Bajaj posts Rs 738-cr profit on back of exports

Higher realisation in exports compensated for sluggish domestic volumes for the company

 

Bajaj Auto, India’s second-largest motorcycle manufacturer, reported a net profit of Rs 738 crore for the quarter ended June, a 2.6 per cent rise compared with the Rs 718-crore profit in the year-ago period, as higher realisations from exports compensated for sluggish domestic volumes.

The rise was in line with estimates.

During the quarter, the Pune-based company’s volumes declined nine per cent, as the domestic market remained weak and shipments to Sri Lanka and Egypt were hit due to adverse geo-political conditions in those countries.

Net sales of the two- and three-wheeler manufacturer rose two per cent to Rs 4,808 crore, compared with Rs 4,714 crore in the corresponding quarter last year. Sales declined to 9,79,275 units, against 10,78,971 in the year-ago quarter.

The company recorded an earnings before interest, tax, depreciation and amortisation margin of 20.4 per cent during the quarter, against 18.8 per cent in the corresponding quarter last year.

Mark-to-market losses stood at Rs 96 crore, which the company said were notional and would be reversed during the tenure of the forward options contract.

While exports remained largely flat at $327 million, in rupee terms, these rose 10 per cent to Rs 1,876 crore. “Taking into account the current trend of the rupee vis-a-vis the dollar and the current position of hedged contracts, a further benefit on account of the depreciating rupee would accrue in the coming quarters,” the company said.

Dhananjay Sinha, co-head (institutional research), Emkay Global Financial Services, said, “Overall, sales volume is a concern for Bajaj Auto. There was a decline in the current quarter. The couple of quarters ahead might show marginal growth. Honda is expected to move up the curve, as it has good rural market exposure. The market share of Honda would fare better.”

Bajaj’s market share fell to 23 per cent, against 24 per cent in the year-ago period.

The premium motorcycle segment, in which Bajaj has a 46 per cent share, contracted 11 per cent during the quarter, hitting the company’s sales.

During the quarter, Bajaj Auto recorded dividend income of Rs 27 crore from its 47.96 per cent stake in Austria’s KTM AG. An additional Rs 47 crore was received as value-added tax refund in April.

To avoid choking supplies of high-margin Pulsar motorcycles, the company shifted production to its Aurangabad plant, even as production at its Chakan facility remained affected. On Friday, the partial strike at the KTM and Pulsar-manufacturing Chakan facility entered its 25th day.

In June, the company recorded a production loss of about 20,000 Pulsars. However, it maintained production at the Chakan plant was meeting 90-93 per cent of its current requirement.

“Whether there would be any upside to labour costs or not needs to be seen. (The ratio of) raw material costs to sales has fallen because of a fall in raw material costs. Both these costs may not be a disappointment ahead…Let’s see how it pans out,” Sinha said.