INDIAN ECONOMY AND BUSINESS ENVIRONMENT

The world is passing through uncertain times. Across the globe, socio-political turmoil and economic volatility are almost impossible to avoid. The ongoing refugee crisis in Europe; Brexit in UK, the bitterly-fought Presidential election in the US; and the currency crisis in Latin America and Africa – have all contributed towards creating a lot of uncertainties across the globe.

The accelerating pace of change is an everyday reality and Hero MotoCorp remains cognisant of the changing world. India undoubtedly shines as one bright star amidst this global turmoil. With a stable government, a well-established democratic political system, an impartial judiciary, a rapidly growing economy, a vibrant middle class and the ever-powerful ‘Indian intellect,’ our country enjoys a unique advantage over others to emerge as a global power in the next decade.

This year also marks the 25th year of India’s economic liberalisation. The impact of those reforms has been so profound that the India of today is completely unrecognisable from the India of 1991.

Allowing Foreign Direct Investment (FDI) in various sectors was one significant aspect of the reforms that has had a considerably positive impact on the economy. It not only turned India into a true free-market economy, but also ‘opened’ the country to the world. The growth and expansion of the Information Technology (IT) industry in India is an outstanding example of how the privatisation policy of the government has helped the spirit of entrepreneurship and innovation.

In a nutshell, by eliminating the ‘license raj,’ the economic reforms of 1991 helped liberalise and unshackle the Indian economy, enabling all of us to think bold and dream big.

Moreover, the current government at the Centre has unleashed the much needed ‘second wave’ of reforms, providing a strong fillip to the agenda of growth and development. With Prime Minister Shri Narendra Modi’s ‘Make in India’ initiative, the country will be led into an era of a ‘manufacturing revolution.’ Because of these transformations, now is one of the best times to do business in India and ‘from India.’

Indeed, we all, at Hero MotoCorp, have come a long way since. Today our Company has more than 65 million satisfied customers worldwide, and has created many iconic brands and created huge value for all stakeholders.

GLORIOUS FIVE YEARS OF SOLO JOURNEY

The Indian economy faces internal challenges that are inevitable in such a large and diverse country as ours. The domestic automotive industry, which is a significant contributor to the Indian economy, has not remained immune to these challenges. As a result, the twowheeler industry has gone through a sluggish phase for the past few years.

Despite the adverse environment, our company has maintained its market leadership, staving off intense competition. The conclusion of FY 2015-16 marked the completion of five years of our solo journey. During this time period, our company has proven its inherent capabilities and resilience to not just retain its leadership at home, but also transform itself into a global automotive player with robust in-house research, design and development capabilities

Hero MotoCorp is already a global leader in developing energy-efficient mobility solutions. Be it through our Garden Factory at Neemrana or the fuel-efficient i3S technology, we have set global benchmarks in promoting environment-friendly manufacturing. For carving out a distinctive niche in building sustainable platforms for future growth, Hero MotoCorp was bestowed with the coveted ‘Manufacturing Innovator of the Year’ award at the inaugural TIME India Awards.

It was indeed a great privilege to receive the award from the Honorable Prime Minister, Shri Narendra Modi at the ‘Make in India Week’. Our Centre of Innovation and Technology (CIT), the core of Hero’s research and development, began operating in March 2016. The CIT is a one-of-its-kind facility housing all aspects of research, development and testing capabilities under one roof. With a team of highly talented engineers drawn from within the country and from around the world, the CIT will be the origin of all future products and technologies from Hero MotoCorp

In September 2015, our company established its first overseas facility in Colombia in an effort to expand our manufacturing base. In the process, Hero became the first Indian two-wheeler company to have a manufacturing facility in Latin America. This facility will also act as an exports hub for the Andean countries. During the year, Hero MotoCorp has also expanded its global presence to 32 countries across Asia, Africa and South and Central America.

This fiscal year also marks two very significant milestones in Hero’s solo journey as a company. Firstly, in October 2015, Hero introduced the Maestro Edge and Duet scooters - the very first products to have been completely designed and developed by our in-house R&D team. Attractively designed with contemporary styling and loaded with a host of unique features, Maestro Edge and Duet have been well received by customers, helping our company increase its market share in the scooter segment.

Secondly, in February 2016, during the Auto Expo, we showcased another one of our new innovations, Splendor iSmart 110 - the first motorcycle to have been designed and developed completely in-house by Hero R&D. Splendor iSmart 110 has already received a positive initial response in the market.

With the launch of these three all-new products - the Maestro Edge, the Duet and the Splendor iSmart 110 - our company has now proven its technology capabilities to develop world-class products fit for the global audience.

…AND THE EXCITING ROAD AHEAD

Having laid a strong platform of technology and production capabilities, our aim now is to further expand our portfolio and develop technologies that will have a positive and sustainable impact on the world.

The road ahead is indeed challenging, yet Hero has proven time and again that we are able to turn adversity into opportunity. We are currently working on developing a series of new products across multiple segments, including those in the premium space. We are also working on developing next generation technologies to stay ahead of the curve, so that our company is future-ready.

At the same time, Hero continues to engage with our customers across urban and rural markets. Our innovative rural initiative ‘Har Gaon Har Aangan’ (Every Village Every Household) has been one of the most successful rural customer engagement programmes, and will continue to give us the competitive edge in the domestic market. Considering the low twowheeler penetration in the country, our company sees a tremendous growth potential for many years to come.

Despite the current headwinds in several markets across Latin America and Africa, we will continue to expand our footprint in the global markets. Our upcoming manufacturing facility in Bangladesh, which will become operational this fiscal year, is set to be yet another important milestone in our global journey.

The domestic market continues to be sluggish due to various factors. However, positive forces such as the above-average monsoons, the increased spend on infrastructure by the government and the Pay Commission payout are expected to further support the market growth this year. With a large distribution network across the country, huge brand equity and trust of customers, our company is well poised to leverage these positive sentiments.

As the Chairman, I promise to continue to uphold the value system that binds the large Hero family together. We at Hero remain proud of our brand and strong equity with our employees, customers and shareholders. We will continue to lead with innovative products, expand geographically to develop our brand globally while continuing to provide superior returns to our shareholders.

On behalf of everyone at Hero MotoCorp, I thank each one of you – our valued shareholders, dealers, ancillaries, vendors, employees including workmen and our customers in India and across the globe for your continued support and faith in us.

Pawan Munjal
Chairman, Managing Director and
Chief Executive Officer