Bajaj Auto, TVS Motor fall on duty drawback cut

Shares of two-wheeler manufacturers Bajaj Auto and TVS Motor fell 1-1.5 percent in early trade after the government has slashed export duty drawback to 2 percent from 5.5 percent.

In a notification, the Ministry of Finance (Department of Revenue) said it has reduced duty drawback rates on exports. "Duty drawback rates on motorcycles, 3-wheelers and medium and heavy commercial vehicles have been reduced to 2 percent from 5.5 percent previously. In light commercial vehicles, duty drawback rates have been reduced to 2 percent from 4 percent earlier, while the rates have been largely unchanged for the cars segment at 3 percent."

"For auto components, rates have been reduced from 3-5 percent to around 2.4-4 percent. These new rates will be effective from October 10, 2012," MoF said.

Analysts expect the impact of the duty drawback at around 2-10 percent assuming no pricing change by companies.

Rajiv Bajaj, MD of Bajaj Auto said duty drawback cut would not impact margins materially. "We will pass on additional cost to consumers."

At 09:56 hours IST, Bajaj Auto was trading at Rs 1,723.50, down 1.55 percent while TVS Motor Company fell 1.13 percent to Rs 43.75.