Bajaj rocked by volatile fiscal, optimistic about road ahead

Murali Gopalan Mumbai | Updated on January 11, 2018


Both the domestic and export markets had huge challenges to contend with

S Ravikumar admits that 2016-17 was a truly challenging fiscal for Bajaj Auto marked by tremendous volatility both in India and overseas markets. “The last five months, in particular, were particularly tough,” the President (Business Development) told Business Line in a telephone interview to discuss the fourth quarter results.

The company reported a net profit of ₹3,828 crore for the year on Thursday, down from ₹3,930 crore in FY ‘16. Net profit for the quarter fell to ₹ 802 crore from ₹ 949 crore. Total income for the year was down to₹24,310 crore from ₹ 24,957 crore. The EBITDA margin for the year was 21.7 per cent against 22.2 per cent in the previous year .

According to Ravikumar, the fiscal started on a buoyant note with the period from April to October 2016 seeing brisk growth for Bajaj Auto. During these seven months, the company’s motorcycle sales grew by 16 per cent surpassing industry’s growth of 12 per cent. Likewise, the three-wheeler business was up by 24 per cent which was nearly twice as much as industry’s 13 per cent.

Then came the demonetisation move by the Centre in early November which completely disrupted the automotive ecosystem. Motorcycle sales, both for Bajaj Auto and industry, plummeted by 10 per cent while the fall was even steeper in the case of three-wheelers at 32 per cent compared to industry’s 27 per cent drop.

This was the time cash-dominated markets in rural India just stopped buying two-wheelers and it took some months before the momentum began resuming gradually. However, towards the end of the fiscal, there were huge discounts offered by companies on liquidating their Bharat Stage III two-wheeler inventories though Ravikumar reiterated that Bajaj Auto “practically spent nothing” during this three-day frenzy even while it had to join the discounting bandwagon.

“We had already shifted to BS IV and did not face any problems relating to huge stock pileups,” he said. However, customers made a beeline for discounted bikes and scooters offered by competition which impacted Bajaj Auto's sales numbers. The company wrapped up the fiscal with an 18 per cent share in two-wheelers.

Apart from challenges back home, international markets also came under pressure for Bajaj Auto last fiscal especially important regions like Africa, Latin America and ASEAN. All of them were coping with their own sets of economic woes which affected buying sentiment. This setback was evident in the company’s export component of total sales last fiscal which was 39 per cent compared to 44 per cent in FY 16.

“Going forward, we are more optimistic about the Indian market given the monsoons prediction,” said Ravikumar. In addition, the buying sentiment post-demonetisation has long passed and people are queuing up at showrooms all over again. Motorcycle brands like Pulsar, Dominar 400 and the ‘V’ duo are also expected to continue their good growth.

“This fiscal looks more solid on exports with every sign of a turnaround happening in countries like Africa. Further, we are quickly building our base in new ASEAN regions like the Philippines, Indonesia and Malaysia. Yet, we at Bajaj Auto remain cautiously optimistic about the road ahead,” said Ravikumar.

Published on May 18, 2017

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