Taxes cap Hero's net profit growth

Tax expenses more than doubled to Rs 192 crore from Rs 95 crore in the year-ago period

India’s largest two-wheeler maker, Hero MotoCorp, on Thursday reported a 7.5 per cent rise in net profit at Rs 525 crore for the December quarter even as tax benefits on one of its factories ended partially. Net profit in the year-ago period was Rs 488 crore.

A share of Hero MotoCorp, which declared its results after market hours, closed at Rs 1,999.75, down 3.4 per cent from its previous close on the BSE exchange.

Ravi Sud, chief financial officer, said, “One important factor that impacted our net profit is an increased tax rate. Tax benefits at the Haridwar plant are coming to a partial end. Therefore, our tax rate went up from 16.5 per cent to 27.5 per cent this quarter.” Tax expenses during the quarter more than doubled to Rs 192 crore from Rs 95 crore in the year-ago period.

Net sales was up 11 per cent year-on-year to Rs 6,877 crore in the period from Rs 6,188 crore.

In the third quarter, Hero MotoCorp sold 1,680,940 two-wheelers, up seven per cent from  1,573,135 sold in the year-ago period. “We have been able to post solid sales in the quarter in a relatively dull market and our PAT (profit after tax) and total turnover figures are up from the corresponding quarter last year. However, our Ebitda (earnings before interest, taxes, depreciation and amortisation) has been affected due to partial recovery of rising metal costs and currency fluctuation,” said Pawan Munjal, chief executive and managing director.

Raw material costs rose 13 per cent year-on-year to Rs 4,978 crore during the quarter, while other expenses were up 29 per cent over the previous quarter and 18 per cent year-on-year to Rs 736 crore. The Ebitda margin was 13 per cent.

Nitesh Sharma, analyst at investment bank Espirito Santo, said, “Revenue was in line with our estimates, growing at 11 per cent year-on-year. Ebitda grew 15.3 per cent year-on-year but missed our estimates by seven per cent and consensus by 10 per cent, mainly because of higher raw material costs, promotional expenses and discounts. Overall PAT at 12 per cent was below our estimates and 15-18 per cent below what the Street expected.”

On Wednesday, the company unveiled a concept 150cc diesel engine and four other products, including the HX250R sports motorcycle and the Leap hybrid scooter .

Shares of Hero MotoCorp which declared its results post market hours were trading at Rs 1,999.75 a piece, down by 3.43% from its previous close on the Bombay Stock Exchange.