See sombre Mar exports; Egypt's devaluation priced in:Bajaj Auto

Latha: What is the amount of money you make from the Egyptian market and how seriously will this be affected the valuation?

A: The facts are that the Egyptian scenario is very much like the Argentinean scenario, for example about a year back, in January 2015, the official exchange rate was around 7.15 and the dollar available at that type of a rate. Progressively they mildly devalued to 7.83, but for the last five-six months or so the blue dollar-as it is called in Latin America region, in the black the dollar rate already is as high as 9.75.

Egypt also trying to get things in order and they had curtailed imports of luxury cars and those types of items and they were in dialogue with IMF and other such agencies and they saw reason to depreciate their local currency and the Governor of the central bank there had once said that this artificial gap has got to be bridged and that is the right thing to do, which is what they have done recently.

Therefore, so this devaluation for all practical purposes has already happened about six months back and we have been living with that already, everything is already priced in and that is how the scenario is, for example if you look at Argentina, after the official devaluation was done and rate came closer to blue dollar rate, things have started dramatically improving, investments have started flowing in and officially dollars are available and business is getting better. This is the scenario on the ground in Egypt.

However, 20 percent of our three-wheeler export basket is from Egypt and about 3 percent of two-wheelers in total and it will chug along as it stands today.

Reema: As a percentage of your overall sales, Egypt would contribute how much?

A: Of my exports, 20 percent is attributed to Egypt. Of my motorcycles, 3 percent is coming from Egypt.

Latha: You cannot tell us in rupees terms?

A: We have to calculate that.

Latha: I am asking because last month your exports did rather badly.

A: That was not certainly due to Egypt. However, that is a nice comparison to make. Nigeria slipped to almost -- one year back it was 156 and when Rajiv Bajaj talked to you on January 19 from Dubai, it was around 200. It went as bad as 400. _PAGEBREAK_

Latha: You are saying your sales in Egypt will be unaffected entirely or only marginally affected and will your exports be positive this month?

A: This month is not the Egypt story. We have to look at the totality. This month will not be any different as compared to February because that is largely flowing because of Nigeria. However, Egypt, whatever adjustments had to be done, have already been factored in the last six months and now distributors are doing a great job on collecting the dollars there.

One more thing, when they cut some many categories of products import, the government there saw the employment generation potential of three-wheelers and two-wheelers and service in the public transport area that they are doing, so after two-three rounds, it has not been affected. The government still said that you have to localise a bit, you have to do one-two-three things which we have already done and which is quite okay.

Reema: Diverting from this issue, we understand that Bajaj Auto, Royal Enfield as well as Suzuki, a couple of the automakers, their vehicles cannot be sold in Delhi because the transport authorities have not given their approval. Could you verify this news for us and if yes, what the impact would be on your company?

A: The Central Motor Vehicles Rules (CMVR) which applies all over India, it mandated this norms-BS-IV, they said that whether it is the manufacturers, they have to ramp up, the testing agencies have got to do the testing properly over a time because if everything comes to a particular date, the entire existing range of models plus the new models should all get certified for the new norm. This is a huge load and this is very normal in all countries, Europe does it all the time and we do it regularly. So here they said that the new vehicles will comply after April 1, 2016. The existing models which are approved by Automotive Research Association of India (ARAI) before that date, before March 31, 2016, will have one more year and progressively they will get converted to Euro IV. So this is very practical situation on the ground.

The CMVR is the main rule making body, ARAI is the testing agency. Government center has given this type of a relaxation. We understand that transport commissioner in Delhi has not given approvals for any new models for the last two-three months and Bajaj V is also in the basket, for example in almost all the other states, whatever approvals requires are taken and then the message goes to the Regional Transport Offices (RTOs) and RTOs start registering. This all is absolutely in pipeline and no problem.

Here the Society of Indian Automobile Manufacturers (SIAM) is in touch with both Ministry of Road Transport & Highways (MoRTH) and also the transport commissioner. The latest that I hear is the transport commissioner, there is a change in the person and the new person we are waiting for him to resume office and hopefully it will get resolved. But when the individual state has to give some approval and that is a process, we have to go through that process and this hiccup is absolutely uncalled and unwarranted but we have to face it when it comes to this.

Latha: How long can this problem go on and whether other cities will also now start demanding?

A: I don't think so because the process that is laid out is very simple and clear. We are not having a window of four years. Here it is very practical solution on the ground. Therefore, I do not see any problem; I don't see any other state following this but that said how soon it will get resolved. I hope it gets resolved in a week's time.

Reema: Coming back to the export picture. Since the export problems have got compounded in the last few months; first Argentina then Nigeria and now Egypt. For Q4, will the exports look worse or bad or better than what you did in Q3? In Q3 your export volumes were down nearly 16 percent? Give us a picture, at least qualitatively, how Q4 exports will look like?

A: For Q4 you already have the numbers, it is sub one lakh type of a number. However, March is also going to be similar to February. So that's the story there and we are hoping that things have started cooling off a bit in Nigeria and Argentina is not a problem. Egypt is not a problem because these things have been already factored in well in advance and the market is already living with this but when a major country, major market currency goes for 100 percent type of a toss then we have to deal with that.