Hero MotoCorp Q4 net declines 14 pc at Rs 477 cr

Hit by a one-time impairment payment due to the bankruptcy of its US-based technology partner Erik Buell Racing (EBR), Hero MotoCorp today reported a 14.05 per cent decline in net profit at Rs 476.53 crore for the fourth quarter ended March 31, 2015.
The company, which had posted a net profit of Rs 554.43 crore in the same period of the previous fiscal, will set up a wholly-owned arm in the US for research, development and consulting services, distribution and marketing, among others post the set back with EBR.
Keeping with its overall expansion plan, the two-wheeler marker leader will invest over Rs 3,000 crore in the next two years, including expansion of production capacity and enhancing R&D.

Net sales of the company for the fourth quarter ended March 31, 2015 stood at Rs 6,793.87 crore, up 4.31 per cent, as against Rs 6,512.96 crore in the year-ago period.
Explaining the decline in net profit the company said: "This (profit after tax) is after impairment of Rs 155.04 crore (USD 25 million) of equity investment in Erik Buell Racing, Inc."
US-based EBR, in which Hero MotoCorp had acquired a substantial stake, has filed for bankruptcy. The two-wheeler giant had acquired 49.2 per cent stake in EBR in 2013 for USD 25 million and had plans to market its products in the US through the EBR network.

Sales during the quarter have been subdued, specially due to weak demand from the rural markets. The company posted sales of 15,75,501 units, marginally down from 15,89,462 units in the same period of the previous fiscal.

"The industry has remained sluggish due to the slowing rural economy on account of poor crop realisation and moderating wages in the rural markets," Hero MotoCorp Vice Chairman, CEO and MD, Pawan Munjal said.
On the move to set up an arm in the US, the company said company's board, which met today, has approved it along with an initial investment of up to Rs 35 crore.

The arm will also be involved in marketing and promotion of two wheeler vehicles and other ancillary activities.
"This could also entail purchase of assets for establishing the business," the company said.
Shares of Hero MotoCorp closed at Rs 2,354.10 per scrip, up 1.21 per cent from previous close on the BSE.
On the investment front, Hero MotoCorp said it would invest over Rs 3,000 crore in FY16 and FY17.
"This will be mainly on capacity expansion, the setting up of new plant in Gujarat. Out of the total, Rs 1,650 crore will be invested in FY16 and rest in FY17. We are also investing Rs 700 crore on enhancing R&D capacity," Hero MotoCorp Senior Vice-President and CFO Ravi Sud told analysts.