Hero Honda's Dividend Policy
| Case Code: FINA005 Case Length: 11 Pages Period: 2003 - 2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.300 Organization: Hero Honda Industry: Automobile Countries: India Themes: Accounting Policies, Control, Fraud |
Abstract Case Intro 1 Excerpts
"We did look at buyback but we are not convinced that it would enhance shareholders value. Only the promoters will benefit. It is better to earn the shareholders goodwill by giving them higher dividends."
- Brijmohan Lall Munjal, Chairman, Hero Honda
Introduction
In 2004, India's largest two-wheeler manufacturer, Hero Honda Motors Limited (Hero Honda) had announced a huge 1000% dividend following a 25% increase in its net profits and 14.3% increase in net sales.2 The company had declared a final dividend of Rs.10 per share and a special dividend of Rs.8 per share, representing almost 70% payout of profits in 2003.
Hero Honda had a 47.6% overall share of the motorcycle market and a 33 % overall share of the two-wheeler market during 2003-043. The company had emerged as one of the most successful players in the industry, on account of its superior and reliable product quality and aggressive marketing. Hero Honda's motorcycles enjoyed a strong brand equity due to their fuel-efficiency and sleek looks backed by a well spread distribution and after sales network...
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