In an otherwise tough environment, the festival months of October-November has helped Hero MotoCorp keep its head above water in the quarter ended December 2015. Buoyed by a 2.5 per cent growth in volumes, net sales grew 5.6 per cent to ₹7,174 crore in this period (over the same quarter last year).

A 3 per cent growth in average realisations helped too. While these factors did play a role in the strong 36.5 per cent growth in profits to ₹796 crore, lower input costs also contributed significantly to the rise.

Raw material as a percentage of sales stood at 68.5 per cent this quarter, down from 73 per cent in the same quarter last year. Both higher realisations and lower input costs helped operating margins expand to 15.6 per cent from 12 per cent a year ago.

Although recent launches and executive segment (110-115 cc) bikes may have aided growth, it is predominantly the festival season that has helped this quarter. The company recorded an 11.25 per cent year-on-year volume growth in October due to this, compared with a less than one per cent growth in November and a five per cent fall in volumes in December.

Hence, the sustainability of volume growth into the next few quarters needs to be seen.

However, the company may continue to do well in the 110-125 cc space. Its market share in this segment has grown to 38 per cent in the nine months ended December 2015 from 35 per cent in the same period last year.

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