Bajaj Auto net grows 6 per cent

Bajaj Auto Ltd, the country's second biggest motorcycle maker, said on Friday that net profit increased by 5.93 per cent in the quarter ended September 30, 2007, helped by better margins from premium bikes and cost-saving measures.

Net profit rose to Rs 336.42 crore in the quarter, as compared with Rs 317.59 crore in the previous corresponding period.

The company managed to get into the black once again after a slow down in sales and pinching interest rates halted sales for two preceding quarters, when it registered a dip in net profit by 15 and 11 per cent respectively.

The quarterly results surprised brokers in a weak Mumbai market, as Bajaj shares closed 2.07 per cent higher at Rs 2,511 on the Bombay Stock Exchange on Friday.

However, income dropped by 2.67 per cent to Rs 2,509.51 crore in the quarter, against Rs 2,578.40 crore in the previous corresponding period, due to a sharp decline in sales.

Bajaj also makes scooters and leads the market for three-wheeled motorised rickshaws.

The company managed to eliminate the costs for September on its Akurdi plant as operations there have shut down. In addition an increase in stock-in-trade was added to the EBIDTA.

Sanjiv Bajaj, executive director, Bajaj Auto, said, "Due to a better product mix in the 125cc and above segment, where we have close to 50 per cent market share, growth in exports and cost-cutting measures, we have managed to post better than expected results."

Bajaj has seven different models in the 125cc and above segment, which is generating higher profitability. But it continues to make low-margin 100cc bikes, a segment dominated by leader Hero Honda. Bajaj is offering these bikes at a discount of Rs 4,000, making them the cheapest 100cc motorcycles in the market.

The company said that while sales in the 100cc segment declined, that for 125cc vehicles grew 16 per cent.

It sold about 18,000 units of the XCD 125 which was launched in September and it intends to produce 50,000 units this month.

"The results of Bajaj Auto for the quarter have been better than our expectations. The company was successful in containing material costs and other expenses even as actual sales were down," Mahantesh Sabarad, auto analyst with brokerage house Prabhudas Lilladher.

The company is looking foward to more flexible interest rates to push sales in the months ahead. "Better regional credit availability will improve the situation," Bajaj said.

Bajaj also earmarked Rs 7.74 crore towards losses (if any) on the sale of machinery, dyes and components at its Akurdi facility.

The company will also carry out R&D activity and product development at Akurdi.