Hero launches Improve Margin Ops; eyes Rs 1.7k cr savings

Oct 17, 2013, 04.16 PM IST

Executives have identified two key steps to bring down the overall cost. The first one is to get into e-bidding of bulk standardised components which are more or less standard to various two wheeler companies. A ball bearing, for example, is a standardised component.

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Hero launches Improve Margin Ops; eyes Rs 1.7k cr savings

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Hero Motocorp is not going to just sit and watch while the company's margins deteriorate every passing quarter. As a part of an overall cost reducing strategy, the company will be looking at a wide array of business processes and overall operating expenses, reports CNBC-TV18's Ronojoy Banerjee.

Also read: Hero to hike scooter production to boost mkt share

Secondly, the company is now looking at a raw material consolidation and that is why they are going to work very closely with the suppliers and vendors. The company is also seeking a lot of comments from the employees and vendors.

Due to these initiatives, the company will be able to save as high as Rs 1,700 crore in FY18. In FY14, the company will Rs 80 and Rs 100 crore, but going forward in FY15 they are looking at an annual savings of about Rs 350 crore. The savings are likely to increase in FY16, at an estimated Rs 800 crore.

These initiatives are also likely to have an impact on the operating margins. In the last quarter, the operating margin was about 14.9 percent and the company expects its to inch up by 4-5 percentage points in FY17-18 because of these measures. This translates into 18-20 percent margins for the company.

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