The Hindu Business Line : Bajaj Auto net profit dips in Q2 at Rs 180 cr

BAJAJ Auto Ltd (BAL) on Wednesday reported a lower profit after a tax of Rs 179.9 crore for the second quarter of 2004-05 as against the previous corresponding Rs 193.4 crore. The company's sales and income from operations amounted to Rs 1,448.2 crore (Rs 1,249 crore for the year-ago period).

Other income and revenues from wind power dipped to Rs 88.3 crore (Rs 117.6 crore). Gross profit after interest and before depreciation and tax was Rs 327.7 crore (Rs 344.1 crore).

Profit before tax was almost on par at Rs 264.9 crore (Rs 264.4 crore) but provision for tax increased to Rs 85 crore (Rs 71 crore) leading to a lower profit after tax.

BAL's results were affected by a combination of factors. According to Mr Sanjiv Bajaj, Executive Director, FY04 was characterised by a low tax rate averaging 24 per cent for the whole year and 27 per cent for the second quarter.

This level structured through investment in tax-free instruments, compared with a normal corporate tax rate of 35-36 per cent.

"It was more like an aberration," he said.

With government rules on the subject having changed since, the tax rate in the just concluded quarter touched 32 per cent, a level that may persist through the remaining part of the fiscal as well.

Additionally, raw material cost, driven by high steel prices, will need to be tackled through the year, particularly as production volumes are rising.

For the quarter, BAL's total sales volume was up 17 per cent to 445,195 units (380,273 units). Despite this, Mr Bajaj pointed out, the company's EBITDA percentage rose to 16.8 per cent in the second quarter from 15.3 per cent in the first quarter.

BAL's profit from automobile operations gained by 21 per cent to Rs 187 crore (Rs 155.2 crore).

The company's official statement said, "Seven hundred and fourteen workmen opted for the voluntary retirement scheme in July 2004.

The total outflow on this account is Rs 49 crore. This will be charged equally over three quarters of the current financial year.

"Accordingly in this quarter, a sum of Rs 16.3 crore has been charged."

Export earnings were up 41 per cent to Rs 181.7 crore (Rs 128.6 crore). The company's non-operating income for the quarter declined to Rs 78.2 crore (Rs 103.9 crore).

As of end-September, the cost of its investment portfolio was Rs 4,151.1 crore (Rs 3,907.2 crore at end-March 2004) and its corresponding market value, Rs 4,521 crore (Rs 4,510.8 crore).

Mr Bajaj attributed the dip in non-operating income to the declining interest rate regime and gains in earlier times from tax-free investment opportunities.

For the first half, BAL had a profit after tax of Rs 344.5 crore (Rs 354.4 crore) on sales and income from operations of Rs 2,674.4 crore (Rs 2,323.1 crore).

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