Last year, I shared with you my concerns about India''s gloomy economic
landscape in the course of 2012-13 and, looking forward to 2013-14, had
written, I do not yet see signs of substantial recovery in the near
future. The decline in the growth may have bottomed out; but
incremental growth will be modest. I shall be pleasantly surprised if
India can grow its real GDP by over 6% in 2013-14.
Regrettably, desired growth has not occurred in the year under review.
In 2012-13, the country achieved real GDP growth of just 4.5%. In an
environment of widespread inactivity, risk aversion and non-governance
- where critical economic and infrastructure decisions were kept in
abeyance for one reason or the other - there was little chance of any
significant improvement in the investment cycle and, thus, the growth
rate. Hence, April-June 2013 saw real GDP growth of 4.4% compared with
the same quarter of the previous year; July-September 2013 was
marginally better at 4.8%, but wholly insufficient to boost the next
take-off; and October-December 2013 was 4.7%. The Central Statistical
Organisation''s forecasted growth for 2013-14 is 4.9%. Personally, I am
not so sure that even this growth is possible, for it assumes over 5.5%
growth in the fourth quarter of the fiscal year, i.e. for January-March
2014. However, even if it were to occur, the fact is that India''s GDP
will have grown by less than 5% for two consecutive years. Surely, we
Yet, there are rays of hope. In the recently held national elections,
the Bharatiya Janata Party (BJP) has alone won a majority of Lok Sabha
seats. Along with BJP''s partners, the National Democratic Alliance
(NDA) has secured in the lower house of Parliament a total of 336
seats. The new Prime Minister, Mr. Narendra Modi, has a clear bias in
favour of growth and economic development; and a proven record of doing
so over three consecutive terms as the chief minister of Gujarat. There
is a sense of optimism in the air and, like many in industry and in the
corporate world, I hope that the new national government of Mr. Modi
and his cabinet colleagues, will focus on removing all impediments to
growth and thus allow the corporate sector to regain its
entrepreneurial ''animal spirits'' that had all but disappeared in the
last few years under the Congress-led United Progressive Alliance
It will be a difficult task and much needs to be done, especially in
the first six months to a year of governance to demonstrate definitive
growth intent. I wish Mr. Modi and his team well but with a warning:
many believed that when the UPA-II government was formed in 2009 with a
stronger mandate and without the drag-down presence of the communist
parties, there would be a burst of much needed reforms. As we know,
these did not occur. The new NDA government must, therefore, ensure
that this is not another false dawn. India cannot afford that mistake
It is time now to focus on your Company''s performance during 2013-14.
Let me first give the headline numbers and then share some of my
- It was a very difficult market. Consequently, net sales and other
operating income was flat at Rs. 20,348 crore.
- Sales in volume terms reduced by 8.7%, with Bajaj Auto selling 3.87
million units compared to 4.24 million units in the previous year. This
is a cause of concern and I shall dwell upon it in this letter.
- Exports rose by 2.4% - 1.58 million units in 2013-14 versus 1.55
million units last year. In terms of revenue, however, depreciation of
the Indian rupee helped in lifting exports by 22.1% to Rs. 8,199 crore.
- At Rs.4,305 crore in 2013-14, your Company''s operating EBITDA was 7.8%
higher than the previous year. The operating EBITDA margin was 21.2% of
net sales and other operating income, which was 1.6 percentage points
higher than in 2012-13. It is by far the highest margin in our
- Profit before tax (PBT) grew by 8.6% to Rs.4,632 crore.
- Profit after tax (PAT) was up by 6.6% at Rs. 3,243 crore.
This brings me to an observation regarding your Company''s performance.
At one level, one can but only applaud an organisation that responds to
a very challenging environment by delivering the Company''s highest
EBITDA; a significantly industry-leading EBITDA margin; and all time
high PBT and PAT.
At another level, however, we need to ask why should Bajaj Auto have a
flat growth in the top line? Or why should your Company, with its
outstanding offerings of motorcycles, lose 4 percentage points of
domestic market share - to 20% in 2013-14?
I have shared this thought with Mr. Rajiv Bajaj, your Company''s
Managing Director, who leads a performance driven team. As the CEO, he
will I am sure take a decision which is in the best long-term interests
of your Company.
On my part, I wish to look forward to rapidly growing domestic sales as
well as exports. Simply put, any time on the streets, I should see
Pulsars, Discovers, Platinas and KTM Dukes zipping by, let aside the
three-wheelers which, in any case, dominate the market. And, coming
from where I do, Bajaj scooters. That''s what I mean by Hamara Bajaj.
With the new national government at the helm, I also believe that we
will again see a period of economic optimism and growth. I envisage an
environment where we will return to consumer confidence who will make
the purchases that had been held back over the last few years. With
that, I look forward to a much needed rise in demand for motorcycles.
I have huge faith in the capability of Bajaj Auto''s Management. If it
could produce superior EBITDA margins in a challenging year, it is best
placed in the industry to deliver higher sales and a greater market
share when the headwinds disappear - as I expect they will under the
new national government.
Pen ultimately, I wish to congratulate Mr. Rajiv Bajaj for winning
NDTV''s Business Leader of the Year Award, 2013 as well as that of
CNN-IBN. His team and he have delivered performance through good and
bad years. These awards recognised the superior merits of the team that
Finally, as always, my thanks to our employees, dealers, vendors and
customers who make us what we are. And to you for the support that you
With warm regards,
18 May 2014