Bonus Issue Props Bajaj

The sales stood at Rs 3,244.12 crore with the growth rate falling from 26.65 per cent in 1995-96 to 16.11 per cent this year. Sales growth, in terms of volumes, was a meagre at 8.8 per cent at 14,39,174 vehicles.

Increased competition has also led to a decline in the companys market share. In fact, Bajaj's market share has been continuously dropping from 48.6 per cent in 1994-95, 46 per cent in 1995-96 to the current level of 44.5 per cent.

Another depressing factor has been the decline in the exports by 16.54 per cent to Rs 158.20 crore.

However, other income of the company has gone against the predictions of a section of analysts. In contrast to the predictions, other income increased by 51.89 per cent to Rs 209.98 crore, contributing 31.01 per cent of profit before tax (PBT).

 

Operating profit margins fell marginally from 19.34 per cent to 18.56 per cent. However, the company could maintain the interest burden at lower level despite tight liquidity prevailing in the market. Interest declined by 26.61 per cent to Rs 7.31 crore.

Depreciation increased by 59.91 per cent to Rs 117.87 crore mainly because of the implementation of the expansion project, which increased the production capacity to 1.83 million vehicles. The company plans to take up the capacity further to 2 million by the end of 1998.

Tax liability, excluding the corporate dividend tax of Rs 7.96 crore, increased by 33.6 per cent to Rs 236.5 crore. However, the company will benefit in the current year from the budget proposal which brought down the corporate tax.

Due to intense competition and declining market share, the company is gearing up to overcome these problems. It has plans to introduce a range of new products in 1997-98, which include a diesel rear-engine three wheeler, 60cc two-wheeler (Cygnet) besides a four-stroke motorcycle developed by Kawasaki of Japan.

However, analysts expect the first-half performance for the current year to be unimpressive though they are hopeful of a strong second half. In view of the bonus issue, the scrip may see some buying interest.