Worst is behind us, good times to come: Bajaj

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

Q: Can you list the highlights of the quarter's performance? The results are a tad better than expected though the margins have disappointed.

A: For the quarter, there is a positive factor and not so positive factor. The positive factor is the margins. The EBITDA margin at 19.4% is actually a little better than last year at 19.1% despite the pressure on volumes, product-mix, trouble in export markets etc.

The pressure of commodities continues thanks the weakness in the rupee. Despite all this pressure, in absolute terms the EBITDA is up from about Rs 911 crore to Rs 961 crore and as a percentage, it is up from 19.1% to 19.4%.

Of course it is down quarter-on-quarter, but it’s up year-on-year. So for us that is a positive because that has proved the robustness of our cost structure. We have very low fixed costs.

Our fixed cost as percentage of sales is under 10%. It’s in single digits and to the best of my knowledge, it’s the best in the industry and that makes us quite immune to any situation where growth tapers off.

What is not positive is the fact that sales and revenues are flat. Sales are lower by 1%. Total revenues are marginally up from Rs 4,850 crore to Rs 5,050 crore. We should have done much better than that. The reason for that is the delay in the launch of new products which was to drive growth in this sluggish market.

We eventually launched our new products, but we have lost out on the growth momentum. We are ramping up production and I hope that while maintaining or improving margins, we will demonstrate growth in sales as well.

Q: Do you expect the quarter-on-quarter pressures get worse? Will it dwindle by another 1% in the coming quarter and will sales make up for loss in margins?

A: Nobody knows the future. The company expects the quarter to be the worst in terms of profitability and EBITDA margins because we expect sales to grow as production is ramped up with new products. We expect our mix to improve particularly in the domestic market because we will sell more of the bigger 'Discover' and the 'Pulsar' models.