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
Investor Presentation 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
Investor Presentation 3 Moving forward...
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
Investor Presentation 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
Investor Presentation 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
Investor Presentation 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
Investor Presentation 7 Moving forward...
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
Investor Presentation 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 9.8 10 9.5 Targets total Infrastructure spending of 9% 9 8.5 of GDP by 2014 8 7.5 7.2 Highway construction target of 20 kms a 6.7 6.9 day by 2012 vs current level of 12 kms a 5.8 6 day 4.4 3.8 4 Targets to construct 35,000 km of highways in five years under the National Highways Development Program. 2 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
Investor Presentation 9 …presents significant opportunities for surge in commercial vehicles industry 500000 60 447318 450000 48.8 405259 50 400000 345522 352141 40 350000 30.3 306573 290520 30 300000 268809 272434 18.9 250000 20 206369 8.1 Growth % 200000 10.4 10 150000 1.9 Sales Volumes (Units) Volumes Sales 0 100000 -11.1 -12.9 50000 -10 0 -20 2003 2004 2005 2006 2007 2008 2009 2010 2011
Bus HD Trucks LMD Trucks Exports Total industry Growth (%)
200000 15 -11.3 5 100049 100000 88701
(Units) -5
% Growth % Sales Volume Volume Sales 0 -15 Q2' 2011 Q2' 2012
Investor Presentation 10 Moving forward...
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
Investor Presentation 11 VECV was established in 2008 with strong parentage
Eicher strengths Volvo strengths VECV vision
Leadership in LD / MD Global expertise “To be segments Leadership in product Specialist skills and recognised as technology experience in developing the industry Good infrastructure low cost, better leader driving facilities performance products modernisation in Well-defined processes Wide dealer network and controls 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.
Investor Presentation 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
Investor Presentation 13 VECV Overview
Eicher Eicher Eicher Trucks Volvo Trucks Medium Duty Engineering Engineering & Buses India Engine Project Components Solutions
Investor Presentation 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
Investor Presentation 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
Investor Presentation 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% 6496 40000 38181 2717 7352 30% 30136 4819 26.6% 16.6% 26853 30000 2078 12.6% 4219 23839 1883 3857 23775 24264 20452 1455 2773 12.2% 2665 10% 4501 2533 Growth % 2345 3236
Sales Volume (Units) Volume Sales 20000 1232 2942 3282 2027 2.1% 3781 2496 1424 14063 3018 31381 1114 1392 26426 953 -10% 19700 10000 18961 16893 14175 16258 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% 10000 10907 11864 732 702 1407 1906 5000
6641 6472 % Growth % 2127 2784
0 Sales Volume (Units) Volume Sales Q2'2011 Q2' 2012
Investor Presentation 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 58.3 802 60 800 FH520: The most 706 40 powerful truck on 610 31.5 Indian roads! 600 543 18.2 22.7 20 12.3 Growth (%) 0 400 343 -5.1 -20 Sales Volumes (Units) Volumes Sales 195 200 -36.1 -40 0 -60 Mining Tipper 2003 2004 2005 2006 2007 2008 2009 2010 2011
200 24.6 152 150 30 Aviation refueller 122 100
-20 (Units)
50 Growth % Sales Volumes Volumes Sales 0 -70 Q2'2011 Q2' 2012
Investor Presentation 18 Volvo Trucks India has a unique distribution and after market model
Investor Presentation 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
Investor Presentation 20 Eicher Truck & Buses is widening reach in overseas markets 3500 35 3108 3000 30 29.4 2665 2533 2717 2500 25 2078 21.9 2000 1883 20 18.1 1455 1500 14.4 15 Growth % 1114 1232 1000 10.6 10.4 10
Export Volume (units) Volume Export 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 9 700 -4.1 7 5 KD Assembly operations in Egypt, Kenya, Bangladesh & 600 3 Mauritius 1 500 -1 400 -3 Local Bus body building facilities in Egypt, Turkey, -5
300 Growth % (Units) Mauritius, Nepal & Bangladesh Volume Export -7 200 -9 -11 Volvo and ETB jointly exploring opportunities in ASEAN 100 -13 and Africa 0 -15 Q2' 2011 Q2' 2012
Investor Presentation 21 Breakthrough into Heavy Duty category is critical to VECV....early success is evident
8000 3.5% 7352 3.1% 7000 3.0% 6000 2.5% 2.3% 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 2000 1906 5% 1407 4.8% 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
Investor Presentation 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
Investor Presentation 23 VECV - Wanted position in 2015
Wanted position 2015: Strategic Wanted position 2015: Operations
Market share Most innovative products Sales in units Seen as a (2015) covering entire range Bus 100,000 leading CV Comprehensive network LD/MD including 11000 100,000 exports group in Proactive solution / service HD provider India 17,500 16% Lean organization 80,000
60,000 38181 35% inclusive of 2717 36,400 exports Best fuel economy 40,000 Recognized Reliable products 4819 Superior service quality 44,000 15% competitive 20,000 26425 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
Investor Presentation 24 Moving forward...
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
Investor Presentation 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.
Investor Presentation 26 After successfully managing 2010, the year of transition, Royal Enfield continues to grow and evolve
80000 74626 50 70000 41.9 40000 80 60000 40 51955 52576 35000 70 50000 43298 30 30000 27519 60 40000 36786 Sales Volume 30457 32642 17.7 20.0 28383 28868 12.7 20 25000 50 30000 Growth (%) 48.1 20000 7.2 20000 18581 40
Sales Volume(units) Sales 5.5 10 10000 4.1 1.7 15000 (%) Growth 1.2 (*%) Growth 30 0
0 (units) Volume Sales 10000 20 2003 2004 2005 2006 2007 2008 2009 2010 2011 5000 10 In 2010, Royal Enfield transitioned to Unit Construction 0 0 Engine, new engine platform Q2 '2011 Q2' 2012 Unrivalled brand image has created unmet demand: 6-10 month waiting period
Bullet Thunderbird Classic Café Race A future launch
Investor Presentation 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
Investor Presentation 28 Moving forward...
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
Investor Presentation 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% 14513 9.8% 8.8% 13897 8.8% 14000 9.0% 8.2% 12984 7.6% 12435 12000 6.8% 10984 7.0% 6.6% 10409 10385 10000 8593 8803 5.0%
8000 5.1% % Operating Margin Operating % Net Income (MINR) Income Net 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
Investor Presentation 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
Investor Presentation 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
Investor Presentation 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
Investor Presentation 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.
Investor Presentation THANK YOU
Investor Presentation