The bike maker continues to struggle in the domestic market, but exports help the company register sales growth.
It continues to be a rough ride for the Pune-headquartered Bajaj Auto. With bank credit both scarce and expensive and the economy too showing signs of a slowdown, there just aren’t enough takers for motorcycles. While rival Hero Honda nevertheless did a good job in a difficult environment to post a top line growth of 36 per cent in the September 2008 quarter, Bajaj has managed only a single digit sales growth of 8 per cent to Rs 2,548 crore. That too has been driven partly by better exports which rose a smart 33 per cent during the quarter — volumes for the home market actually dipped 3 per cent.
In fact, business for the Rs 9,046-crore firm has been rather dull in the home market for the last six months. That wasn’t quite the trend for the industry though because thanks to Hero Honda, which has a market share of 50 per cent, volumes were up 12.6 per cent. Both the bike makers managed to take price hikes to be able to pass on the higher cost of inputs — Bajaj took a price increase sometime in August. However, that was not enough to arrest the fall in operating profit margins, which came off by 270 basis points to 13.5 per cent, leaving the operating profit lower by 10 per cent at Rs 344 crore.
Of course, the industry has had to grapple with severe raw material cost pressures. For Bajaj, raw material costs increased by 15 per cent to Rs 1,907 crore during the September quarter; and as a share of sales, they were up a fairly sharp 443 basis points to 74.8 per cent. The net profit fell 22.5 per cent to Rs 185 crore as the company needed to set aside a sum of Rs 61 crore for a voluntary retirement scheme (VRS). Adjusting for this one time expense, the profit after tax would have been lower by 6 per cent y-o-y. However, the firm has seen a lower outflow on account of taxes and at the profit before tax level, there has been a fall of nearly 9 per cent to Rs 327 crore.
The management says volumes may pick in the second half of the year with the launch of some new models -- two new bikes, on the DTSi platform, are expected to hit the market before the end of the March 2009. A variant of the 125cc Platina was launched ahead of the festive season. Bajaj has for some time now been talking of changing its product mix in favour of bigger and more importantly, higher-margin bikes.
The company continues to see disappointing volumes for three-wheelers and the trend is unlikely to change in a hurry. In the past six months, three-wheeler sales in the home market have declined by nearly 5 per cent and in the export market by about 2 per cent.
