What More Wisdom Can There Be Than Sharing Wealth With Shareholders

Updated: Jun 28 2003, 05:30am hrs
Hero Honda Motors Ltd will complete two decades of motorcycle manufacturing in India next year. It will also be the year of an unusual develop-ment in the life of the two joint venture partners Hero group and Honda Motor. While Hondas wholly owned subsidiary Honda Motorcycle and Scooters India (HMSI) confined to scooter market so far as per an agreement will enter the motorcycle market on its own while Hero Honda will be free to make scooters. In simple words, Hero Honda in which Honda has a 26 per cent stake will become a competitor of HMSI.

Both Hero and Honda managements have brushed aside speculations that the joint venture partners relationship will never be the same after 2004 as Honda would focus more on its wholly owned subsidiary.

Hero Hondas chairman Brijmohan Lall Munjal is brimming with confidence over the performance of his company in the coming years. VEESHAL BAKSHI of The Financial Express caught up with him to assess the companys future.

What impact will HMSIs entry into the motorcycle market have on Hero Honda
I dont know why there is so much speculation over this issue. We share a wonderful relationship with Honda ever since we signed a joint venture partnership with them in 1983. Our relationship is based on transparency, belief in each others capabilities and trust in each other. Many Japanese have come to India for training at Hero Honda and have gone back with a wonderful experience.

HMSI entry into motorcycle business will strengthen both the companies position in the market. Hero Honda and HMSI will complement each other to gain a majority share of the total two wheeler market in times to come.

Hondas general manager (south west Asia) responsible for Indian operations Mr M Sudo said it categorically in March this year during a visit to India that there was no doubt over renewal of technical agreement when it falls due in June 2004 and that Honda will cotinue to provide Hero Honda full technical support and assistance for new product introductions. Hero Honda R&D and Honda have begun joint work.

So Hero Honda will continue to launch new models and introduce latest technologies to retain its leadership position in the domestic motorcycle market
Of course we will not only retain leadership in the motorcycle market but have set a target of having at least 50 per cent market share jointly with HMSI of the total two wheeler market in India.

We will be launching variants of two existing models, one of which will be Splendon which is already the largest selling model in the world. We are planning to launch a new motorcycle model next year.

All other major Japanese bike makers such as Yamaha, Suzuki and Kawasaki have been in India for almost the same time as Hero Honda. What made your company click while others lagged behind
Knowledge of business, sincerity to implement it and knowing the needs of customers. It is because of a combination of these factors that we have led the market and I am sure we will continue to do so.

We created everything new when we set up Hero Honda. Whether it was introduction of advanced technology in vendors and suppliers or our relationship with dealers. Our experience in a very tough industry like bicycle helped us a lot in motorcycle manufacturing.

We revolutionised the market by giving customers a bike that gave them a mileage of 80 kms to a litre. Hero Hondas attitude towards its vendors, suppliers and dealers is very different. We treat their livelihood to be our responsibility. Even if we have to retain a lesser margin on our bikes, we make sure that our vendors and dealers are financially viable.

Hero Honda gave a 900 per cent dividend to its shareholders in 2002-03 and 850 per cent in 2001-02. Some analysts have questioned the wisdom of distributing cash which you may need in years to come to fight increasing competition
What more wisdom can be there than sharing your wealth with your shareholders. It shows our confidence and belief in Hero Honda and its future. We are a debt free company and have consistently generated higher cash flows year after year. Do people who question our dividend payouts think that we dont do any financial planning for the future. I and every top management person in Hero Honda knows about each and every penny that has to be spent and invested in the coming years. Is it we who know about our business and its future requirements or these people sitting outside and merely criticising us for rewarding our shareholders.

So what is your future vision for Hero Honda
We are by far the market leader today and we will definitely be the market leader in times to come. Our model introduction plan for the next five years is already decided and we are already in the process of developing some models.

Our vision is to have at least 50 per cent share of the total two-wheeler market in India alongwith HMSI. We would continue with our endeavour to maximise shareholders wealth.