Bajaj posts highest-ever quarterly profit

The company’s return to the 100cc space well before the festive season led to a jump in revenues.

Bajaj Auto's return to the 100cc space well before the festive season helped the company post its highest-ever quarterly net profit at Rs 402.83 crore in the second quarter ended September 30, as demand for the bike surpassed the company's own expectations.

The company launched the new Discover (100cc) in mid-July in a desperate attempt to grab a pie of the 3.5-million strong entry-level bike market, where Hero Honda is the market leader with a share of about 90 per cent. It sold more than 100,000 units within 50 days of its launch.

Despite the 117 per cent jump in net profit of Bajaj Auto, the market reacted negatively with its stock price dropping by 3.37 per cent, closing at Rs 1,554, compared to yesterday's close of Rs 1,608.15 on the Bombay Stock Exchange.

The company had reported a profit of Rs 184.91 during the same quarter a year ago.

Sales in volumes of the company during the quarter grew by 7.29 per cent to 686,727 units as compared to 640,042 units posted in the corresponding quarter a year ago.

Kevin D'Sa, vice-president - finance, Bajaj Auto, said, "We were able to do a huge amount of leveraging of metal utilisation during the quarter. Metal content in profitable brands like the Pulsar and Discover was far lesser, as well as increased demand for the Pulsar range and the-newly launched Discover pushed the margins of the company.”

Net sales of the company grew by 15.40 per cent to Rs 2,793.22 crore for the quarter, as against Rs 2,420.27 crore reported in the same quarter a year earlier. This was largely aided by a reduction in excise duty pay-out, which dipped by 23 per cent to Rs 151 crore from Rs 197 crore.

During the quarter, the company also recognised a charge of Rs 45.83 crore as expenses incurred on voluntary retirement of employees of its Akurdi plant, it stated in a statement.

Even though raw material prices were lower during the reporting quarter compared to the same period a year ago, when they were considered to be at their peak, they are expected to move upwards along with interest rates for financing, in the coming months.

"Currently, raw material prices constitute 66 per cent of the total expenditure, this is expected to move to 68 per cent by the end of the year, partially depending on the exchange rate. We may have to pass on this hike to the three-wheeler segment and also the Pulsar range, but this will only happen at the end of the final quarter,” added D'Sa.

The Pune-based company is also gearing up to launch a new bike in the entry or the executive (around 125cc) segment in January, which would be priced around Rs 40,000. This would be the eleventh model in the motorcycle segment for the company.

Its domestic sales are expected to grow at 50 per cent in the second half of this year keeping in mind the very low levels of sales it recorded in the same period last year as well as the launch of a new product and the ramp up in production of the Discover (100cc).

The company also expects hardening of interest rates during February and March but not by a significant margin. "The current rate of 24-26 per cent could be revised upwards by 2 percentage points, thereby resulting in an increase of Rs 50-60 on the equated monthly installment,” said D'Sa.