• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

B. Krishnakumar

TWO-WHEELER major Bajaj Auto reported a 14 per cent increase in turnover and 38 per cent increase in post-tax earnings for 2003-04.

A shift in product mix in favour of higher-valued motorcycle models and growth in three-wheeler sales were the striking features of the company's performance.

Aided by the success of the premium segment motorcycle, Pulsar, Bajaj recorded an 18 per cent increase in motorcycle sales volume. It, however, had to contend with stiff competition in the economy and executive bike segments on account of the success of Hero Honda's CD-Dawn, Splendor+ and Passion Plus models.

The pressure on market share in these two segments, however, appears to have been compensated by the strong growth in the premium bike segment.

In the three-wheeler segment, the company posted an 18 per cent growth in volume. Apart from growth in exports, the success of the one-tonne goods carrier appears to have propped up three-wheeler volume growth.

Helped by these factors, the average realisation per vehicle rose 8 per cent in 2003-04. The operating profit margin increased to 24.5 per cent from 23.3 per cent in 2002-03. The growth in profitability was, however, affected by the rising trend in raw material cost. Besides, the aggressive discount and promotion schemes offered by the company in 2003-04 also affected margin expansion.

The post-tax earnings rose 38 per cent to Rs 743.8 crore. As in the past, `other income' played a key role in bolstering profits.

The steady flow of income from other sources is explained by Bajaj's huge investment portfolio. In 2003-04, income from other sources almost doubled to Rs 353.4 crore.

The company absorbed a sum of Rs 65 crore, representing extraordinary expenditure towards compensation under the voluntary retirement scheme and liability arising out of labour disputes.

While the performance for 2003-04 appears impressive, recent developments do not portray a positive outlook for the company. The impending entry of the Japanese major, Honda Motors, into the motorcycle segment is a major cause of concern.

This could dilute Bajaj's prominent position in the premium bike segment. The company is facing threat from Hero Honda in the entry level and executive segments.On the positive side, the company has lined product launches in the scooter and motorcycle market. Bajaj would be launching an ungeared scooter and a couple of bikes in the executive segment this fiscal.

The company is also expected to commission its assembling unit in Indonesia in 2004-05. This could result in an increase in export earnings. However, for the moment, investors may reduce exposures and book profits. Any evidence of success in product launches may be used to take exposures at a later date.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Investment Quiz

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line