Hero Honda posts best ever Nov monthly sales

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India's largest two-wheeler maker, Hero Honda reported 31.49% growth in its November sales at 3.8 lakh units as against 2.89 lakh units in the same period last year and 7.34% jump as against 3.54 lakh units month-on-month.

Commenting on the numbers, Anil Dua, Senior Vice-President, Hero Honda, says it is the best November monthly sales ever posted by the company. "Buoyancy in demand continues even after the festive season. There was an over 40% growth in the scooter segment." He is confident that the company will cross the four million mark much ahead of its initial target of FY10-end.

Here is a verbatim transcript of an exclusive interview with Anil Dua on CNBC-TV18. Also watch the accompanying video.

Q: What is the break up of the numbers you reported? Does this mean that the disruptions which you are facing are because of the auto strikes?

A: We have done more than 3,81,000 sales this month. This is the best November that we have ever had. We have never in November crossed the figure of three lakh. Hence, this is a truly exceptional November where we have not only crossed three lakh but done more than 3,81,000. In fact, this month also is another landmark month because for the first time we have crossed 3 million in the middle of the year itself. This month marks the crossing of 3 million milestone.

The breakup is that essentially we have grown across segments of 100 CC, 150 CC and above. We have had good growth across scooter segment. Our year-to-date (YTD) overall growth is now 21%. We are growing by almost 30% in the premium segment which is 150 CC. We are growing by over 40% in scooters. Therefore, we continue to grow in our traditional high growth segment which is 100 CC. We are also doing very well in the premium segment as well as scooters. The labour issues had an insignificant impact on us and are truly behind us now.

Q: What do you think you are on track to do for the full year that is FY10 in terms of sales?

A: We had given guidance earlier of crossing 4 million units this year. I believe we will be crossing that much ahead of the end of the fiscal. We should be going well beyond 4 million and posting a much bigger figure than 4 million.

Q: Market expectations were working at a higher figure this month. They reckoned Hero Honda would do about 4 lakh units. What exactly was that spillover effect for the auto disruptions as you have indicated? How large or significant was it?

A: We have grown 32% in this month. Our highest ever November in the past has been 2,89,000. So I do not know where the expectation of 4 lakh was there. However, 3,81,000 figure certainly has excited all because this is post festival month when the sales take a dip.

I believe, the overall economy is buoyant in the gross domestic product (GDP) numbers. There is good buoyancy in both urban segments. The rural areas are doing very well with all the government money going into the rural areas. Therefore, we have seen that this overall buoyancy has helped the demand continue even post the festival season. Hero Honda has followed a strategy which is very growth oriented.

We have been launching new models regularly just ahead of festival. We have launched three new models and have been expanding our network very vigorously. We have doubled it over last three from 2,000 touch points to over 4,000 touch points. This all has led to this ground level growth. So 3,81,000 number is something which is definitely looking very good in this quarter. We hope to continue this kind of a momentum.

Q: If you maintain this kind of a run rate of more than 3.8, forget 4 million, you should be on target to get very close to 4.5 million by the time the year is out. Do you think that is a stretched target or very achievable?

A: I will not be able to comment on specific numbers. In this industry, different months show different performance because of various reasons. The year end month traditionally has been a smaller month. Traditionally, February has been a smaller month in expectation of what is going to happen with the budget. Therefore, it is difficult to extrapolate directly from this kind of a number. Certainly, we should be able to go well beyond 4 million.

Q: There is a slight upward push though in terms of raw material cost right now. By when do you think you can start relooking prices?

A: There has been a firm trend in commodity pricing. In fact, we have seen it through the first half and this quarter also. While this trend is upward, firming up is not very alarming. Hence, I do not think we will be doing any knee-jerk reaction but certainly we are keeping our options open. We are seeing an overall surge in demand all around us and it is natural that some of the commodities will start moving up. If there are sharper movements than what we are seeing then certainly we will relook at our pricing.

Q: While sales look very strong this month, we understand that market share for Hero Honda has been slipping a bit over the past six months or so it has gone from about 70% to 60%. Where does market share stand right now?

A: Infact, our market share has moved up consistently it has not been slipping 70% was never the figure. We used to be below 50% a couple of years back and currently a market share is over 59%, close to 60% in the domestic motorcycle market. If you look at this year, the market has probably grown by 15-16%. We have grown by 21% clearly indicating that we gained market share during this period.