Bajaj Auto Limited · NSE:BAJAJ_AUTO
Bajaj Auto — Investor Presentation (February 2007)
51 slides from Bajaj Auto's investor presentation, February 2007
Slide 1: Bajaj Auto Investor Meet February 2007
1 © Bajaj Auto Limited, India, February 2007
Slide 2: Agenda
AGENDA INDUSTRY INDUSTRY SCENARIO SCENARIO BAJAJ BAJAJ PLANS PLANS BAJAJ BAJAJ STRATEGY STRATEGY MARGINS MARGINS & & ROCE ROCE FINANCIAL FINANCIAL SERVICES SERVICES INSURANCE INSURANCE –– GENERAL GENERAL & & LIFE LIFE 2 © Bajaj Auto Limited, India, February 2007
Slide 3: Industry
INDUSTRY … our forecast 3 © Bajaj Auto Limited, India, February 2007
Slide 4: Motorcycles will continue to dominate the 2 wheeler market
Motorcycles will continue to dominate the 2 wheeler market 12 12.0 2.0 17% 10 8.6 8 1.4 16% Volumes in million 6 10.0 83% 4 3.8 7.2 84% 2.2 58% 2 1.6 42% - FY 00 FY 07E FY 10E * M'cycle Other 2 Wh * Internal estimates CAGR over next 3 years ~ 12% 4 © Bajaj Auto Limited, India, February 2007
Slide 5: Further consolidation expected in the industry
Further consolidation expected in the industry HH, Projected motorcycle volumes BAL 10 HH, HH, BAL, BAL, 8 4.2 TVS Suzuki, TVS Volum es in m illion Yamaha, Escorts, 6 LML, 2.5 Kinetic 4 3.4 2 0.3 0.8 0.9 0.3 0 0.1 0.2 0.5 FY 00 FY 07E FY 10E * Others Escorts Yamaha TVS HH / HMSI Bajaj * Internal est
Slide 6: Industry should continue to grow at ~13% p.a.
Industry should continue to grow at 12 ~ 13% p.a Industry Volumes 12.0 12 10 10.0 8.6 Volumes in million 8 12% 7.2 6 3.8 4 1.6 2 24% 0 FY 00 FY 07E FY 10E * M'cycle 2 Wh * Internal estimates ….. lead by 6 © Bajaj Auto Limited, India, February 2007
Slide 7: Existing and fresh growth drivers
….. lead by Lower Penetration Existing growth drivers 600 Taiw an Favorable demographics 500 400 2W per 1000 Poor mass transport system 300 ThailandMalaysia Italy Replacement demand 200 Vietnam Japan Indonesia 100 Nigeria Low penetration 0 Pakistan China Brazil Germ any France UK USA Philippines Col
Slide 8: We anticipate customers moving up the value chain
We anticipate customers moving up the value chain 100% 5% ~ 5% 12% Higher-end > 12% 80% S 27% E > 30% G 60% M 95% E 40% N T 61% < 50% 20% 0% FY 00 FY 07E FY 10E * 100 cc 125 cc 150 cc > 180 cc * Internal estimates 8 © Bajaj Auto Limited, India, February 2007
Slide 9: Bajaj Auto Vision 2010
BAJAJ AUTO … Vision 2010 9 © Bajaj Auto Limited, India, February 2007
Slide 10: Achievement to date
Achievement … to date 3.00 2.50 2.5 2.5 Volumes in million 2.00 1.50 1.2 1.00 0.50 0.3 0.3 - 0.2 FY 00 FY 07E 2 Wh's 3Wh's M'cycles Total volume 1.4 2.8 million units Motorcycles 0.3 2.5 million units Market share 16% 35% Player No. 3 No.2 Exports 4% 17% 10 © Bajaj Auto Limited, India, February 2007
Slide 11: Plans for 2010
Plans for 2010 5.00 4.5 4.2 4.00 Volumes in million 3.00 2.5 2.5 2.00 1.00 0.3 0.5 - FY 07E FY 10E * 2 Wh's 3Wh's M'cycles Total volume 2.8 5.0 million units Motorcycles 2.5 4.2 million units Market share 35% > 40% Exports 17% 20% 11 © Bajaj Auto Limited, India, February 2007 * Internal estimates
Slide 12: Strategy: Capacity expansion
Strategy … A. Capacity expansion Plant wise capacities ( in million ) Plant FY 06 Expansion New FY 10E Akurdi 0.7 0.8 1.5 Waluj 1.5 0.3 1.8 Chakan 1.0 1.0 Uttaranchal 1.0 1.0 Chakan New 0.2 0.2 Total 3.2 1.1 1.2 5.5 Product wise capacities ( in million ) Product FY 06 Expansion New FY 10E 2 wheeler
Slide 13: Distribution and Service Network
B. Distribution and Service Network Dealer Network 2 wheelers 3 wheelers Pro-biking Urban Technology showcase Rural Service & Brand building Market Penetration Segregation of 2 and 3 wheeler dealerships Exclusive showrooms to showcase Bajaj technology and for brand building Network of 500+ dealers a
Slide 14: Products
C. Products 100% 4% 15% S 80% E 32% G 60% M 100% E 40% N 49% T 20% 0% FY 00 FY 07E 100 cc 125 cc 150 cc > 180 cc Leverage R & D strength for superior products Shift the customer up the value chain Introduced 200 and 220 cc models Create super premium segment, > 180 cc reason being … 14 © Bajaj Auto
Slide 15: 100 cc segment will not make money
100 cc segment will not make money … The 100cc segment has become more or less a commodity market Net realization to manufacturer ~ Rs. 20,000 to 23,000 Industry Profit * Competition Drivers 12% 20% Low Technology 150cc+ and Product 125cc 23% 35% Moderate features Price cuts, 100cc Intense Subventio
Slide 16: International market
D. International market Exports FY 00 FY 07E FY 10E 27 36.00 Traditional 24 32.00 Srilanka Exports as % to Net Sales 20.0 Exports (Rs. in billion) 21 28.00 Bangladesh 17.3 18 24.00 Egypt 15 20.00 17 12 16.00 Recent expansion 9 12.00 Colombia 4.3 6 8.00 Guatemala 3 1 4.00 Mexico 0 0.00 Peru FY 00 FY
Slide 17: 3 Wheelers
E. 3 Wheelers FY 00 FY 07E FY 10E Passenger Carrier 3 seater Multi seater Electric Cargo < 750 > 750 4 wheeler cargo Total ( 000's ) 172 315 450 Expanding presence across all segments Market share - PC 81% 78% Cargo - 28% Exports 10% 45% 17 © Bajaj Auto Limited, India, February 2007
Slide 18: Vendor Development and Labour Productivity
F. Vendor Development Strengthening the supply chain, expansions based on cluster layout No of vendors consolidated to ~ 200 Vendors as partners for design, development and TPM Knowledge transfer through training and deputation ( ~ 100 middle level managers to be deputed at vendors end ) Warranty co
Slide 19: Margins and ROCE
Margins and ROCE Rs. in billion Operating EBITDA & Pre Tax Operating ROCE % 12 131 140 10 120 10.96 100 8 80 6 5.85 60 4 40 34 2 20 18.2% 15.2% 0 0 FY 00 FY 07 (9M) EBITDA ROCE % EBITDA % As of Margins healthy, consistently in Investment Portfolio Dec March excess of 15% Rs in billion 2006 2000 ROCE
Slide 20: Financials
Financials (Rs. in billions) 2006 – 07 Particulars H1 Q3 9 Month Sales & operating income 52.81 29.27 82.07 Less: Excise Duty 6.42 3.59 10.00 Net Sales 46.39 25.68 72.07 Q3 margin at 14.2%, primarily Material Cost 33.12 18.79 51.91 due to … % 71.4 73.2 72.0 Strategic reduction in prices of Stores &
Slide 21: Bajaj Auto: Consolidated
Bajaj Auto : Consolidated Consolidated revenues for FY07 (9M) at Revenue Composition : FY 07 ( 9M ) Rs.110 billion (USD 2.5 billion), up 40% Invest. & Others Insurance 4% Share from Insurance sector - up from 18% 31% in FY05 to 31% in FY07 (9M) Insurance and retail finance show huge growth in revenu
Slide 22: Evolving Mission Statement
Evolving Mission Statement Distinctly Ahead Value for money 2003 2004 2010 22 © Bajaj Auto Limited, India, February 2007
Slide 23: Vision 2010
Vision 2010 … Mobilise India – by supplying 4 million motorcycles per year in a market of 10 million customers. Globalise India – by rapidly enhancing exports and international facilities to become among the three largest global producers in two wheelers. Finance India – by ramping up Bajaj Auto Fin
Slide 24: Bajaj Auto Finance Ltd
BAJAJ AUTO FINANCE LTD 24 © Bajaj Auto Limited, India, February 2007
Slide 25: Disbursals and PBT
Disbursals and PBT 30.0 0.6 0.55 26.00 25.0 0.5 19.55 10.00 20.0 0.4 D isb u rsals R s. b illio n 0.34 15.0 7.83 0.3 10.0 0.2 16.00 5.10 11.72 5.0 0.1 2.70 2.40 0.0 0 FY 00 FY 06 FY 07E Automobiles Non-automobiles PBT 25 © Bajaj Auto Limited, India, February 2007
Slide 26: Growth journey
Growth journey FY 00 FY 07 Leading NBFC in consumer and An extended marketing tool for 2 2 wheeler financing wheelers manufactured by Bajaj National presence … Auto Ltd 109 branches across 20 states ~ 53% disbursals in automobile 270 independent satellite locations segment No. of employees ~ 2,200 C
Slide 27: Key indicators and going forward
Key indicators … Rs. in billion FY 00 FY 06 Gross receiveable from financed assets 4.0 16.6 Net assets under finance 2.9 14.5 Borrowings 2.7 10.2 Net Worth 1.6 5.0 Capital Adequacy Ratio 33.9% 28.1% NPA as a % of assets financed 1.8% 3.3% Average cost of borrowing < 7% FY 10 Going forward … Expand r
Slide 28: To achieve
To achieve … Consolidating our Revamp of organization structure strength Strengthen top management with CEO, CFO and Credit Controller Re-organize the back office operations, in view of increased operations Expand of branch network Build on IT system for substantially increased operation size Raisin
Slide 29: Bajaj Allianz Life Insurance Co. Ltd.
BAJAJ ALLIANZ LIFE INSURANCE CO. LTD. 29 © Bajaj Auto Limited, India, February 2007
Slide 30: The Potential for Growth of Life Insurance in India
The Potential for Growth of Life Insurance in India Growing Per Capita Income 36,180 40,000 35,000 Per Capita Income (INR) 27,000 30,000 25,155 25,000 20,000 13,333 14018 15,000 10,000 5,000 0 2003-04 2004-05 2005-06 2006-07 2009-10 Financial Year Trends in Premium and Insurance Penetration 1,200,00
Slide 31: Story so far
Story so far……. Factors 2000-01 2005-06 Number of Players 1 16 Insurance Premium as a % ~ 1.2% ~3.4% of GDP Insurance Premium per ~ 280 ~ 761 Capita (INR) Population Insured (Mn) ~ 120 (2001-02) ~ 198 Bancassurance and Other Alternate Channels Agency only Distribution Force contributing towards over
Slide 32: Indian Life Insurance Market - NB Premium
Indian Life Insurance Market - NB Premium 400 35 Private Insurers 3 years CAGR– 120% – 120% 9 Market 3 years CAGR – 28% – 28% 350 103 300 254 NB Premium INR bn 250 56 YoY 18 Growt Private Insurers 200 17 7 LIC h 0 24 42% In INR Bn 10 YoY Apr-Dec 06 150 256 Private & Public Insurer Growt NB Premium M
Slide 33: A Brief History - Bajaj Allianz Life Insurance
A Brief History – Bajaj Allianz Life Insurance Co. Ltd. Started operations in October 2001 BALIC recorded 217% growth in New Business for the FY 05-06 Licensed to underwrite all classes of life insurance Multi Channel company 30,000 8.00% Wide range of products 7.6% 7.00% 25,000 27.1 6.00% 20,000 NB
Slide 34: Indian Private Life Insurance Market NB Premium
Indian Private Life Insurance Market NB Premium (Apr to Dec 06) INR Bln Private Life Insurers NB Premium ICICI Prudential 29.5 Bajaj Allianz 21.8 SBI Life 11.9 HDFC Standard 9.9 Birla SunLife 5.1 SBI Life Bajaj Allianz Others 28.1 HDFC 11% 21% 106.2 Standard 9% Birla ICICI SunLife Others Prudential
Slide 35: BALIC - Key Strategic Initiatives
BALIC - Key Strategic Initiatives Multi distribution channels with maximum geographical coverage Diversified product range Cost control Efficient capital management Competent fund management Operational efficiency 35 © Bajaj Auto Limited, India, February 2007
Slide 36: BALIC - Multi-Distribution Channels
BALIC - Multi-Distribution Channels AGENCY The company follows a hub & spoke model BALIC has the largest REGIONAL AREA BRANCH network in the market OFFICE OFFICE OFFICE after LIC with over (22 Offices) (275 Offices) (601 Offices) 170,000 Licensed agents The penetration into smaller towns and rural a
Slide 37: BALIC - Cost Control & Efficient Capital Management
BALIC - Cost Control & Efficient Capital Management 1 INR = 45 USD Private Life Insurers GWP NB Premium Surplus/ (Deficit)* Share Capital AUM March '06 March '06 INR bn USD bn INR bn USD bn INR bn USD bn INR bn USD bn INR bn USD bn ICICI Prudential 42.61 0.95 26.03 0.58 (1.78) (0.04) 11.85 0.26 87.7
Slide 38: BALIC - Operational Efficiency
BALIC - Operational Efficiency The only company among the private life insurers to have decentralized underwriting at branches resulting in efficient customer servicing and low TAT Fully online and integrated policy underwriting and administration system The company has a huge network of individual
Slide 39: BALIC - The way forward
BALIC -The way forward …… New & innovative products are in the process of being launched Expanding the Agency network through new branches and Agent recruitment Further focus on regional banks for penetration at regional levels Increase focus on new Tie Ups with Corporate Agents and Franchisees 39 ©
Slide 40: Bajaj Allianz General Insurance Co. Ltd.
BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. 40 © Bajaj Auto Limited, India, February 2007
Slide 41: Non-life Insurance in India
Non-life Insurance in India 2000-01 2005-06 Number of players 4* 12 Premium Income 94 (2.1) 204 (4.5) INR bn (USD bn) Insurance premium ~ 0.4% 0.7% as % of GDP Insurance premium ~ 100 (2.2) 186 (4.1) per capita – INR (USD) •The four players in 2000-01 were state owned non-life insurance companies –
Slide 42: Drivers to growth
Drivers to growth… Real GDP Growth 9.0% 8.0% 7.0% 6.0% Increase in GDP and a surge in the GDP (% ) 5.0% capital formation and auto industry are key drivers of non-life insurance industry. 4.0% 3.0% 2.0% 1.0% 0.0% 00-01 01-02 02-03 03-04 04-05 05-06 Financial Year 30% 29% 9 25% 26% 8 25% 23% 8 G ross
Slide 43: Indian Non-Life Insurance Market - Snapshot
Indian Non-Life Insurance Market – Snapshot Non-Life Insurer Market Share FY 05-06 Non-Life Insurer Market Share Apr-Nov 2006 25% 23% 25% 20% 20% 17% 17% 20% 15% 16% 14% 14% 15% 15% 12% 13% 10% 8% 8% 10% 7% 6% 5% 4% 5% 5% 0% 0% ICICI Lombard Other private sector New India Iffco Tokio United India Na
Slide 44: Market trends - de-tariffication
Market trends – de-tariffication • Nearly two-thirds of market business was monitored by tariff • Tariffs removed w.e.f. 01 Jan 2007 • Prices expected to drop for Property, Engineering businesses – profitable segments • Opportunities – Risk based pricing – Cost leadership – Service differentiation –
Slide 45: De-tariffication - Sources of new premium
De-tariffication – Sources of new premium Pre 2000 Personal non-life insurance products ( except motor ) virtually nil. Non life insurance mainly restricted to Motor and corporate buying Today New products emerged to cater to personal needs Hospitalization Travel (Overseas/domestic) Householder pack
Slide 46: Bajaj Allianz General - The Growth Story
Bajaj Allianz General – The Growth Story 14 13(.29) 12 Growth INR bn (USD bn). 10 9(.19) 8 5(.11) 6 3(.07) YoY Growth 4 50% YoY Growth 1(.03) 80% YoY Growth 2 YoY Growth 61% 109% 0 01-02 02-03 03-04 04-05 05-06 Financial Year Emerged as one of the leading player in the private sector market with 4 y
Slide 47: Bajaj Allianz General - A Multi Channel Company
Bajaj Allianz General - A Multi Channel Company Extensive distribution– over 122 offices and over 6,000 agents - …. Offices 5 National banks and over a dozen regional banks – widest coverage amongst private insurers. HDFC, UTI, J&K bank, IDBI bank, United Bank of India etc. major bancassurance partn
Slide 48: Bajaj Allianz General Insurance Apr-Dec 2006
FY 2006-07 Apr-Dec 06 Bajaj Allianz General Insurance Apr-Dec 2006 Apr-Dec 2005 Co.Ltd. INR mn USD mn INR mn USD mn Gross Premium 13,015 289 9,553 212 Net Earned Premium 5,967 133 4,230 94 Profit Before Tax 553 12 404 9 Profit after Tax 355 8 254 6 Shareholders Equity 3,235 72 2,101 47 Total Assets
Slide 49: The way forward
The way forward… Highest underwriting profits means buffer to meet pricing adversities post de-tariff Growing cash flows arising out of high retentions - means growing investment income Cost leader in the industry with 24% cost to NEP ratio – leveraging this is critical Focus on Claim settlement rat
Slide 50: How are we different from competitors
How are we different from competitors Strong focus on underwriting profit - Underwriting profit of BJAZ in 2005/06 exceeded that of the industry In house Health Administration - strong service record In house assessment of Motor claims - over 75% of claims assessed in house Lowest expense ratios (ac
Slide 51: Thank you
Thank you No part of this presentation is to be circulated, quoted, or reproduced for any distribution without prior written approval from Bajaj Auto Limited, Mumbai-Pune Road, Akurdi, Pune-411 035, India. Certain part of this presentation describing estimates, objectives and projections may be a “f