STRATEGIC

FINANCIAL
MANAGEMENT
ASSIGNMENT.

RAHUL SANJAY-2128022
ANNA VARUGHESE-2128034
VAZHAMAPLACKAL ALVIN
ZACHARIAS-2128030

WWW.REALLYGREATSITE.COM
 EICHER
MOTORS LTD.
About The Company.

The legendary Royal Enfield motorbike brand, which

dominates the premium motorcycle market in India, is
produced by Eicher Motors (EML). The oldest
motorcycle manufacturer still in operation today is
Royal Enfield. The 350cc and 500cc versions of the
Bullet Classic and Thunderbird models are available
from Royal Enfield.

VE Commercial Vehicles Limited (VECV), a 50/50

joint venture between EML and the Volvo group,
designs, manufactures, and sells dependable, fuel-
efficient trucks and buses. From 15 to 65 seater buses
and 5 to 40 tonne GVW trucks, VECV offers a wide
variety of products. The Skyline and Starline brands
are used to market the buses. In 1982, Eicher Motors
Ltd. was established. Volvo Group currently owns
45.6% of VECV. For 100 crores, VECV acquired the
activities of Volvo Buses India in 2020.

 ECONOMIC VALUE
ADDED (EVA)

The firm's NOPAT has been gradually declining

since 2018, but it recovered in 2022 due to improved
sales. The company was able to recover quickly. The
company's recent Hunter 350 launch has received
positive feedback.
The value of EVA was reduced in 2021 because
NOPAT decreased that year; in the P&l of 2021, we
can see that the revenue from customers has
decreased this could be mainly due to the impact of
covid. The equity share capital has also increased by
15% The ongoing global shortage of semiconductor
chips and the onset of the third wave of COVID
impacted the profits of the company.. These are the
reasons for decreased EVA in 2021.

1. FUTURE GROWTH
VALUE. (FGV)
 Investors and financial planners care about future value
because it helps them estimate how much an
investment made today will be worth in the future.

FGV has increased in 2022 when compared to the

previous years. From 2018 till 2020 the FGV was
negative. In 2021 Eicher motors had a stock split in the
ratio 1:10 this helped in increasing its liquidity by
making the shares more affordable to small investors.
This was the main reason for the increase in FGV in the
year 2021.

RESIDUAL INCOME

Equity is a vital value metric for Residual Income because

it is a significant source of capital. It has been positive
from 2018 to 2022, which indicates the company can
generate a surplus after accounting for the cost of equity.
However, it decreased in 2021 due to more uncertainty and
risk caused by the pandemic and due to the non availability
of the semiconductors. This was factored into the cost of
equity.

This year, net revenue per motorcycle sold could rise by 4-

5%. Hence boosting profits and this creating a domino
effect on the residual income.
 MARKET VALUE ADDED.
(MVA)

Market value added (MVA) is a method that calculates

the difference between a company's market value and
the capital that shareholders and bondholders have each
contributed. A company's MVA demonstrates its
capacity to consistently increase shareholder value.
From 2021 onwards, the MVA became positive this is
mainly due to the increase in the number of equity
shares due to subdivision. The share price has also
increased when compared to 2020. This means now the
company is able to provide value to its shareholders.
 LEVERS OF VALUE
CREATION.
Strategy and
Business Model
The company's business model is centered on
leading the underserved global mid-sized
motorcycle segment (250-750cc). The company
has a yearly production capacity of more than ten
lakh motorcycles and a five-year new product
pipeline.
In the Commercial Vehicle sector Eicher Motors
have Best-in-class, fuel-efficient trucks and
buses with superior uptime and modern
industry-first features for driving productivity
and profitability .
They are Leadership in Light and Medium
STEP 2
vehicle segments.

CAPITAL ALLOCATION
Capital allocation is done to maximize returns.
Periodic investments are made to augment and
upgrade manufacturing equipment and processes.
Regular assessments are performed to gauge the
technology required. In 2021-22, the Company
invested significantly in establishing CKD units in
international markets, as well as expanding its
facilities and production capacity for all motorcycles
at its Indian plants.
Revenue expenditure on research and
development incurred and expensed off during
the year through the appropriate heads of
account aggregate Rs. 70.10 crores (March 31,
2021 : Rs. 103.40 crores).
The capital expenditure incurred during the year
for research and development purposes
aggregated Rs. 172.44 crores. It is a debt free
company and the main source of income is from
cash flow and equity.
In addition, Significant investments have been
made to increase the share of renewable energy
in operations. The Company focuses on
enhancing energy efficiency in manufacturing
and use of renewable energy to progress on its
ambitions of net-zero Carbon emissions.

STRATEGIC FINANCIAL
DECISIONS.

The Debt-Equity ratio is declining and now as per

this year’s report Eicher motors is debt free
company. They are able to provide a dividend of rs
496crs to its shareholders.
 ORGANIZATIONAL
STRUCTURE.

Acquired and merged companies.

Volvo.
Royal Enfield.
Matrix Structure

COST MANAGEMENT.
 1. Much of the low-cost production benefit comes from
cheap labour, and much of the low-cost assembly in
factories and plants is done manually.
2. Eicher Motors chose suppliers with strong process
capabilities who could provide valuable design
suggestions and improvements. Almost everything
was sourced locally.
3. There is an increase in cost of raw materials has
increased by 10% during 2022 , this is the major
reason for increase of total expenses in the year
2022.

CORPORATE RISK
MANAGEMENT.
Risks

Uncertainty surrounding COVID and its variants, as

well as an economic slowdown
Pricing and Availability of Commodities
Availability of Finance
Environmental regulations and compliance are
becoming more stringent than expected.
Middleweight segment growth is slowing, and
competition is increasing.

The Risk Management Committee of the Board and

senior management personnel oversee the process of risk
identification, prioritization, and mitigation. In response
to identified risks, your company has implemented a slew
of strategic measures.
 MERGERS, ACQUISITIONS
AND RESTRUCTURING.

Eicher motors acquired Volvo Buses India

incorporating it into Volvo Eicher Commercial
Vehicles (VECV). The incorporation of VBI into
VECV's newly formed Bus Division strengthens the
relationship between Eicher Motors and the Volvo
Group.
It also gives VECV access to Volvo's world-class bus
technology, putting VECV in a strong position to shape
the future of the Indian bus industry.
It also gives VECV access to Volvo's world-class bus
technology, putting VECV in a strong position to shape
the future of the Indian bus industry.

Eicher Motors has paid €50 million for a 10.35% equity

stake in Spain-based Stark Future SL in order to
collaborate on electric motorcycles.
Eicher Motors will have a seat on Stark Future's Board
of Directors as a result of this investment, and the
company will look for additional opportunities to
collaborate in the field of electric mobility. This
investment is strategically important for both Royal
Enfield and Stark.
CORPORATE GOVERNANCE

The Company's governance processes include the

formation of empowered sub-committees of the Board
to oversee executive management functions.
The Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements)
Regulations, 2015 [SEBI (LODR) Regulations, 2015]
govern corporate governance standards for listed
companies in India. The Company has implemented
the best practises outlined in the SEBI (LODR)
Regulations, 2015.

The Board seeks to ensure business continuity while

formulating and approving policies concerning the
appointment of directors and other senior officers,
board diversity, remuneration, and evaluation.