Bajaj Auto sees festive season growth at 30%

"Domestic motorcycle sales, which were hovering around 200,000 units a month is clearly seeing the possibility reaching 260,000. Last week's retail was up about 50 percent as compared to what we were experiencing in recent weeks," he said in an interview to CNBC-TV18.

However, he was quick to add that despite the sales growth, the sluggishness continues and is 5% lesser than last year.

Its revenue in July-Sep quarter was at Rs 5,139 crore, down 4% . It sold 10.49 lakh vehicles in the quarter, 10% lower than what it did in the year ago quarter. Bajaj Auto's second quarter net profit rose 2% year-on-year to Rs 741 crore, helped by higher other income, while its core motorcycle and CV business hit the speed bumps.

Bajaj, however, is more concerned about competition than the sluggish sales. Talking about the second quarter of FY13, Bajaj said Honda is unlikely to erode market share. Its domestic market share at the end of first half was 27.5%. As new products are helping drive the market share gains, Bajaj Auto will be focusing on 100 cc segment. "Operating leverage is lower by `Rs 100 cr QoQ on weak sales," he added.

Here is the edited transcript of the interview on CNBC-TV18.
 
Q: Let me start by asking you how this season has begun, are you seeing any real solid festive season buzz or has it been a slow start to the season?

A: The season has begun satisfactorily I would say because it is a week now that we are into the Navratras. For Bajaj Auto, I can tell you that we were anticipating a growth of about 30 percent and we can see it as of now. By that I mean for example, with our domestic motorcycle sales, which were hovering around 200,000 a month, we are clearly seeing the possibility this month of making it to 260,000.

Last week’s retail was up about 50 percent as compared to what we were experiencing in recent weeks. From that point of view, it is good but I have to hasten to add that it is still below last year. It is still about 5 percent below last year. The sluggishness that we have seen since April on a year-on-year (YoY) basis continues.

Q: Your margins are good this quarter at 19.7 percent, is it because of the price hikes that you took or because three-wheelers turned in a better performance after the recent difficulties?

A: Primarily, what you say is true. It is the price hikes. If I were to compare YoY, Q2 to Q2, what has hit us significantly is the cost of commodities that is up about Rs 200 crore and about Rs 100 crore in terms of operating leverage because volumes are down a little bit.

What has helped us to the tune of a little over Rs 200 crore on the positive side are the various price increases we have made. In our case, there is some benefit due to the new products, especially the new Discover 125ST and the Pulsar 200NS. These are more profitable. That aided the mix but, primarily it is price increase as you say.