You could call him Hero Honda’s Rs 6k-crore man. The company’s market cap increased by Rs 6,032.93 crore, or 17.99 per cent, on Monday after CFO Ravi Sud told analysts that royalty payments to Honda Motor would be 2.75-2.85 per cent of sales, far less than what investors had initially anticipated.
“The royalty going forward will be in line with what we pay now and we will not be paying any royalty on existing products after 2014,” Sud said in a conference call attended by equity analysts and journalists. His words helped Hero Honda shares recover ground lost in the run-up to the announcement of the split with Honda on concerns over royalty payouts.
Hero Honda had lost Rs 4,371 crore in market cap (11.89 per cent) in December alone, after its stock touched month’s low of Rs 1,621 on December 15.
Who wouldn’t want a CFO like Sud? Clearly, the Munjals know his worth. After a decade-long innings at Hero Honda, Sud had quit in October 2008 to join realty firm Emaar MGF. But the Munjals lost little time snaring the trusted Sud back as CFO in March 2009.
Sud, who studied commerce at Delhi University and is an alumnus of IIM-A, has over three decades of experience in the auto industry, including 17 years with Eicher Group, and is well respected in finance circles. “Hero Honda is virtually a zero-debt company. Capex is funded out of cash accruals. Dealers would pay in advance or pay cash on delivery. Sud played a critical role in managing the cash cycle at the back-end,” says an associate who has known him for years.
In Hero Honda’s rise to the top of the two-wheeler segment, Sud has played a key role in managing its cost and cash, working closely with the Munjals. “Often, your vendors are family and friends, where the chairman plays a big role. In the normal course, a professional would have been a lot stricter than he could be,” says the associate.
A smaller challenge has been to manage the cash that the joint venture has been generating over the years — he doesn’t have much choice, but to go by the guidelines set by the board. Clearly, the Munjals have more than their money’s worth in Sud.
