Sales numbers for November will be pretty much the same as were for October, Kevin Dsa, Chief Financial Officer, Bajaj Auto tells CNBC-TV18.Bajaj Auto sold 3.53 units in October(two wheelers and three wheelers), down around 9 percent year-on-year. Domestic sales were good because of the festive season demand, but exports fell around 20 percent to 1.27 lakh units. Dsa says the company lost some numbers in Nepal because of the disturbance in that country.He says the response to the new Avenger series has been encouraging, and there have been 7000 bookings already.DSa expects new launches in February and March to aid the company's growth.He says it would be reasonable to expect operating margins of 21-22 percent given stable commodity prices and stable exchange rates. Below is the verbatim transcript of Kevin Dsa’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: It has been a dismal performance across all segments. Total sales down 9 percent, exports down 19 percent and domestic sales are also down 1.5 percent. What is the expectation for the festive months?
A: I would like to put it across in a slightly different perspective. Don’t compare quarter-on-quarter (QoQ) because of the shift that has taken place in the festive season. So, lets us look at the November numbers that we did last year. It was about 127,000 numbers and this year this month my estimate will be at least 160,000 numbers purely on account of the shift of festive season. If you look at both put together, when you look at October and November, I don’t think the numbers that you are mentioning as dismal is going to be dismal; that is point number one.
Sonia: I am talking just about the October sales that you have reported this month versus same time last year. I take your point that the festive season has changed, etc but when we had that discussion with Ravi Kumar last month, he indicated that despite the festive season being here and there, he will still be able to report a growth in most segments which has not come through this month around. So the question I am asking is when do you expect to see a sustainable revival in growth?
A: From November onwards purely on basis of last year’s base effect. Second, let me also give a little bit of flare to the numbers that we are talking about. In CT and the Platina - most of the analysts and the fund managers felt that we have sold these during the marriage market. In the festive season they had thought that it would not sell but we have done over 100,000 numbers of Platina and CT100 in this month.
Second is the Pulsar which has crossed 71,000 numbers in this month. However, most encouraging is the Avenger. As you know, we have just launched the Avenger and as a CFO, as a present finance, I was very conservative and my thought was from a selling of about 3,000 numbers we would do about 15,000 numbers at the most of Avenger. However, the number of messages that I am getting across from the dealers is one single message that is "FLG". Basically what they are saying is "feel like god" and this is the sale that is taking place in Avenger.
This month though we started the Avenger sales just about 10-15 days back, we have already built 7,000 numbers and the bookings are overflowing over there. So, for me it is not just the number that I am talking about but the mix and the potential of the numbers going forward. Same is the situation in the Pulsar. The RS200 is rocking._PAGEBREAK_
Latha: How would you rate the second half then? Whereas the motorcycle sales have been around 3.1-3.2 in the first half, more like 3.1, in the second half would you say the monthly run rate would be 3.3?
A: The monthly run rate let me break it up into domestic and exports. As far as the domestic is concerned, I would say the run rate should be somewhere near 1.7. The reason why I am mentioning about this is a) there is the Avenger that is coming in and like I said I believe the run rate could somewhere about 20,000 numbers now as against an average of 3,000 numbers; that is one part.
The second part is an all new vehicle, new brand coming up in February and March which will give us incremental numbers. So, on an average, for the next six months including the month that is just over, I would say a run rate in the domestic of 1.7-1.8 is very much possible.
Coming to the export, I will touch upon exports again; I would rather like you to look at exports on a longer term potential rather than month-on-month (MoM) for two reasons. The first reason is when it comes to domestic sales, all I have to do is get the cash, dispatch the vehicle, transaction over. Less cash, I send off in my way of a credit, transaction over.
In the case of exports, I require a letter of credit in advance before I start production of the goods because each of the products is specific to that country and second, the shipping that takes place. So, there will always be some sort of distortion in the numbers if you take on a MoM basis. However, if you take a quarter, if you take on annual basis, I am on track for the 2 million numbers. This month for example, it is slightly low because the focus has been on the domestic market. I would say that even next month, I don’t see any significant growth in export numbers purely on account of the fact that I will be focusing on the domestic sales.
My colleague Rakesh Sharma who is head of motorcycles, in the first quarter sold 64,000 Pulsars. In the second quarter, he sold 97,000 Pulsars but today he is not position to get Pulsars and the Avengers purely because of the domestic market.
Sonia: For exports, you did about 1.27 lakh this month. In November and December what could the run rate be?
A: I would say that November would be somewhere near 1.35 or so. However, December onwards I would say it will be closer to about 1.5 or so.
Sonia: Can you give us a break up of the markets – Sri Lanka, Nigeria and Egypt? What have you done this month and have you seen any improving tends?
A: We don’t share on MoM basis but I will grant that in this month I did lose a little bit of sales to Nepal. This is because of the dispute and the slight conflict if I may say so between India-Nepal on the various constitutional amendments, so there is a bit of disturbance in the trade over there.
Latha: Since you say you are selling more high-value bikes and therefore the volume numbers don’t reflect it, what would you say in terms of second half revenues? You have done a little shy of Rs 6,000 crore in the second quarter. Should we expect in the third and the fourth quarter this to be 10-20 percent higher?
A: I won’t give a 20 percent but I would say 8-10 percent growth, higher than the second quarter will certainly be there.
Latha: Margins?
A: I won’t comment on margins but as I started the year, I was always talking in terms of a 20 percent margin on a whole year basis. First quarter we did 21.4 percent or so, second quarter we did 22 percent. I would say for the second half commodity prices are stable, the exchange rate is by and large fixed, we have got ourselves hedged to that extent. The higher products prices that are coming in the mix is taking place, I would say for the second half, margin between 21 and 22 percent seems to be okay.
Sonia: You did mention CT100 and Platina is 100,000 which is very good compared to 91,000 that you sold last month and Avengers also is looking good. What did you do with the new Discover? You sold about 17,000 in September.
A: The total Discover we sold this month is around 25,000 numbers. I expect the Discover based on the history, etc would be stable at this level which should be good for us because we will have to build it over a period. However, we are looking clearly at the new brand that will be coming out in February-March which I believe will be a major shift in the industry sales.
Sonia: Overall the sales, on 3.5 lakh, which is the base, what do you expect for November and December?
A: I would say that November would be almost the same. As I explained to you, festive season is for November, we should be having some good numbers. The exports would remain the same. However, in December with the numbers of domestic coming up but exports will go up.
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