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Investor Presentation
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
2
Investor Presentation
1959 1984 1991 1993 2002 2005 2008
Eicher Motors Limited – Journey so far…
India’s first tractor rolls out of Eicher factory in Faridabad
JV with Mitsubishi Motors to make ‘Canter’ trucks
JV with Mitsubishi ended, enters MD bus segment
Divests tractor and allied businesses to focus on CV and motorcycle businesses
Royal Enfield motorcycles acquired
Enters HD trucks segment
Forms JV with AB Volvo of Sweden; transfers CV business to the JV
3
Investor Presentation
Moving forward...
1 Eicher Motors Limited - Journey So far...
2 Eicher Motors Limited Overview3 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
4
Investor Presentation
EML
Volvo A.B.
Retail Investors Institutional Investors
Promoter Group
Eicher Motors Limited Overview
8.4%
11.8% 24.6%
55.2%
Volvo EicherCommercial Vehicles
RoyalEnfield
45.6%
54.4%
5
Investor Presentation
Eicher Management Philosophy
An evolved business model with 50+ years of experience in automotive space in India, that:
In-depth customer insights and market understanding
Best-in-class Capital Optimization:
Frugal engineering practices
Extensive knowledge of suppliers
Operational Excellence
Global Quality Standards
Break-through Market Business Model
Fully empowered management teams
Regular board meetings, every two months - full review with management
Strategic quarterly reviews and regular monthly operations review
Product board, Quality board, Customer Satisfaction board, Soft products board (after-market) held every quarter along with other statutory meetings
Established Corporate Governance
Corporate conduct rooted in highest standards of ethics, integrity and transparency
Highly professional work ethic based on mutual respect
Very strong HR and IR culture and brand
Long-term orientation
Long history of institutionalized CSR and community activities
Strong Values
6
Investor Presentation
Par Ostberg: Non-executive Chairman & Volvo nominated director Bertil Thoren: Volvo nominated director Joakim Hjerpe: Volvo nominated director Siddhartha Lal: Managing Director & Eicher nominated director Raul Rai: Eicher nominated director Prateek Jalan: Eicher nominated director
Established Governance Structure
S Sandilya: Non-executive Chairman
Siddhartha Lal: Managing Director & CEO
RL Ravichandran: Executive Director
Priya Brat: Independent Director
MJ Subbiah: Independent Director
Prateek Jalan: Independent Director
EML Board VECV Board
7
Investor Presentation
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
8
Investor Presentation
Govt. proposes 4,500 BINR investment in 12th five year plan‘12 -’17
Targets total Infrastructure spending of 9%of GDP by 2014
Highway construction target of 20 kms a day by 2012 vs current level of 12 kms a day
Targets to construct 35,000 km of highways in five years under the National Highways Development Program.
Plan to increase port capacity - 95% by 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)
India’s strong and sustained economic growth with
increasing focus on infrastructure...
*Source – CMIE, RBI
Increasing Focus on InfrastructureGDP Growth - Trends
9
4.4
5.8
3.8
8.5
7.5
9.5 9.89
6.77.2 6.9
0
2
4
6
8
10
12
Investor Presentation
…presents significant opportunities for surge in
commercial vehicles industry
206369
268809290520
345522 352141
306573272434
405259
447318
30.3
8.1
18.9
1.9
-12.9-11.1
48.8
10.4
-20
-10
0
10
20
30
40
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60
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2003 2004 2005 2006 2007 2008 2009 2010 2011
Sale
s V
olu
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s (U
nit
s)
Bus HD Trucks LMD Trucks Exports Total industry Growth (%)
% G
row
th
10
-11.3
100049 88701
-15
-5
5
15
0
100000
200000
Q2' 2011 Q2' 2012
Sale
s V
olu
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(U
nit
s)
% G
row
th
Investor Presentation
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 Project5 Royal Enfield
6 Financials
11
Investor Presentation
VECV was established in 2008 with strong parentage
Volvo strengths
Global expertise
Leadership in product
technology
Good infrastructure
facilities
Well-defined processes
and controls
Brand image and
customer relationships
Eicher strengths
Leadership in LD / MD
segments
Specialist skills and
experience in developing
low cost, better
performance products
Wide dealer network
After sales infrastructure
for LD / MD
Cost effective operations
VECV vision
“To be
recognised as
the industry
leader driving
modernisation in
commercial
transportation in
India and the
developing
world” Eicher transferred its CV, components and engineering solutions businesses into VECV
Volvo demerged Volvo Truck India’s sales & distribution business from Volvo India Pvt Ltd.
12
Investor Presentation
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
VECV milestones
May 2008: Signing of definitive agreements
13
Investor Presentation
VECV Overview
Eicher Trucks & Buses
Volvo Trucks India
EicherEngineering Components
EicherEngineering
Solutions
Medium Duty Engine Project
14
Investor Presentation
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
Eicher Trucks and Buses – Ambitions to achieve global benchmarks
in product development and manufacturing capabilities
15
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
Eicher Trucks & Buses is its widening product range and further
strengthening its already extensive distribution and after market
network
Product Range
L/MD, 5-12 Ton GVW
Range
HD, 16-40 Ton GVW
Range
Buses, 21 -69 seater
16
Semi Low Floor City Buses 25 Ton tipper
Launched in 2011
Dealerships (141)
Service Centers (62)
Distribution and after
market Network
Investor Presentation
Eicher Trucks and Buses recorded highest ever volume
in 2010, continues to outgrow industry in 2011
Sale
s V
olu
me
(U
nit
s)
Sale
s V
olu
me
(U
nit
s)
17
1060414175 16258
18961 1970015804 16893
2642631381
953
30183781
32364501
2496 1424
4219
7352
1392
2027
23452773
3857
2942 3282
4819
6496
1114
1232
14551883
2078
2533 2665
2717
310845.4%
16.6%
12.6%
12.2%
-21.1%
2.1%
57.4%
26.6%
-30%
-10%
10%
30%
50%
70%
0
10000
20000
30000
40000
50000
60000
2003 2004 2005 2006 2007 2008 2009 2010 2011
Exports Buses 16 T & above Trucks % Growth
48337
14063
20452
23839
2685330136
23775 24264
38181
8.8%
6641 6472
1407 1906732 702
2127 27840
5000
10000
15000
Q2'2011 Q2' 2012
10907 11864
% G
row
th%
Gro
wth
Investor Presentation
Volvo Trucks India is the leader in specialised high end
trucks; created high end mining tipper segment
FH520: The most
powerful truck on
Indian roads!
Aviation refueller
Mining Tipper
195
343
543610
802
948900
1104
706
75.9
58.3
12.3
31.518.2
-5.1
22.7
-36.1
-60
-40
-20
0
20
40
60
80
100
0
200
400
600
800
1000
1200
2003 2004 2005 2006 2007 2008 2009 2010 2011
Sale
s V
olu
me
s (U
nit
s)Growth (%)
18
122
15224.6
-70
-20
30
0
50
100
150
200
Q2'2011 Q2' 2012
% G
row
th
Sale
s V
olu
me
s (U
nit
s)
Investor Presentation
Volvo Trucks India has a unique distribution and
after market model
19
Investor Presentation
Location : Delhi, Michigan, Shanghai and Beijing
Design, development and consultation services for customised engineering solutions.
Acquired Design Intent Engineering (DIE), Michigan in 2005 & Hoff & Associates (HAI), Michigan in 2007
Comprehensive product development services (Class A surfacing, CAD, CAE, prototyping) with a strong offshore Delivery model.
Competencies for Volvo Group, VECV, EEC
Overview of EEC & EES
Plants at: Thane, Dewas , Pithampur
Supplier of drive line components and aggregates - gear box assembly, , transmission gears and shafts
Caters to full requirements of Eicher Trucks & Buses and supplier to the Volvo Group
Services a global client base including OEMs e.g., John Deere, Caterpillar, CNH
Eicher Engineering Solutions (EES)Eicher Engineering Components (EEC)
20
Investor Presentation
Eicher Truck & Buses is widening reach in overseas
markets
1114 12321455
18832078
25332665 2717
3108
0
10.6
18.1
29.4
10.4
21.9
5.2
2.0
14.4
0
5
10
15
20
25
30
35
0
500
1000
1500
2000
2500
3000
3500
2003 2004 2005 2006 2007 2008 2009 2010 2011
Exp
ort
Vo
lum
e (
un
its)
Export Volume % Growth
% G
row
th
21
Exp
ort
Vo
lum
e
(Un
its)
Presence in 22 countries
Homologation in 10 countries
KD Assembly operations in Egypt, Kenya, Bangladesh & Mauritius
Local Bus body building facilities in Egypt, Turkey, Mauritius, Nepal & Bangladesh
Volvo and ETB jointly exploring opportunities in ASEAN and Africa
732 702-4.1
-15-13-11-9-7-5-3-113579111315
0
100
200
300
400
500
600
700
800
900
1000
Q2' 2011 Q2' 2012
% G
row
th
Investor Presentation
In 2008, an extensive study was initiated in ETB to gather deep insights strategy required in the Heavy Duty segment
The study spanned customers, after market, product and operations
1st phase of insights implemented
HD trucks have rapidly acquired market share since 2010
Breakthrough into Heavy Duty category is critical to
VECV....early success is evident
22
3236
4501
2496
1424
4219
7352
1.7%
2.3%
1.5%1.1%
2.0%
3.1%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0
1000
2000
3000
4000
5000
6000
7000
8000
2006 2007 2008 2009 2010 2011
Sales Volume
1407
1906
2.7%
4.8%
1%
3%
5%
0
500
1000
1500
2000
2500
Q2' 2011 Q2' 2012
Investor Presentation
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.
Medium Duty Engine Project will provide technological
advantage and cushion in times of adverse business cycle
Siddhartha Lal - MD, VE Commercial Vehicles & Peter Karlsten - President & CEO, Volvo Power Train at the MDE Project groundbreaking ceremony, October 2010
23
Investor Presentation
VECV - Wanted position in 2015
Wanted position 2015: Operations
Long term operating margin target >8% over a business cycle
Customer satisfaction to reach >80%
Wanted position 2015: Strategic
4819
26425
4219
2010
17,500
36,400
44,000
2015
0
100,000
60,000
80,000
Sales in units
40,000
20,00015%
35%
16%
Market
share
(2015)
38181 inclusive of 2717
exports
Bus
LD/MD
HD
Seen as a leading CV
group in India
Recognized competitive advantages
"Best of both"
company culture
Most innovative products
covering entire range
Comprehensive network
Proactive solution / service
provider
Lean organization
Culture incorporating best of
Eicher values and Volvo Way
Professionalism, honesty,
people caring to attract best
talents in industry
Best fuel economy
Reliable products
Superior service quality
Safety and comfort setting
industry standards
24
100,000 including 11000
exports
Investor Presentation
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 Enfield6 Financials
25
Investor Presentation
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.
Royal Enfield
1901: Royal Enfield rolls out its first Motor Cycle
1955: Enfield India is incorporated.
1994: Eicher Motors acquires Enfield India Ltd.
26
Investor Presentation
After successfully managing 2010, the year of
transition, Royal Enfield continues to grow and evolve
Bullet Thunderbird Classic Café RaceA future launch
In 2010, Royal Enfield transitioned to Unit Construction Engine, new engine platform
Unrivalled brand image has created unmet demand: 6-10 month waiting period
27
28383 28868 30457 3264236786
43298
51955 52576
74626
4.1 1.75.5
7.212.7
17.7 20.0
1.2
41.9
0
10
20
30
40
50
0
10000
20000
30000
40000
50000
60000
70000
80000
2003 2004 2005 2006 2007 2008 2009 2010 2011
Gro
wth
(*%
)
Sale
s V
olu
me
(un
its)
Sales Volume
Growth (%)18581
27519
48.1
0
10
20
30
40
50
60
70
80
0
5000
10000
15000
20000
25000
30000
35000
40000
Q2 '2011 Q2' 2012
Gro
wth
(%
)
Sale
s V
olu
me
(un
its)
Investor Presentation
Plans being executed for profitable growth
• 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
• Focus on cost management
• Exploit significant opportunities that exist in after market
• New product launches planned for 2012 and 2013; New platform under consideration
• Increase reach in India and global markets
• Currently, there are 230 distribution and after market points in India. Exports to more than 30 countries
Enhance production capacity
Improve profitability
New product launches
Distribution and after market footprint
28
Investor Presentation
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
29
Investor Presentation
Consistently improving performance – all time high
sales and margins in Q1’12
5958 6195
8593 8803
10409 1038510984
12435
1389712984
14513
15791
16950
15849
2.8%
6.6%6.8%
5.1%
8.8%8.2%
7.6%
9.7%
11.7%
9.7%
10.4%
9.8%
10.6%
8.8%
-1.0%
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
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
Ne
t In
com
e (
MIN
R)
Total Net Income (MINR) Operating margin
% O
pe
rati
ng
Mar
gin
30
Investor Presentation
Optimizing capital deployment through relentless
focus on cash management
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
-3000.0
-2000.0
-1000.0
0.0
1000.0
2000.0
Operating Working Capital
Operating Capital
Net Block Net SalesSales/ Assets
Sales/ Operating
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
31
11 consecutive quarter of negative operating working capital
Best in class capital to turnover drives RoCE to >100%
In MINR
In MINR
Investor Presentation
VECV well positioned to take advantage of
discontinuities in Indian CV space
Discontinuity Implication VECV Strategy/ Advantage
Continued tightening of emissions and safety norms
Legacy investments of players less meaningful
VECV investing early in fully-built vehicles and higher emission norms
Better enforcement of regulations on overloading
Right-load vehicles; potential to change value-proposition
Products highly suitable for right-load and mild over-load conditions
Better highways and increased road networks
Higher speeds; increased mileage of vehicles/ year
Better and more reliable engines and driveline
Increasing difficulty in sourcing drivers
Drivers will be more influential in purchase decision
Better comfort and features for drivers; plan to build brand with drivers off-product as well
Professionalisation of transportation/ logistics
Total cost of ownership approach to buying vehicles
Value-selling approach; premium products with better efficiency and turnaround time; world-class after-market and vehicle quality
End-use demands on logistics/ supply-chain
Improved dependability of supplies required
Vehicle quality and after-market excellence
Market shifts faster towards ‘premium domestic’ segment
More modern trucks with right cost-structure and value
VE-series is starting point; developing innovative products that are closely aligned to emerging customer needs …will be introduced from 2012
32
Investor Presentation
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
33
Investor Presentation
Disclaimer
Certain statements in the presentation describing the Company’s views about theIndustry, expectations/predictions, objectives etc may be forward looking within themeaning of applicable laws and regulations. Actual results may differ materially fromthose expressed in the statement. Company’s operations may be affected with thesupply and demand situations, input prices and their availability, changes inGovernment regulations, tax laws and other factors such as Industrial relations andeconomic development etc. This presentation also contains references to findings ofvarious reports available in the public domain. Eicher makes no representation as totheir accuracy or that the Company subscribes to those findings. Investors should bearthe above in mind while going through the presentation.
Investor Presentation
THANK YOU
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