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May 16, 2013, 08.52 PM IST | Source: CNBC-TV18

Bet big on July Discover launches, exports: Rajiv Bajaj

Rajiv Bajaj, MD, Bajaj Auto in an interview to CNBC-TV18, says that the company is betting big on the launch of six versions of the Discover in July plans to focus on exports to boost revenues and increase market share.

Bajaj Auto plans to launch six new versions of the Discover starting July in a bid to boost market share, and expects to maintain EBITDA margins at 20 percent going forward. Speaking to CNBC-TV18, Rajiv Bajaj, MD, Bajaj Auto is optimistic of maintaining double-digit growth in exports. Exports constitute 33 percent of total revenues for the company.

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"We will continue to gain market share at the retail level and out of the six Discover launches, only two will be in the high-end market. I expect 10-12 percent growth for 3-wheelers going forward and hope the auto sector's performance improves."

Below is the edited transcript of the interview on CNBC-TV18

Q: What is your profit and sales for Q4?

A: For Q4, the total revenues were about Rs 5,000 crore, just wee bit more as compared to the same quarter previous year. Profit after tax (PAT) was at Rs 766 crore, again flat year-on-year.

In terms of the number of vehicles sold, it is marginally lower - just under million vehicles. Overall it has been an unremarkable quarter, bringing to an end an unremarkable year. Even for the year as a whole, the earnings were pretty flat.

Q: Can you tell us what exactly your revenues were for the quarter?

A: Total revenue is Rs 4,990 crore and that includes, in our terminology, operating and non-operating other income of Rs 243 crore. So, perhaps the street’s estimate is closer to the revenues we have declared minus this amount.

Q: What were your operating margins were?

A: The EBITDA margins were at 19.2 percent compared to 20.6 percent in Q4 of the previous year, down by almost 150 bps.

Q: Did you sell around 9.8 lakh units?

A: Yes, to be precise we sold 9,81,000 vehicles.

Q: What about the quarter in progress and the quarter ahead? What is your view on sales and competition?

A: It is very clear that nothing will change in the short-term. The month of April has been no different from all of last year and I don't really expect any change going forward.

I think everything else is a positive, at least for Bajaj Auto. We are very enthusiastic about the new products that are to be launched- we have six new Discovers for launch starting in July. We are going to replace our entire portfolio of three-wheelers with a completely new range.

The rupee at Rs 54 to the dollar from April 1, is almost an 8-9 percent improvement on the export turnover which is about Rs 7,000 crore, and that is a big positive.

Thankfully, commodities are also very stable. Uncertainty remains to be the only problem in both the domestic and export markets.

Q: Do you expect margins for FY14 to be in this rage of 19.2-19.6 percent?

A: I expect our EBITDA margins, which have typically been around 20 percent, to remain in that range simply because fixed cost as a percentage of sales is only about 6 percent. Since ours is a completely variable structure, when volumes jump up we don't have any huge gain in terms of economies of scale.

However the reverse is also true that if growth is flat, it doesn’t have any adverse impact as far as our bottom-line is concerned. However, slow growth in the market is a concern.

Q: The contribution of exports to total revenues has gone up. Are you all planning to boost your exports?

A: Exports constitute about 33 percent of total sales and revenue. This year, from a forex point of view, we will realize better rupee value for exports because almost all our exports are in dollars.

To that extent, we have budgeted for a double-digit increase in export-revenues. I hope that this year we will be able to sell more units in the domestic market with our focus on the Discover segment.

Q: With increased competition, it has been estimated that all major participants in the two-wheeler segment will lose 1 percent of their market share. Can you confirm this estimate and at what level will your loss in market stabilise?

A: You are absolutely right. In terms of domestic motorcycle market share, we ended the year with a 24.5-percent share compared to 25.5 percent the year before. But I hasten to add that the change is in the billing market share. At the retail level, we believe we have not lost market share and may have gained a fraction. However, I would not say that we have gained significant market share either. I think market share has remained flat.

Let me put it like this. I think people who wanted to buy either a Hero or a Honda were always buying it from Hero Honda. The people that came to Bajaj, came to us because we offered something different, good, bad or ugly and I think those people continue to come to us. There are some that maybe gravitating from Hero to Honda now that the two entities are different but that is not going to directly benefit us. That is going to the benefit of Honda if at all. Our strategy is one of differentiation. We have to make an impact to the new Discovers that we will launch.

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