Argentine peso slump factored in; no hit on sales: Bajaj

The 30 percent depreciation that has taken place in Argentine peso this morning is unlikely to have an impact on the landed cost of Bajaj Auto's products, S Ravikumar, President -Business Development, Bajaj Auto told CNBC-TV18."Our distributor in Argentina had anticipated this situation and this depreciation was fully factored in", Ravikumar says in an interview to CNBC TV-18, adding the company has in fact upped its volume projections for Argentinian market and expects sales of around 22,000 units per annum in the country."Bajaj largely sells Pulsar range in Argentina and this business is highly profitable for us. We have gained 30 percent market share already and might go up to over 40 percent soon", he says.Ravikumar believes that any hit on the purchasing power due to the currency devaluation will only be temporary.Below is the verbatim transcript of S Ravikumar’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: What is the likely hit because of the peso devaluation in Argentina? A: Much to the contrary we see it as a positive news. Let me just give you some basic details like though the dollar official rate itself was around 9.68, they had this concept of blue dollar which already was trading at somewhere around 14.5 and the collections and all that which panned out in October, the government, the economists and the central bankers were already much moved onto the ground and they were preparing the path already. I was told that there are some quasi measures which they did announce in terms of some foreign bond type of a story there. It was almost quasi official. Even this blue dollar was a quasi official. So, what they have actually done is that now that the new government is in place and the good news is from a socialist type a regime this is more towards the right type of regime, closer to the IMF, US and free market economies like that and they are now making it just official. So, it was already in the market, already on the ground for quite a few months now. Another big intrinsically correct factor in Argentina is Argentinean exports are largely agrarian. They are soya bean, etc so they are not oil exporting country and this new government is absolutely business friendly. If at all in this troubled world you are looking for good sports, Argentina is very good sport. Added to that, our distributer there was very smart and he anticipated all this and he prepared the ground very nicely. n fact Argentina is going to be a fantastic growth spot for us in this particular year and we are absolutely bearish. Ours is from Mumbai basis, we are not going to reduce even USD 1 over there and our volumes projections actually have been upped recently so we are going to grow very well there. It is going to be a strong market for us.Reema: There is no change in the landed cost of Bajaj Auto’s products when it hits Argentina in local currency. Your products are not going to be more expensive compared to what they were a month ago? A: Correct and that is for sure. Even the retail prices because the distributor was already preparing the ground for what was going to happen going forward. So, it was all completely factored in and very well settled in the recent months and things are actually positive. Latha: An aggressive devaluation also leads to local inflation and fall in the purchasing power in the hands of the local Argentinean. You must have already gone through that when the nairu was devalued in Nigeria. Don’t you think that purchasing power hit may come? A: I would agree with you on a macroeconomic principles basis but the fact is that the socialist regime had not allowed things happen on the ground and that had really pulled down the economy. The trade basket is quite favourable and once the right governance sets in place, things should only become alright. So, it is transmission which has got to be managed properly. If the government had gone out and the socialist regime had come in place at this time, I would not be talking this language to you.Reema: Just to give us a few numbers, what percentage of your exports come from the Argentinean market and secondly you said you have upped the volume projections for Argentina. What was it earlier and what does it currently stand at?A: We became active in the last few years only. It is not one of the markets where we have been there for decades. Argentina has had its share of problems in last governance regime. It is not a very huge market, it is a 1,50,000 motorcycle market. In FY14, we are at something like single digit market share and in the last year we went up almost about 30 percent plus type of a market share and we should close this year at a good, almost about 45 percent type of a market share. 22,000 units per annum and it is largely Pulsars, it is only Pulsar range and it is a damn good profitable market for us. Latha: What you are saying is that this new government, Mauricio Macri’s government is more like what Manmohan Singh did in 1991 or probably Narendra Modi has done in 2013 for the economy? A: I think if the trade policies are maybe much easier to implement and once that falls in place today’s world scenario the bounce and the positivity can set in very fast there. Reema: You said volumes in Argentina you are expecting 22,000 units per annum this year? A: Correct.Reema: What was it last year and what were you earlier anticipating because you have said you have upped your volume projections? A: Last year was just 12,000. As I told you, we entered this only a few years back and Pulsar NS is what is really creating the waves there and as you know Pulsar range itself is a very profitable range for us and we are settling in there very neatly. Latha: How has December sales been?A: December is generally a slow month.