. The company has a history of rewarding shareholders handsomely. The case discusses Hero Honda''s dividend policy and how it is linked with other aspects of the company's financial strategy.

<<Previous Page

The Indian Two-wheeler Industry contd...

The License Raj that existed prior to economic liberalization (1940s-1980s) in India did not allow foreign players to enter the market, making it an ideal breeding ground for local players. But the Raj also hurt the growth of the industry by imposing various restrictions.

In the mid-80s, the government started permitting foreign companies to enter the Indian market, through minority joint ventures. During this period, the two-wheeler market witnessed a boom with Japanese players like Honda, Suzuki, Yamaha and Kawasaki, entering the market through joint ventures. Foreign players quickly changed the rules of the game. From a supplier's market, it became a buyer's market. Companies tried to outdo each other in terms of style, price and fuel efficiency.

The technological expertise that the foreign collaborators brought to the marketplace helped increase the overall quality of the products quite significantly. In the early 2000s, the competition intensified further. In 2000, Honda announced its intentions to set up a 100% subsidiary to manufacture scooters and motorcycles.

The Indian two-wheeler industry had seen remarkable growth rates from 2000, due to various factors like fall in interest rates, availability of finance and affordable prices relative to the growing purchasing power. Despite the impressive growth rate of the last few years, two-wheeler penetration still remained low in the country. Analysts believed, increasing urbanization, expanding cities, lack of other modes of mobility and favourable demographics would support double digit growth in the coming decade........

More...

Exhibit: I Comparative Valuation of the Leading Companies

Background Note

Figure (ii) Hero Honda: Volume & Market Share

Exhibit: II Hero Honda - Key Financials

Financial Management

Exhibit: III Hero Honda: Working Capital Management

and Liquidity Ratios

Exhibit:IV Hero Honda: Total Dividend Rate

Looking Ahead

Exhibit: V Performance of Hero Honda Stock vs. Competitors

Exhibit: VII Hero Honda: Shareholding Pattern

Exhibit: VIII Hero Honda - Milestones

Bibliography

        Case Code   FINA005
   Case Length    11 Pages
              Period    2003 - 2004
Organization     Hero Honda
        Pub Date     2004
Teaching Note    Not Available
     Countries    India
      Industry    Automobile

Issues

Hero Honda, Dividend Policies, Financial Strategy

Keywords

Indian two-wheeler industry; Hero Honda Motors Limited; Honda Motor Corporation; Financial management; Cost management; Working capital management; Capital structure; Dividends; Dividend policy; Dividend pay out

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

       To download this case (No.
       FINA005 ) click on the button
       below, and select the case
       from the list of available
       cases:



       ť ICMR Case Collection

       ť ICMR Home

       ť How To Order

       Prices:

       For delivery in Electronic
       Format: Rs. 300

Current Exchange Rates
INR 300.00 = USD ($),
= GBP (Ł),
= EURO (€)
Currency data courtesy coinmill.com
INR is INDIAN RUPEES (Rs.)

       For delivery through courier
     (within India): Rs. 300 + Rs. 25
     for Shipping & Handling
     Charges

       View Detailed Pricing Info