Unit sales down but HMSI's net profit jumps by 604% to Rs 1,000 cr in FY22

Honda Motorcycle and Scooter India's (HMSI's) net profit jumped 604 per cent to Rs 1,000 crore in FY22 even as its unit sales fell by 5 per cent to 3.8 million units, according to documents submitted to the Registrar of Companies (RoC) and reviewed by Business Standard.

Industry sources said that India’s second largest two-wheeler manufacturer was able to increase its net profit primarily due to the multiple price increases it effected during the financial year ended 31 March, 2022 (FY22).

For example, Honda Activa 6G STD’s price was Rs 66,799 (ex-showroom) at the beginning of FY22 but after multiple hikes, it stood at Rs 70,599 (ex-showroom) by the end of the financial year, sources said. HMSI did not respond to queries.

“The price hikes were done to deal with pressures on the cost side, but it is clear that it helped the company’s bottom line too,” a source said.

According to the documents, the company’s sales turnover decreased by just 0.3 per cent to Rs 21,093 crore in FY22.

“Despite signs of moderation, FY22 continued to impact business momentum due to challenges arising from both demand and supply side,” HMSI stated in its director’s report submitted to the RoC.

While the first quarter of FY22 was about driving optimism across dealer networks and market in view of the staggered reopening of the economy, the second quarter hinted towards signs of normalcy as HMSI entered the festive season with renewed spirits, the report mentioned.

“Rising resiliently above past challenges to regain the lost momentum, third and fourth quarters witnessed green shoots of progress,” it noted.

HMSI had recorded its highest net profit and unit sales in FY18 at Rs 1,983 crore and 6.1 million units, respectively.

During FY22, HMSI exported 332,942 units to various countries, mainly Bangladesh, Nepal, Mexico, Guatemala, Colombia, Japan, Peru, UAE, El Salvador, and Italy. This helped HMSI earn Rs 1,644 crore in foreign exchange during the financial year, the report said.

 

The company said that it continued to expand its footprint on a regional level and is now “trusted by over 5 million two-wheeler customers in Gujarat and 4 million customers in Karnataka, respectively”.

The firm said it opened 11 new authorised main dealers in FY22 to rapidly expand its network to cater to urban as well as rural customers in the country. Therefore, at the end of March this year, the company had a total 1,025 authorised main dealers in India.

Moreover, the company said it established 119 additional associate dealers and 239 additional authorised service centers in the country during FY22.

Atsushi Ogata, chief executive officer and managing director of HMSI, had on September 15 told reporters that the total cost of ownership for a two-wheeler in India has increased drastically in the last five years due to the new emission norms, new safety regulations for advanced brake systems and commodity supply issues.

“These factors have increased the price range of our vehicles by more than 30 per cent in the last five years,” he added.

On the other hand, the actual income level in rural areas – where HMSI targets its business – has not increased by 30 per cent due to the pandemic, Ogata noted.

“This gap is having a negative impact on us…The demand is still there but the new consumer who wants to buy our product is still struggling,” he added.

Meanwhile, in September 2022, Hero MotoCorp (HMCL) lost its top position in the monthly domestic two-wheeler retail sales to HMSI for the first time in more than two years.