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Last Updated : Mar 02, 2015 04:01 PM IST | Source: CNBC-TV18

Nigeria, Sri Lanka exports to normalise in Mar: Bajaj Auto

Rajiv Bajaj, MD, Bajaj Auto said acute situation in two key markets, Nigeria and Sri Lanka, is to be blamed for negative export growth in February.


The two-wheeler major Bajaj Auto said in a filing to the Bombay Stock Exchange (BSE) that its exports declined by 20% during the month to 1,12,909 units from 1,42,009 units in the corresponding year-ago period.


Speaking to CNBC-TV18, Rajiv Bajaj, MD, Bajaj Auto said acute situation in three key markets, Nigeria, Sri Lanka and Egypt, is to be blamed for negative export growth in February.


Below is the transcript of Rajiv Bajaj’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.

Anuj: The market is disappointed with this export number, do you think this Nigeria factor is hurting you now? We spoke about it earlier, the currency factor and the fact that you will see how it goes. Anecdotally are you seeing that that is now hurting you a bit?

A: Let me put it this like this, the story of February really is the story of issue with exports and that can be brought down to three of our major markets; one is Nigeria, second is Sri Lanka and the third is Egypt.

Let me give you some numbers to put it into perspective. If you look at exports as a whole, up until the previous month, exports were growing at 22 percent year-on-year (YoY). In February, there is a negative growth of 20 percent. It is very odd to have such a dramatic change from plus 22 to minus 22. The reason has been given - in two markets, in Nigeria and Sri Lanka it has been more of what I call as a acute situation.

In Nigeria it has brought about by the disruption due to the election. It is not so much due to the forex because between a retail price increase and adjustment in distributor margins and our own prices we have managed that. However, because of the disruption due to the local election, there has been disruption in all aspects of the business whether it is the imports, the assembly, the distribution, etc. However, we are already coming back. For example in the month of February we clocked retail of almost 35,000 motorcycles and almost 4000 three wheelers.

Similarly in Sri Lanka, there is a gap of 30,000 motorcycles because again there is an acute situation, the government changed and the new government is taking some time to process the business that was promised by the previous government. So, there again we given to believe now by our distributors, that from this month those orders should be coming. All that has happened in February is that couple of these very big markets we have had delays due to local situation.

Egypt is more of a chronic issue as oppose to the acute issue in Nigeria and Sri Lanka. In Egypt basically the country has no money to buy motorcycles and three wheelers and which is not new to February. Egypt is one market you would observe, through the year has been very volatile for us. There have been months when our export to Egypt has been zero, there are months when it has been 15,000 motorcycles. So, Egypt I don’t see changing in a hurry but Nigeria and Sri Lanka will normalise from this month.

Close

Ekta: Can you just tell us what the inventory levels are currently for the export markets if that is the case and there are some reports indicating that the production at your Aurangabad plant had come to a halt or had been reduced and for your three wheelers you had in fact stopped production for sometime. What is the status on that and if you could confirm it for us?

A: As far as inventory is concerned, we carry very little inventory because everything that is made is made to order. It is made to order, so containers are waiting and goods are shipped out everyday. So, we don’t carry any significant inventory at our end.

Distributor inventories are between four weeks and 12 weeks depending on where the distributor is. If somebody in Columbia then if you have to include everything that is on the high seas and that may well be three to four month of inventory but that is normal; that has always been the case.

As far as production in Aurangabad is concerned, we have had to cutback over there for these two reasons because we have a motorcycle plant there and a three wheeler plant. So, the three wheeler plant was affected by reduction in orders for three wheelers from Nigeria. On Sri Lanka we were fine as far as three wheelers are concerned. In fact there is a slight uptick in three wheeler volumes out of Sri Lanka.

On Motorcycles, again all our exports to Nigeria, Sri Lanka and Egypt go out of the Waluj plant alone. That is why this deficit in motorcycle exports in February had to be mirrored in lowering of production at the plant.

Anuj: Let me go back to the export question because as you yourself said this has been the story of the month of February. What makes you confident that things will be back to normal especially in Nigeria because there is this whole currency issue which we still haven’t impact of and do you think you still remain competitive in markets like Nigeria and it was just a one-off? What gives you that kind of confidence?

A: Simply the track record so far. It is not the first time that we have witnessed disruption due to elections; it has happened before. Let me give you some numbers. When we budgeted Nigeria volumes for this year, we just discounted one whole month because we had no way to know when elections would be exactly. You might know that it is now postponed from February to March. However, we had cutout one month, it will cause that kind of disruption. So, we had budgeted for about 455,000 motorcycles to Nigeria this year and at the end of March we would be achieving that number. So, we are on plan.

If you look at our overall volumes also beyond Nigeria, exports at 1.7 million at the end of February are 16 percent higher than the 1.45 million approximately last year. So, that is one issue. Once the election passes, there is nothing in the marketplace which is going to deter us from achieving our volumes. There is no competitive issue at all. In fact now the naira is at about 204 to the dollar, we had budgeted at that. Our prices are adjusted to that, the distributors margins are adjusted to that and retail price has gone up already. If I remember right about five weeks back to 121 naira at which we have retailed almost 35,000 motorcycles last month. So, demand is not the issue and competition is not the issue.



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First Published on Mar 2, 2015 12:50 pm
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