Jul 19, 2013, 05.57 PM | Source: CNBC-TV18

Won't resort to huge discounts to boost sales: Bajaj Auto

The company’s first quarter earnings matched market expectations, even though volume sales declined. Bajaj said his company had not lost any material market share on a year-on-year basis, adding that it had a 46 percent market share in the sports bike segment.

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Bajaj Auto could make an incremental profit of Rs 100 crore this quarter on the rupee alone, if the currency stays between 58-59 to the US dollar, Managing Director Rajiv Bajaj told CNBC-TV18 in an interview. This would also help the company maintain operating margins at 21 percent , he said.

The company’s first quarter earnings matched market expectations, even though volume sales declined. Bajaj said his company had not lost any material market share on a year-on-year basis, adding that it had a 46 percent market share in the sports bike segment. To bolster growth, Bajaj Auto will be focussing on the commuter segment bikes. Bajaj said his company was working on six new variations of the ‘Discover’ brand.

But he added that there would be no large discounts to boost sales. Bajaj is hopeful of motorcycle exports rising to 110,000 units monthly, from about 95,000 currently. He expects an average monthly run rate of 20,000 units for three-wheelers, and record three-wheeler sales this financial year.

Below is the edited transcript of his interview with CNBC-TV18:

Q: I read in your press release that you say that there could be further benefits from rupee depreciation that will accrue to the company. Can you tell us about what kind of impact that would have on your margins and whether you could sustain your margins at this 21.3 percent level that you clocked in this quarter?

A: It is hard to say because it depends on how the rupee moves and as you know well it has been very volatile in recent weeks. In the Q1, for the first two months of April and May our realisation was typically around 54 or 55 rupees to a dollar. In the month of June, I think that is closer to 57 or 58 rupees to the dollar and so that has made a significant impact in Q1.

In Q2, we would like to believe that if the rupee continues to stay at this level then it is for the entire quarter, for all three months that we would realise probably something like 58 or perhaps closer to 59 rupees to a dollar for everything that we export in this quarter and I don’t know the exact numbers, but I heard our CFO mentioned at the annual general meeting (AGM) today that what we stand to gain incrementally in Q2 assuming the rupee remains between 58-59 is something like an additional Rs 100 crore in terms of profits. Now whether that is before that or after tax I don’t know, but it would be significant.

Q: Just focusing on the domestic market share, that seems to have taken a bit of a hit this quarter. In your expectations going forward where do you think that your market share within the domestic market would be something you would be able to sustain as well as combating competitive intensity at the same time?

A: Let me give you a somewhat longer answer to that question. Essentially with the Pulsar we have in the sports segment a 46 percent market share and that market share has remained intact from Q1 last year to Q1 this year. Unfortunately, given the sentiments in the marketplace that segment itself is not really growing or is unlikely to grow in the near future, which means we must focus now on the second segment  that is the commuter segment where we compete primarily with the Discover.

Now let me tell you this that before the new Discovers were launched, starting July 2009, if you were to go back then you would see that our domestic motorcycle market share was around 15.9 percent, let us say 15 percent and once the new Discovers were launched, there were four of them launched over a period of six months in 2009. T  hat market share moved up to about 25 percent. So by December 2009, our motorcycle market share in the domestic market was around 25 percent.

Now in the last three and half years, since December 2009, it has remained there. Quarter-to-quarter it may go up by a percentage point or go down by one percentage point, that depends a lot on how everybody in the industry builds, adds to stock, depletes a stock etc. but the big picture is that we remain around that 25 percent level.

If that has to move up then as I was saying earlier we cannot really hope for much from the Pulsar, but we need to do something all over again with the Discover as we did in 2009.

Towards that purpose, we have been working for the last two years to create a new platform, infact two new platforms, which will yield us six new Discovers in this financial year. The first two of them we have just started production, just in the last few days both at our Aurangabad as well as at our Pantnagar plants. We have another big launch coming up by September, that will be the third Discover, new Discover this year and then in the second half, mostly in the Q3, we will launch the other three.

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