Hero Hondas board is slated to meet on April 12, 2004, to take the 2003-04 financials on record and firm up its strategies for fiscal 2004-05including a decision on the feasibility study on further capacity expansion and final dividend payout.
Hero Honda spent around Rs 85 crore in 2002-03 and another Rs 100-110 crore in 2003-04 towards capacity expansion and new product development. For the last one year, the company has been weighing options to have a greenfield project at a new location or setting up a new plant at its existing Gurgaon plant, near Delhi.
During April 2003-Feb 2004, Hero Honda sold 1,842,519 bikes in the domestic market and exported another 35,457 bikes, up from 1,541,000 units and 20,853 units, respectively, in the corresponding period last year. Considering, its cumulative sales of 1,877,976 in 11 months (or 170,725 units a month), Hero Honda is expected to surpass 20-lakh units-a-year- mark.
As per its 03-04 strategy, Hero Honda had planned to stretch its existing capacity from 1.8 million bikes in 2002-03 to 2.2 million bikes in 2003-04, which would cater to the demand for 2003-04 and 2004-05.
FE had pointed out last year that Hero Hondas third plantonce its location was finalisedwould entail a capital expenditure of Rs 300 crore.
Hero Honda managing director Pawan Munjal had said: The exact size of the third plant will only be known at the end of the study. The initial capacity of the plant may be three lakh units, with all provisions for expansion and growth.
According to Hero Honda, The company had a return on capital employed of 100 per cent in 2002-03, which indicates a high level of capital efficiency. The company has had a negative working capital cycle in the last five years.
Hero Honda had earlier announced an interim dividend of 500 per cent in January 2004. The Hero Honda board will decide on the final dividend payout at its board meeting.