Downloads AnalystPresentation Investors Presentation Q2 2012 PDF

Eicher Motors Ltd.
Investor Presentation
In this Presentation
1 Eicher Motors Limited - Journey So far...

2 Eicher Motors Limited Overview
3 India’s Economic Growth and Opportunities for Commercial Vehicles
4 Volvo Eicher Commercial Vehicles Limited
 Eicher Trucks & Buses
 Volvo Trucks India
 Eicher Engineering Components & Eicher Engineering Solutions
 Heavy Duty Breakthrough
 Medium Duty Engine Project
5 Royal Enfield
6 Financials
2
Eicher Motors Limited – Journey so far…
India’s first Forms JV with AB

tractor rolls out Royal Enfield Volvo of Sweden;
of Eicher factory motorcycles Enters HD trucks transfers CV
in Faridabad acquired segment business to the JV
1959 1984 1991 1993 2002 2005 2008

JV with JV with Divests tractor
Mitsubishi Mitsubishi ended, and allied
Motors to make enters MD bus businesses to
‘Canter’ trucks segment focus on CV and
motorcycle
businesses
3
Moving forward...

5 Royal Enfield
6 Financials
4
Eicher Motors Limited Overview
Institutional Investors
Retail Investors
11.8% 24.6%
Volvo A.B. Promoter Group

8.4% 55.2%
45.6%
EML
54.4%
Volvo Eicher Royal

Commercial Vehicles Enfield
5
Eicher Management Philosophy
Break-through Market Established Corporate

Strong Values
Business Model Governance
 An evolved business model  Fully empowered management  Corporate conduct rooted in
with 50+ years of experience teams highest standards of ethics,
in automotive space in India, integrity and transparency
that:  Regular board meetings, every
 In-depth customer insights two months - full review with  Highly professional work ethic
and market understanding management based on mutual respect
 Best-in-class Capital  Strategic quarterly reviews and  Very strong HR and IR culture
Optimization: regular monthly operations and brand
 Frugal engineering review
practices  Long-term orientation
 Extensive knowledge of  Product board, Quality board,
suppliers Customer Satisfaction board,  Long history of
 Operational Excellence Soft products board (after- institutionalized CSR and
 Global Quality Standards market) held every quarter community activities
along with other statutory
meetings
6
Established Governance Structure
EML Board VECV Board
 S Sandilya: Non-executive  Par Ostberg: Non-executive

Chairman Chairman & Volvo nominated
 Siddhartha Lal: Managing director
Director & CEO  Bertil Thoren: Volvo nominated
 RL Ravichandran: Executive director
Director  Joakim Hjerpe: Volvo nominated
 Priya Brat: Independent Director director
 MJ Subbiah: Independent  Siddhartha Lal: Managing
Director Director & Eicher nominated
 Prateek Jalan: Independent director
Director  Raul Rai: Eicher nominated
director
 Prateek Jalan: Eicher nominated
director
7
Moving forward...

3 India’s economic growth and opportunities for
Commercial Vehicles
5 Royal Enfield
6 Financials
8
India’s strong and sustained economic growth with
increasing focus on infrastructure...
GDP Growth - Trends Increasing Focus on Infrastructure
 Govt. proposes 4,500 BINR investment in

12 12th five year plan‘12 -’17
10 9.5 9.8  Targets total Infrastructure spending of 9%

9 of GDP by 2014
8.5
8 7.5 7.2  Highway construction target of 20 kms a
6.7 6.9
5.8
day by 2012 vs current level of 12 kms a
6 day
4.4
4
3.8  Targets to construct 35,000 km of highways
in five years under the National Highways
2
Development Program.
 Plan to increase port capacity - 95% by
0 volume and 70% by value of India’s external
trade takes place through ports
 Traffic at ports across India projected to
grow at 11% CAGR during the new decade
(2011 – ’20)
*Source – CMIE, RBI
9
…presents significant opportunities for surge in
commercial vehicles industry
500000 60
447318
450000 48.8 405259 50
400000
345522 352141 40
Sales Volumes (Units)
350000 30.3 306573
% Growth
300000 290520 30
268809 272434
18.9
250000 20
206369 8.1
200000 10.4 10
150000 1.9
0
100000 -11.1
-12.9 -10
50000
0 -20
2003 2004 2005 2006 2007 2008 2009 2010 2011
Bus HD Trucks LMD Trucks Exports Total industry Growth (%)
200000 15
Sales Volume
-11.3
% Growth
5
(Units)
100049 88701
100000
-5
0 -15
Q2' 2011 Q2' 2012
10
Moving forward...

3 India’s economic growth and opportunities for Commercial Vehicles
 Eicher Engineering Components & Eicher

Engineering Solutions

5 Royal Enfield
6 Financials
11
VECV was established in 2008 with strong parentage
Eicher strengths Volvo strengths

VECV vision
 Leadership in LD / MD  Global expertise
segments
“To be  Leadership in product
 Specialist skills and recognised as technology
experience in developing the industry  Good infrastructure
low cost, better leader driving facilities
performance products  Well-defined processes
modernisation in and controls
 Wide dealer network
 After sales infrastructure commercial  Brand image and
for LD / MD transportation in customer relationships
 Cost effective operations India and the
Eicher transferred its developing Volvo demerged
CV, components and world” Volvo Truck India’s
engineering solutions sales & distribution
businesses into VECV business from Volvo
India Pvt Ltd.
12
VECV milestones
 Dec 2007: Signing of Letter of intent

 May 2008: Signing of definitive
agreements
 Jul – Aug 2008: Commencement of JV
 Dec 2008: Volvo Board Visit
 Mar 2009: Launch of Quality Improvement
CSI-1 Initiative
 April 2009: Inauguration of the new gear
plant at Dewas
 Jan 2010: Launch of VE-series of Eicher HD
trucks
 June 2010: Launch of MDE Project
 July 2010: Vinod Aggarwal takes over as
CEO
 October 2010: Groundbreaking ceremony
of MDEP plant site
May 2008: Signing of definitive agreements
13
VECV Overview
Eicher Eicher
Eicher Trucks Volvo Trucks Medium Duty
Engineering Engineering
& Buses India Engine Project
Components Solutions
14
Eicher Trucks and Buses – Ambitions to achieve global benchmarks
in product development and manufacturing capabilities
Facility located at: Pithampur
 State-of-the art manufacturing facility spread over 85

acres
 Annual Capacity = 48,000; upgrading to 100,000
 Capabilities for machining and assembly of
engines, gearboxes and axles
 Lean and scalable manufacturing setup
 Cab weld shop with robotic welding
 100% hot test of engines
 CED Paint shop commissioned for capacity of 90,000
trucks per year
 Focus on adopting world class quality standards to
become No. 1 in Customer Satisfaction
 Product Development- Frugal Engineering driving
future technology
 R&D expenditure of 2-3 % of net sales
 Fully equipped Vehicle & Engine development center
with Fatigue lab
 Developmental support for technologies of Euro 5 &
Euro 6 Volvo Group global requirement
 Complete virtual vehicle integration & different
simulations to carry out DFA, DFS failures simulations
15
Eicher Trucks & Buses is its widening product range and further
strengthening its already extensive distribution and after market
network
Distribution and after Product Range

market Network
L/MD, 5-12 HD, 16-40 Buses, 21 -

Ton GVW Ton GVW 69 seater
Range Range
Launched in 2011
Dealerships (141)
Service Centers (62)
Semi Low Floor

City Buses 25 Ton tipper
16
Eicher Trucks and Buses recorded highest ever volume
in 2010, continues to outgrow industry in 2011
60000 70%
57.4%
50000 48337
3108 50%
45.4%
38181 6496
40000
Sales Volume (Units)
2717 30%
% Growth
7352 26.6%
30136 4819
16.6% 26853
30000 2078 4219
23839 12.6% 3857 23775 24264
1883
20452 1455 2773 12.2%
2533 2665 10%
2345 4501
20000 1232
2027 3781
3236 2942 3282
2.1%
14063 2496 1424
3018 31381
1114 26426
1392
953 -10%
10000 16258
18961 19700
16893
14175 15804
10604 -21.1%
0 -30%
2003 2004 2005 2006 2007 2008 2009 2010 2011
Exports Buses 16 T & above Trucks % Growth
15000
8.8%
Sales Volume (Units)
% Growth
10000 10907 11864
732 702
1407 1906
5000 6641 6472
2127 2784
0
Q2'2011 Q2' 2012
17
Volvo Trucks India is the leader in specialised high end
trucks; created high end mining tipper segment
1200 1104 100
75.9 948 80
1000 900
Sales Volumes (Units)

58.3 802 60
800 706
FH520: The most 40
powerful truck on 610 31.5
Indian roads! 600 543 18.2 22.7 20
12.3 Growth (%)
0
400 343 -5.1
195 -20
200 -36.1
-40
0 -60
Mining Tipper
2003 2004 2005 2006 2007 2008 2009 2010 2011
200 24.6
152
150 30
Sales Volumes
% Growth
Aviation refueller 122
(Units)
100
-20
50
0 -70
Q2'2011 Q2' 2012
18
Volvo Trucks India has a unique distribution and
after market model
19
Overview of EEC & EES
Eicher Engineering Components (EEC) Eicher Engineering Solutions (EES)
Plants at: Thane, Dewas , Pithampur  Location : Delhi, Michigan, Shanghai and
Beijing
 Supplier of drive line components and
aggregates - gear box assembly, ,  Design, development and consultation
transmission gears and shafts services for customised engineering
solutions.
 Caters to full requirements of Eicher Trucks  Acquired Design Intent Engineering (DIE),
& Buses and supplier to the Volvo Group Michigan in 2005 & Hoff & Associates
(HAI), Michigan in 2007
 Services a global client base including
OEMs e.g., John Deere, Caterpillar, CNH  Comprehensive product development
services (Class A surfacing, CAD, CAE,
prototyping) with a strong offshore
Delivery model.
 Competencies for Volvo Group, VECV, EEC
20
Eicher Truck & Buses is widening reach in overseas
markets
3500 35
3108
3000 29.4 30
2665 2717
Export Volume (units)
2533
2500 25
% Growth
2078
1883 21.9
2000 20
18.1
1455 14.4
1500 1232 15
1114
1000 10.6 10.4 10
500 5.2 5
2.0
0 0 0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Export Volume % Growth
 Presence in 22 countries 1000 15

13
900 11
 Homologation in 10 countries 800 732 702 9
Export Volume
700 -4.1 7
 KD Assembly operations in Egypt, Kenya, Bangladesh & 5
% Growth
600 3
Mauritius 500
1
(Units)
-1
 Local Bus body building facilities in Egypt, Turkey, 400 -3
-5
300
Mauritius, Nepal & Bangladesh -7
200 -9
-11
 Volvo and ETB jointly exploring opportunities in ASEAN 100 -13
and Africa 0 -15
Q2' 2011 Q2' 2012
21
Breakthrough into Heavy Duty category is critical to
VECV....early success is evident
8000 7352 3.1% 3.5%
7000 3.0%
6000
2.3% 2.5%
2.0%
5000 4501
4219 2.0%
Sales Volume 4000 1.7%
3236 1.5% 1.5%
3000 2496 1.1%
1.0%
2000 1424
1000 0.5%
0 0.0%
2006 2007 2008 2009 2010 2011
 In 2008, an extensive study was initiated in ETB to gather
deep insights strategy required in the Heavy Duty 2500
segment 1906
2000
4.8% 5%
1407
 The study spanned customers, after market, product and 1500
operations
1000
3%
2.7%
 1st phase of insights implemented 500
0 1%
 HD trucks have rapidly acquired market share since 2010 Q2' 2011 Q2' 2012
22
Medium Duty Engine Project will provide technological
advantage and cushion in times of adverse business cycle
 Futuristic global engine platform to power the medium duty range of trucks within Volvo
group and Eicher Truck
 VECV will manufacture Euro 3 and 4 compliant engines and Euro 5 & 6 base engine. The
engines will be of 5 & 8 litre capacity
 New facility in Pithampur to be the Global Manufacturing hub and Industrial base
 Investment of ~5000 MINR for the state-of-the-art facility
 Will be operational by December 2012
 Annual Production capacity - 100000 engines.
Siddhartha Lal - MD, VE Commercial

Vehicles & Peter Karlsten - President
& CEO, Volvo Power Train at the
MDE Project groundbreaking
ceremony, October 2010
23
VECV - Wanted position in 2015
Wanted position 2015: Strategic Wanted position 2015: Operations

Market
 Most innovative products Sales in units
share
Seen as a covering entire range Bus
(2015)
leading CV  Comprehensive network LD/MD

100,000
including 11000
100,000
group in  Proactive solution / service HD
exports
India provider 16%

17,500
 Lean organization 80,000
60,000 38181
36,400 35%
inclusive of 2717
exports
 Best fuel economy 40,000

Recognized  Reliable products 4819
competitive  Superior service quality 26425 44,000 15%

20,000
advantages  Safety and comfort setting
industry standards 4219
0
2010 2015
 Culture incorporating best of  Long term operating margin target >8% over a business cycle
"Best of Eicher values and Volvo Way  Customer satisfaction to reach >80%
both"  Professionalism, honesty,
company  people caring to attract best
culture talents in industry
24
Moving forward...

5 Royal Enfield
6 Financials
25
Royal Enfield
Royal Enfield “Bullet” is the longest

running model in continuous
production. Royal Enfield Motorcycles
are unique in terms of the engine
character - Single Cylinder, Air-Cooled,
Push-rod &Valve operated for the
distinctive Bullet beat. The authentic
vintage styling , traditional paint
schemes, 1950’s style, nacelle and
toolboxes contribute to its “distinctive
classic” appeal.
1901: Royal Enfield rolls out its first Motor Cycle

1955: Enfield India is incorporated.
1994: Eicher Motors acquires Enfield India Ltd.
26
After successfully managing 2010, the year of
transition, Royal Enfield continues to grow and evolve
80000 74626 50
70000 40000 80
41.940
Sales Volume(units)
60000
51955 52576 35000 70
50000 43298 30 30000 60
Growth (*%)
36786 27519
Sales Volume (units)

40000
30457 32642 17.7 20.0 Sales Volume
28383 28868
12.7 20 25000 48.1 50
Growth (%)
30000
Growth (%)
20000 7.2 20000 18581
40
5.5 10
10000 4.1 1.7 30
1.2 15000
0 0
10000 20
2003 2004 2005 2006 2007 2008 2009 2010 2011
5000 10
 In 2010, Royal Enfield transitioned to Unit Construction 0 0
Q2 '2011 Q2' 2012
Engine, new engine platform
 Unrivalled brand image has created unmet demand: 6-10
month waiting period
Bullet Thunderbird Classic Café Race

A future launch
27
Plans being executed for profitable growth
Enhance production capacity

• Enhance production capacity to 100,000 units in 2012
• Expand capacity to 150, 000 by setting up 2nd manufacturing site ; expected to
start commercial production in 1st half, 2013
Improve profitability
• Focus on cost management

• Exploit significant opportunities that exist in after market
New product launches
• New product launches planned for 2012 and 2013; New platform under
consideration
Distribution and after market footprint
• Increase reach in India and global markets

• Currently, there are 230 distribution and after market points in India. Exports to
more than 30 countries
28
Moving forward...

5 Royal Enfield
6 Financials
29
Consistently improving performance – all time high
sales and margins in Q1’12
20000 13.0%
11.7%
18000
16950
10.4% 10.6% 11.0%
15791 15849
16000 9.7% 9.7%
9.8%
14513
8.8% 13897 8.8% 9.0%
14000 8.2% 12984
% Operating Margin
7.6% 12435
Net Income (MINR)
12000 6.8% 10984 7.0%

6.6% 10409 10385
10000
8593 8803
5.1% 5.0%
8000
5958 6195
6000 3.0%
2.8%
4000
1.0%
2000
0 -1.0%
Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12
Total Net Income (MINR) Operating margin
30
Optimizing capital deployment through relentless
focus on cash management
11 consecutive quarter of negative operating working capital
In MINR
Operating Working Capital
2000.0
1000.0
0.0
-1000.0
-2000.0
-3000.0
Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12
Operating Working Capital 825.8 906.2 89.2 -924.1 -1347. -313.6 -405.1 -974.1 -1717. -949.2 -967.8 -1761. -2662. -208.8
Best in class capital to turnover drives RoCE to >100%

In MINR
Sales/
Operating Sales/
Net Block Net Sales Operating
Capital Assets
Capital
EML Consolidated - CY 09 3195 3635 29386 8.1 9.2
- CY 10 2870 3844 43847 11.4 15.3
- CY 11 3283 5044 56775 11.3 17.3
Peers - average 1.5-2.5 1-1.5
31
VECV well positioned to take advantage of
discontinuities in Indian CV space
Discontinuity Implication VECV Strategy/ Advantage

Continued tightening of Legacy investments of players less VECV investing early in fully-built vehicles and
emissions and safety norms meaningful higher emission norms
Better enforcement of Right-load vehicles; potential to Products highly suitable for right-load and
regulations on overloading change value-proposition mild over-load conditions
Better highways and Higher speeds; increased mileage Better and more reliable engines and
increased road networks of vehicles/ year driveline
Increasing difficulty in Drivers will be more influential in Better comfort and features for drivers; plan
sourcing drivers purchase decision to build brand with drivers off-product as well
Value-selling approach; premium products
Professionalisation of Total cost of ownership approach
with better efficiency and turnaround time;
transportation/ logistics to buying vehicles
world-class after-market and vehicle quality
End-use demands on Improved dependability of
Vehicle quality and after-market excellence
logistics/ supply-chain supplies required
VE-series is starting point; developing
Market shifts faster towards More modern trucks with right innovative products that are closely aligned
‘premium domestic’ segment cost-structure and value to emerging customer needs …will be
introduced from 2012
32
Recap…Eicher well poised to succeed
 Strongly positioned to gain scale and profitability in Low and Medium through
improved offerings
 Become meaningful player in Heavy Duty through differentiated products, after
markets and brand leverage
 Gain volumes and market share in Bus market through better products and market
expansion
 Increase margins and reduce cyclical business dependency - Grow through soft
products, Medium Duty Engine Project , exports using Volvo’s existing distribution
strength
 Set benchmark in Aftermarket and Quality in India, where general level is poor –
establish a strong differentiation for Eicher brand in these areas; maintain lead for
Volvo brand
 Realise full potential of niche market through capacity expansion, cost optimisation
and geographical expansion
33
Disclaimer
Certain statements in the presentation describing the Company’s views about the
Industry, expectations/predictions, objectives etc may be forward looking within the
meaning of applicable laws and regulations. Actual results may differ materially from
those expressed in the statement. Company’s operations may be affected with the
supply and demand situations, input prices and their availability, changes in
Government regulations, tax laws and other factors such as Industrial relations and
economic development etc. This presentation also contains references to findings of
various reports available in the public domain. Eicher makes no representation as to
their accuracy or that the Company subscribes to those findings. Investors should bear
the above in mind while going through the presentation.
THANK YOU

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Eicher Motors Ltd.

1 Eicher Motors Limited - Journey So far...

 Medium Duty Engine Project

India’s first Forms JV with AB

1959 1984 1991 1993 2002 2005 2008

1 Eicher Motors Limited - Journey So far...

 Medium Duty Engine Project

Volvo A.B. Promoter Group

Volvo Eicher Royal

Break-through Market Established Corporate

EML Board VECV Board

 S Sandilya: Non-executive  Par Ostberg: Non-executive

1 Eicher Motors Limited - Journey So far...

 Medium Duty Engine Project

 Govt. proposes 4,500 BINR investment in

10 9.5 9.8  Targets total Infrastructure spending of 9%

*Source – CMIE, RBI

350000 30.3 306573

Bus HD Trucks LMD Trucks Exports Total industry Growth (%)

1 Eicher Motors Limited - Journey So far...

 Volvo Trucks India

 Eicher Engineering Components & Eicher

 Medium Duty Engine Project

Eicher strengths Volvo strengths

 Dec 2007: Signing of Letter of intent

May 2008: Signing of definitive agreements

Facility located at: Pithampur

 State-of-the art manufacturing facility spread over 85

Distribution and after Product Range

L/MD, 5-12 HD, 16-40 Buses, 21 -

Semi Low Floor

Sales Volume (Units)

Q2'2011 Q2' 2012

Sales Volumes (Units)

Eicher Engineering Components (EEC) Eicher Engineering Solutions (EES)

 Presence in 22 countries 1000 15

 Investment of ~5000 MINR for the state-of-the-art facility

 Will be operational by December 2012

 Annual Production capacity - 100000 engines.

Siddhartha Lal - MD, VE Commercial

Wanted position 2015: Strategic Wanted position 2015: Operations

leading CV  Comprehensive network LD/MD

India provider 16%

 Best fuel economy 40,000

competitive  Superior service quality 26425 44,000 15%

1 Eicher Motors Limited - Journey So far...

 Medium Duty Engine Project

Royal Enfield “Bullet” is the longest

1901: Royal Enfield rolls out its first Motor Cycle

Sales Volume (units)

Bullet Thunderbird Classic Café Race

Enhance production capacity

• Focus on cost management

New product launches

Distribution and after market footprint

• Increase reach in India and global markets

1 Eicher Motors Limited - Journey So far...

 Medium Duty Engine Project

12000 6.8% 10984 7.0%

Best in class capital to turnover drives RoCE to >100%

Discontinuity Implication VECV Strategy/ Advantage

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