Sluggish domestic sales for its bikes and three-wheelers impacted Bajaj Auto’s performance in the December 2013 quarter. Compared with the December 2012 quarter, the company’s net sales dropped by 5.3 per cent to Rs 5,025 crore in this period.

But net profits shot up by 10.5 per cent, thanks to lower other expenses and higher other income. Besides, the company managed to hold raw material expenses tight, despite an increase in steel and aluminium costs. Raw material costs as a percentage of sales, stood at 71 per cent in December 2013 and the year-ago period.

A break down of the numbers though reveal that the benefit of lower other expenses is from the adjustment of mark-to-market gains/losses on foreign exchange hedging contracts for its exports. Doing away with the impact of this in both the periods, the other expenses is higher by about 14 per cent in the December 2013 quarter.

For the same period, the operating margin also comes down to 20.2 per cent.

This is in any case, higher than the 19 per cent in the year-ago period and has been supported by its export earnings. Export realisations stood at Rs 61 to a dollar during the quarter.

Outlook The company expects the drop in volumes to have bottomed out in the third quarter. Hence, the months to come may witness a pick-up in bike sales for the company.

With the demand for entry-level bikes picking up in the last few months, thanks to the good monsoons, Bajaj expects to see the Discover 100cc bike launched in October 2013, doing well in the current quarter.

A new 125cc bike is also in the offing.

Related Topics
comment COMMENT NOW