RECOMMENDATIONS to Bajaj

sunandaC

New member
RECOMMENDATIONS to Bajaj

Comments On Short Term Liquidity Position

The short-term liquidity position of Bajaj is excellent compared with both the industry & its competitors.


Thus a creditor or a supplier would feel more secure at Bajaj than at any other company.


However I feel that a better use of its working capital should be made.


There should be better utilization of its huge idle cash reserves by making investments & thus earn higher income on such idle funds.

Comments On Management Efficiency Ratios


This shows that management efficiency when compared with both industry standard & TVS is superior.


However Hero Honda performance is better for all turnover ratios.


Hence we should benchmark our self against Hero Honda.


Initiatives must be taken to improve the inventory turnover (finished goods) by using aggressive marketing strategies.


Improve the fixed asset turnover by better utilization of production capacity.

Comments On Capital Structure Ratios


Most of the companies in the sector have been reducing their debt components. Bajaj in the past never believed in using debt as a way of financing.


However with interest rates reducing, using debt is a cheap means of finance vis-à-vis equity, & hence Bajaj is trading on equity to improve the returns to its equity shareholders.



Since the debt component is increasing lesser proportion of shareholders funds are invested in purchasing long term fixed assets.


Since the debt used to finance long-term asset is short-term debts it is not a very prudent practice.


Comments On Profitability Ratios


Since Bajaj is one of the lowest cost producers all individual expenses as % of sales are lowest.


Hence the gross profit, operating margin & net profit margins are highest when compared with the industry & its major competitors.


However ROE & ROCE of Bajaj is very low when compared with Hero Honda, this is because of the huge capital base & huge reserves giving it a lower ratio.



Bajaj is regular in declaring dividend, which is around 20-30% of its profits.



The EPS of Bajaj is growing by 30% over the last two years & hence provide excellent growth opportunity for its shareholders by way of capital appreciation by increase in its market price.

General Recommendations



The impression of Bajaj in the minds of the public is that it is a moped & a three-wheeler company, & it is a very orthodox & unhappening image in the minds of the youth. It should use a powerful brand ambassador & individual whom the youth can relate with.



It should aggressively market itself as a motorcycle company & move from its traditional mindset (Rahul Bajaj had once stated that he had only one department in his company the dispatch department & that he did not require a marketing department.)



Bajaj should aggressively push sales of higher margin products & launch new products in niche segments.




Bajaj should also try & push for tie-ups & Joint Ventures in foreign market & try & increase its export base. (E.g. Tata Motors tie-up with Rover for marketing of India & Joint Venture with Senegal government for manufacturing trucks & commercial vehicles.)



Bajaj should look for possible mergers & acquisitions. (E.g. Maharashtra Scooters) & try & improve its distribution network & provide it with products in niche segments & help increase production capacity & provide economies of scale.



Bajaj should evaluate the process of backward integration as it has huge cash reserves surplus.


This process would help it in acquiring inputs continuously at lower cost & at regular intervals.



Increase its dealer network to tap rural growing markets by going in for tie-ups & offering better margins to dealers.



The key to Bajaj real success lies in Research & development.



How it is able to use value analysis & value engineering by adding new features to its existing product line & how it is able to come out with new product for different niche markets.




Analysis of different alternatives like outsourcing, in-house, purchase & tie-up should be evaluated.
 
RECOMMENDATIONS to Bajaj

Comments On Short Term Liquidity Position

The short-term liquidity position of Bajaj is excellent compared with both the industry & its competitors.


Thus a creditor or a supplier would feel more secure at Bajaj than at any other company.


However I feel that a better use of its working capital should be made.


There should be better utilization of its huge idle cash reserves by making investments & thus earn higher income on such idle funds.

Comments On Management Efficiency Ratios


This shows that management efficiency when compared with both industry standard & TVS is superior.


However Hero Honda performance is better for all turnover ratios.


Hence we should benchmark our self against Hero Honda.


Initiatives must be taken to improve the inventory turnover (finished goods) by using aggressive marketing strategies.


Improve the fixed asset turnover by better utilization of production capacity.

Comments On Capital Structure Ratios


Most of the companies in the sector have been reducing their debt components. Bajaj in the past never believed in using debt as a way of financing.


However with interest rates reducing, using debt is a cheap means of finance vis-à-vis equity, & hence Bajaj is trading on equity to improve the returns to its equity shareholders.



Since the debt component is increasing lesser proportion of shareholders funds are invested in purchasing long term fixed assets.


Since the debt used to finance long-term asset is short-term debts it is not a very prudent practice.


Comments On Profitability Ratios


Since Bajaj is one of the lowest cost producers all individual expenses as % of sales are lowest.


Hence the gross profit, operating margin & net profit margins are highest when compared with the industry & its major competitors.


However ROE & ROCE of Bajaj is very low when compared with Hero Honda, this is because of the huge capital base & huge reserves giving it a lower ratio.



Bajaj is regular in declaring dividend, which is around 20-30% of its profits.



The EPS of Bajaj is growing by 30% over the last two years & hence provide excellent growth opportunity for its shareholders by way of capital appreciation by increase in its market price.

General Recommendations



The impression of Bajaj in the minds of the public is that it is a moped & a three-wheeler company, & it is a very orthodox & unhappening image in the minds of the youth. It should use a powerful brand ambassador & individual whom the youth can relate with.



It should aggressively market itself as a motorcycle company & move from its traditional mindset (Rahul Bajaj had once stated that he had only one department in his company the dispatch department & that he did not require a marketing department.)



Bajaj should aggressively push sales of higher margin products & launch new products in niche segments.




Bajaj should also try & push for tie-ups & Joint Ventures in foreign market & try & increase its export base. (E.g. Tata Motors tie-up with Rover for marketing of India & Joint Venture with Senegal government for manufacturing trucks & commercial vehicles.)



Bajaj should look for possible mergers & acquisitions. (E.g. Maharashtra Scooters) & try & improve its distribution network & provide it with products in niche segments & help increase production capacity & provide economies of scale.



Bajaj should evaluate the process of backward integration as it has huge cash reserves surplus.


This process would help it in acquiring inputs continuously at lower cost & at regular intervals.



Increase its dealer network to tap rural growing markets by going in for tie-ups & offering better margins to dealers.



The key to Bajaj real success lies in Research & development.



How it is able to use value analysis & value engineering by adding new features to its existing product line & how it is able to come out with new product for different niche markets.




Analysis of different alternatives like outsourcing, in-house, purchase & tie-up should be evaluated.

Hey sunanda, thanks for sharing the information and i really liked it and also appreciate your work. Well, i have also got some important information regarding capital management of Bajaj and would like to share it with you.
 

Attachments

  • short-term liquidity position of Bajaj.pdf
    177.9 KB · Views: 0
Top