The Stock Story of EICHER MOTORS

EICHER MOTORS

Eicher motors produce commercial vehicles, such as trucks and tractors. During the close of the 20th century, Eicher made an acquisition that would go on to change the firm's fortunes entirely. The company acquired Enfield Motorcycles in 1995, an English motorcycle brand with a strong heritage but the financials of which were marred by poor economic policy.

        The stock price has risen over 1000 times from a modest ₹24 to some ₹20000 + today, signalling a new age in the history and scripting of Eicher, which is perhaps one of the greatest revival stories of this decade. On December 2, 2009, Eicher Motors stock stood at Rs 594.7 and rose to Rs 21,727 on December 2, 2019, translating into an increase of 3,553 per cent on BSE.

Company History

Eicher Motors Ltd is engaged in the production of commercial vehicles, motorcycles, and engineering components. The company's product range includes Motors- manufactures several commercial vehicles, Motorcycles- manufactures Royal Enfield bullet motorcycles. Engineering Components- manufactures the entire automobiles gear range. Spiral bevels (Crown wheel and pinions), straight bevels, and transmission gears are included in the gear range.

 The company was incorporated on October 14, and the start-up certificate was obtained on March 28, 1983. Eicher Goodearth Ltd., Mitsubishi Corporation, Japan, Mitsubishi Motors Corporation, Japan and Madhya Pradesh Audyogik Vikas Nigam Ltd. promoted it to the joint sector. The company's main objective was to manufacture light commercial vehicles belonging to the Mitsubishi' CANTER' series.

Eicher's a leader in finance. It is virtually debt-free and has enough cash in its coffers to potentially wield with tremendous ease any short-term financial turbulence. Its balance sheet is clean as a whistle, and legendary stuff is his income statement. For other manufacturing companies, the majority of its financial ratios serve as a benchmark. In particular, one rate that sums up its operating excellence is the holding days of inventories.

Financial Performance

The company reported a PAT of Rs 1,827 crore for the 2019-20 financial year compared to Rs 2,203 crore in 2018-19. Quarterly Net Income in March 2020 at Rs 304.28 crore down 44.15 per cent from Rs 544.84 crore in March 2019. EBITDA is down 30.47 per cent from Rs. 827.39 crores in March 2019 at Rs. 575.30 crores in March 2020. In March 2020, Eicher Motors EPS declined to Rs. 111.44 from Rs. 199.73 in March.

Shares in Eicher Motors closed at 16,857.30 on June 12, 2020 (NSE), and yielded -23.21 per cent in the last six months and -16.16 per cent over the previous year. The company's combined overall operating revenue stood at Rs 2,208.18 crore for the quarter being considered down 11.68 per cent from Rs 2,500.08 crore in March 2019.

    Royal Enfield sold 1,63,083 motorcycles in the fourth quarter, a 17 per cent decline from 1,97,567 motorcycles sold in the last financial year over the same period, the company said. The total revenue from Royal Enfield operations decreased by 7 per cent to Rs 9,154 crore, compared to Rs 9,797 crore recorded for the year ended March 2019. In 2019-20 the company sold 6,97,582 units, down 15 percent from 8,22,724 units in 2018-19.

Dividend Payment

Eicher Motors has declared an equity dividend of 1250.00 percent for the year ending March 2020, amounting to Rs 125 per share. This results in a dividend yield of 0.64 percent on the current share price of Rs 19391.70. The firm has an excellent report on dividend track and has regularly announced dividends over the last five years.

Bonus

Until now, Eicher Motors has declared no bonus.

Splits

Eicher Motors had previously split the face value of its stock from Rs 10 to Rs 1 in 2020.

Efficiency of Management

Company's top management includes S Sandilya (Chairman & Independent Director), Siddhartha Lal (Managing Director & CEO, Manhar Kapoor (Company Secretary), Manvi Sinha (Independent Director), Inder Mohan Singh (Independent Director), Vinod K Desari (Whole-time Director), Vinod Aggarwal (Addtnl Non-Executive Director). Company has S R Batliboi & Co. LLP as its auditors. Stock price markets at unprecedented highs, not least because of the financial ratios or the outstanding income statements.  It is the man behind the statistics who inspires such confidence and respect among loyalists in Eicher.

    The CEO of Eicher Motors, Siddhartha Lal, launched a divestment campaign like no other in 2006. Imagine running a business empire selling trucks, buses, tractors, footwear, clothes, and a few other products on the side, and you've had to decide to be on average across 15 separate business verticals or to be celebrated in a few? Siddhartha had agreed to exit most business interests in one full push, maintaining only the motorcycle (Royal Enfield) divisions and the trucks. All other assets were either liquidated or sold off. It was a gutsy move that could have brought the firm to the verge of disaster, but Siddhartha stayed steadfast.

    Every year, Siddhartha sets production estimates for the following year in his annual address to the shareholders, and every year there is the usual scepticism-sales contracting, inadequate delivery, unrealistic targets.

Factors which affected the stock price

➢     The year 1990 saw the opening of three major markets in East Africa. In select pockets, a new four tyre model was introduced, and another model with a higher payload was ready for launch. The company launched an independent 'car finance group' throughout the year to fund retail vehicles in underdeveloped areas.

➢     In 1997 the Left Hand Drive (LHD) vehicle was designed primarily for export markets. Eicher Motors Limited (EML), introduced the new Eicher 10.70 LCV for the company-in Karnataka. EML also tied in with financiers to provide consumers with funding options.

➢     The company also introduced variants of products such as Eicher 10.60 G. 10.90 released in February 1998 and an updated 10.90. The company also launched the skyline school bus, which includes safety features such as a stop sign, footsteps retractable, warning lamps for danger. The bus was designed jointly with a non-governmental agency, the Institute for Road Traffic Education. The company also signed a technical collaboration agreement with Finland-based Valtra Inc. for the manufacture of 61 tractors and higher to hp.

➢     Eicher joined up with Volkswagen in the year 1999 to join the passenger car market.

➢     Eicher Motors forayed into the dominant tractor segment in 2000 with the launch of a 61 HP tractor designed and built-in cooperation with Finland's Valtra Inc.

➢     Eicher launched a new 34-seater bus under the brand 'Voila' in 2002.

➢     In 2003 Eicher Motors launched their first HCV in Karnataka called 'Eicher Jumbo 20.16.' UBI tied in with Eicher and L & T in the same year to finance equipment and farm vehicles.

➢     On December 27, 2004, SBI collaborated with Eicher Motors.

➢     In 2005 Eicher Motors acquired Design Purpose Engineering Inc., USA, for $2.5 m.

➢     In 2006, Eicher joined hands for a source of hydraulic kits with Wipro.

➢     In 2010 the company introduced the Heavy Duty Trucks VE-series.

➢     In 2013, Eicher unveiled The Future Of Indian Trucking with the all-new pro series, and Royal Enfield started commercial production from the factory in Oragadam.

➢     Eicher Motors-Royal Enfield acquired Harris Performance-based in the UK in 2015. Eicher Polaris Pvt. Ltd. Launched Multix, India's first utility vehicle for human capital the same year.

➢     Eicher Motors -Royal Enfield launched Himalayan motorcycles in 2016.

➢     Eicher Motors -Royal Enfield unveiled the Interceptor INT 650 and the Continental GT 650 at the EICMA Motor Show in Milan in November 2017, for its ground-up hybrid twin motorcycles.

➢     Royal Enfield converted its existing motorcycle portfolio into BS-VI emission standards in 2019 and expanded its distribution network by opening studio stores-a new, portable model that will house the full range of Royal Enfield motorcycles.

Conclusion:

Brokerages held mixed views on Royal Enfield motorcycle manufacturer Eicher Motors after the company reported lower than expected financial results for the quarter ended March 31. Although the current situation prevails, plants are operational and currently operate at around 40% utilization. Over 90 per cent of the retail network of the company is now operational. Order bookings reached levels pre-COVID-19 (about 60,000 units per month).

    In FY20, six regular stores and 600 studio stores were added to the domestic market, bringing the total network to 1.521. There are projected to be more than 600 studio stores added in FY21. Network growth continued in overseas markets, with an increase in exclusive stores from 42 in 18 countries in FY19 year to 77 in 21 countries in FY20. Thailand and Brazil have been experiencing aggressive expansion. New countries have been added, including Korea, Italy, and Belgium. The initial response was positive for BS6 products, and the product pipeline remains stable for the future.

~ By Alex Thomas