Hero Honda net grows 9 per cent

Hero Honda Motors, India’s biggest motorcycle maker, posted a better-than-estimated 9.1 per cent growth in its net profit to Rs 300.42 crore for the third quarter ended December 2008.

Revenues went up 4.77 per cent at Rs 2881.27 crore over those earned for the same period a year ago.

Operating profit margin dipped by 40 basis points compared to the corresponding period last year. However, the margin went up by marginally compared to the preceding quarter of this financial year due to softening commodity prices, price hikes, absence of festival discounts, record sales, strategic utilisation of the 4 per cent excise duty cut announced in the first stimulus package across models and tax holiday benefits at the Hardwar plant.

“We expect to maintain the same growth momentum for the fourth quarter. The marriage season, the second fiscal stimulus package taking effect in the coming months and easier liquidity for two wheeler buyers will help us end this financial year with a growth rate that is in “high single digit,” said Pawan Munjal, MD & CEO, Hero Honda.

Munjal, however, hoped that the overall sentiment would improve in the fourth quarter. The only problem could be banks’ and NBFCs' continued wariness in lending to two-wheeler buyers because of the high rate of loan defaults.

Hero Honda now commands a market share of 56 per cent and has grown by 2 per cent between April – December 2008 though the overall two wheeler industry posted 11 per cent decline in growth.

The Hero Honda stock gained about 2 per cent to close at Rs 834.05 on the Bombay Stock Exchange.

The company raised motorcycle prices in August for the second time last year to offset higher costs of steel, aluminium and other raw materials. Raw material costs rose 6 per cent to Rs 1,950 crore in the last quarter, compared with an 18 per cent increase in the quarter a year ago.