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[Music]
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thank you so much for joining us today
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pach pleasure um if you could tell us a
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little first about your company um you
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are the head of hero Motors um obviously
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you have a lot of um two wheelers Auto
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components tell us a little bit about
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the structure of the business and um you
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know the the separate parts of the
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business hero group uh is the eighth
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largest group in India manufacturing uh
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group we have $5 billion worth of sale
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we employ 27,000 people last year and
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our group has got two uh ends one is the
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front end that means this uh thing of
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bicycle motorcycles which go and touch a
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customer and then at the back end where
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their paths and services which are
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working at the back end fortunately uh
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group companies are leaders in
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bicycle we claim to be the world largest
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maker motorcycle was also very large
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company and uh our parts making is about
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$1.2 billion of sale last year now in
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part making I'll share with you that
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because again the hero cycle Hero Honda
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motorcycle touch a consumer that we know
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but in the part making companies we have
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a joint venture with sha of Japan we are
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Market leaders in the country we Supply
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to Suzuki
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Honda as a leader Suzuki is a market
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leader there 50% share of Market in
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India and uh we've got a joint venture
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with sumito Corporation Japan called
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mjal kiru we Supply again to Suzuki
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Toyota Nissan General
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Motors who else have I missed out
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practically everybody they're all number
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one every hero group company that I'm
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talking about they are number one in the
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field then we have a Foundry aluminium
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diecasting plant which supplies again to
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these all majors so when I tell you
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these components are getting into
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automobiles means there are they are
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most competitive these they uh these are
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global companies Suzuki when they have a
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tender it'll be like a tender for the
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whole worldwide sale so if they're
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buying from us means we are really
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globally competitive MH so this is
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the broad structure I would say about
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how the group is looking like so
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obviously the um business that you're in
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um especially the auto parts side um you
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know if you look at um what's happening
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in uh for example the United States um a
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lot of it is dependent on the health of
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the Auto industry um and so have you
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seen any challenges with the global
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downturn um you know what has been your
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strategy to weather that obviously
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you're Diversified across different
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things but um any particular things
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you've been doing especially in the auto
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parts uh
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side India never really had a downturn
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in October 08 that's when the Meltdown
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started so there was a little lull for
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about 2 months and uh it was not like a
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depression but a little flat curve the
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growths were not that aggressive and uh
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come 2009 January the things were up and
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Point again and uh our North American
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exports they got hit they got hit pretty
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badly and uh uh so we were feeding the
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Recreational Products that time
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allterrain Vehicles if you have money in
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your pocket then you go and buy these
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expensive toys but if there's problem
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then they take the worst hit so we have
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now focused our energies onto a small
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car market India Indian market is 2
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million units per year going to be 4
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million units a year and going to be 6
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million units a year in the coming next
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2 plus 2 years now North America is a
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similar number so but then North America
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is a huge Market I mean luxury cars and
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big cars and all that Vans but India is
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a small car market so that's where our
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focus is that's where it is going this
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segment that I just talked about it's
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uh $16 billion worth of Market size
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going to go to $125 billion worth of
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Market size it's a big jump so we are
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focused there we are laser sharp focused
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Hero has got the best technology part
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Partners from Germany we got ZF it's a
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13 billion Euro company sumitu as I told
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you just now sha Japan MH uh Honda
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Foundry all these are technology
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Partners so when I go to a customer then
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they believe in the technology with the
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partner and a lowcost manufacturing
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ability tell me a little about that um
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small car Marketplace from a consumer
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side um what do you see in terms of
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consumer Trends in India what are they
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looking to buy what what do you see in
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in that in that space consumer trend is
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very
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clear bicycle person goes to motorcycle
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and a motorcycle person goes to a car so
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when the jump is from two whe to
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four-wheel he's looking at somewhat
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basic car he's looking at uh spending
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not that dramatically away he wants to
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uh spend both in fixed cost and in
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running cost so fixed cost I mean if he
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buys today he has to pay in 36 months or
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months so that is a installment that he
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has to pay and then the running cost so
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based on all these constraint it is a
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small car market compact car market not
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really feature driven it's pretty price
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driven okay Market in the US um and
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other uh countries um credit is a big
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part of that right so when you buy a car
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um a lot of people buy on credit they um
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take a loan do you see that increasing a
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lot in the Indian market obviously um
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you know the idea of consumer credit um
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is is is much more relatively recent
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it's not so much that they couldn't get
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it but there was this idea that you paid
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for stuff with money that you had so um
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have you seen a a huge um uh shift in
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that mindset in India in recent years
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yeah uh India will have to be divided
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into rural and urban okay now Urban is
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pretty much European North American you
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know they wear the zena suits and
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whatever and uh over there it is
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installment it is you you buy on
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financing and uh people spend more than
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what they can what they capable of
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anyway that is boiling down to finance
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but the rural markets in India they
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behave little
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differently they don't want to carry a
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risk for the family they don't want to
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have any exposure back home so will you
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believe it the big growth which is
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coming from the rural areas that is on
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cash there's a little bit of financing
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so say 70% of the urban is financed 30%
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is non in The Villages it's the other
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way around wow so it's a very different
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two two totally separate segments um in
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this Marketplace um in this in this
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particular uh industry um environmental
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concerns are um something that
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everyone's talking about pollution Etc
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um talk a little bit about what your
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company has done you know any shifts
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that it has made um I think one of the
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things I did you switch to like just
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electric um you know uh vehicle two
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wheelers and things like that talk a
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little bit about that um aspect of
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it law is driving this segment uh a lot
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so you know the carbon monoxide
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hydrocarbons nitrogen oxides these are
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Under Control they are as per law so
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something
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called in Indian bhat ratna 1 2 3 4 so
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we are at stage four now so the co HC
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nox they are all as per the law getting
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controlled I would say these laws are
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pretty International we are very much in
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line with Europe and North America and
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uh maybe few years running behind that
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and uh we are meeting the Norms all the
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technology is there to meet the Norms is
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it something where you see your company
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being playing a leadership role at all
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um in sort of um in in this space you
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know um green Vehicles
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Etc we have got electric scooters
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uh it's quite a fun vehicle to ride one
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uh doctor he gave me a ring one day oh
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page I want a electric vehicle so he
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said for who you know my people have to
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come from this place to this place and I
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need a electric vehicle and we go to the
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campus and the doctor zipping on it he
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goes from one place to the other on the
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electric scooter it's fun so it's
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catching up electric scooter it's had a
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start it's getting visibility I think
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the big King story will should be
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starting in that also okay um tell me a
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little bit about the fact that um hero
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is a family business so um you know
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there's been uh a lot of um you know
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experts have analyzed family businesses
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um all over the world and the challenges
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um faced by Family businesses in terms
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of you know what the uh family members
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want versus um getting professional
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managers in ETC so what has been your
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experience um or Hero's experience and
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and how has it um you know managed that
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Hero's got uh more than 20 companies and
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uh some are private some are public so
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the uh let's talk about the public
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companies they are uh professional they
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have outside CEOs cosos are empowered
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and they are running the organization so
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it's familyowned it's not family run so
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it's family own professionally run so
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that is the way those companies are
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running and the stock market views you
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give you better rating points and our PE
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ratios price to equity ratios price to
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earning ratios they show this mhm and in
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terms of that kind of thing do you have
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any sort of um governance governance
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standards or anything that you have
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developed to to kind of um you know make
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sure that even though it's um you know
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as you said familyowned but
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professionally operated um you know that
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the family um is is sort of kept
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separate do you have any um sort of
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written standards or how do you um uh
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codify that so the water flows from the
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top so the board structure so the board
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structure is pretty uh balanced board
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it's not a family driven board they
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outside people and
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uh more in ratio MH so that sets the
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tone and from there of course there are
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corporate governance guidelines which
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one is following up and following
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through in terms of the structure of
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hero um when at its outset there there
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was a it's it's kind of like a what was
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it a JV or something with a Japanese uh
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company right and its
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structure in terms of the R&D the
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research and development um do you find
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that you're doing most of it are you
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sort of um indianizing everything or um
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is it done abroad um you're like do are
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you uh producing your own intellectual
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property around R&D um you know R is on
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product and process MH uh the product
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R&D is with the Japanese okay especially
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in Hiro Honda and uh we nurturing our
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own R&D now we having a small setup in
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Austria MH and we have our Engineers
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place there close to the customer and uh
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that story is building up now and the
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process R&D the process capability those
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iprs are ours okay when you say close to
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the customer so why Austria tell me a
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little bit about what why some of our
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big customers are in Germany okay and uh
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Austria is very close to Germany common
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border uhhuh and uh no we got a good
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setup there we have a very large
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customer Bombardier over there I see so
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based there okay and um what kinds of uh
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products for which Market are you
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developing uh is it for the small car
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market there what kinds of products are
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you doing the r& what we are doing there
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is for uh European products okay uh if
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it's Indian R&D then it's India India
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specific Okay so so that's different so
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that's the parts for European cars or
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what kind of components for components
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for European cars okay um when you are
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running the business when you are um
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hiring people what is your hiring
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strategy when you look at candidates for
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instance um for your company what's a
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favorite question you like to ask of
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them what do you look for in in a
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candidate for this kind of
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company they should have the ability to
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look into the eye and say no mhm
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somewhere you know they are great people
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and they don't make an opinion and they
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don't have an opinion so I've seen some
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very good people they could not get the
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get their point across so some or the
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other the ability to say no get reality
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on the table because if you get the
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problem on the table it'll be solved mhm
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if it's not coming on the table it is
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under the table or it just does not come
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that is real where the big problem is so
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we somehow provoke people and try to say
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do they have to have a passion for the
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business is that something that's
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without that there's no story mhm hero
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is first is Passion you have to die to
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achieve and how do you gauge that in a
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candidate I mean what what kinds of
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things do you look for characteristics
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or things that they've done anything
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particular that you ask them to to draw
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that out of them see in an interview you
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get maybe 30 minutes to spend time with
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a candidate but then there's so much
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more you got to uh
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understand and then once the employee
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comes in then your partners for life
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then you have to live with each other
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for a long time so uh to understand that
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you read little bit about the past try
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to understand the nature capabilities
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and uh demographic psychographics
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everything and uh body language
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references so you know a lot of homework
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is done before it comes up to us and uh
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we really want some of the American
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culture I would say you want American
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culture talk a little bit about that
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what do you mean by that we are taking
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our companies now boundary list some of
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our supply chains come from outside
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India some of our front end goes to
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Austria goes to Mexico goes to Germany
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goes to America goes to UK so you know
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uh it's not a Indian company supplying
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them it's like it was that but now it's
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got to be different it's really we have
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to take it make it more boundary lless
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so you're looking for a global mindset
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definitely definitely
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so let me ask you what would I find in
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your garage what do you take around when
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you have to go
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around I love guys I've got some nice
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toys how many
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toys few of them and do you take a do
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you ever take a two- Wheeler around what
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what's what's your if you had to just um
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you know pick one of the cars that you
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have in your garage and drive around
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what's your what's your
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favorite I love my Audi R8 yeah but of
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course the two wheelers is fun which two
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wheelers do you take around our own your
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own two wheelers excellent well thank
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you very much for joining us today my
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pleasure absolutely my pleasure
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wonderful thank you
