Two-wheelers to see low single digit growth in FY14: Hero

Meanwhile, most brokerages have maintained a sell or underweight rating on the stock despite its good financial performance in second quarter FY14 (Read More). According to them, stretched valuations, fall in company’s market share and mute demand are the key reasons.

Hero’s management at conference call guided for low single digit volume growth in FY14 versus 5 percent guided at the end of Q1, which was scaled down from 8-9 percent given in Q4FY13. Hero’s domestic market share in second quarter slipped to 39 percent from 44 percent in the first quarter.

Below is the edited transcript of Munjal’s interview with CNBC-TV18

Q: Trade deficit has narrowed significantly and a part of that has come courtesy the improvement in exports. You head the CII International policy council, what is the situation on the ground? Do you think this improvement is a sustainable macro point and that will continue to sort of bring out positive data points in the trade deficit numbers as well?

A: Two things have helped. One, there has been low capacity utilisation in India, so people’s ability to produce for export has improved. Secondly, with the rupee/dollar parity changing, it has made India little bit more competitive. What worries everybody is this extreme fluctuation in the foreign exchange rates, I don’t think the higher or lower rate is such a big worry.

It is the extreme changes at very short notice, which are worrisome. If the rupee remains stable, where it is, clearly the case for export is sustainable because Indian industry has started to become competitive in many different areas - it is not just industries, it is all the way down to handicrafts where India has a potential.

Q: Speaking about domestic demand given the weak demand environment, do you see banks extending the discounts that have been offered to few of the consumer durables or consumer goods space well after the festival season as well, is there a case?

A: For many businesses, there may not even be a choice. One as we were talking earlier, there is clearly a time for demand to pick up. We have seen some early signs especially in the rural areas. Demand has started to turnaround in many different sectors, but it is still very slow and very tentative and it is only in a few sectors. So, that is a bit of a concern. I would imagine special incentives, discounts, special initiatives and efforts by companies on large number of product lines would continue for a while now.

Q: What is your overall estimate on the gross domestic product (GDP) figure? What is your expectation on the two-wheeler space? Society of Indian Automobile Manufacturers (SIAM) has projected about 6-8 percent growth, but many analysts on the street believe that that is unrealistic for FY14. Do you think we are dealing with low single digit growth in the two-wheeler space as well for FY14?

A: On the GDP growth, I still expect 5 percent is something that this nation will hit partially because of the sheer momentum which we have been operating. I also think the current account and the fiscal deficit will remain within the revised numbers that the government has announced. There is a fair amount of signaling of that right now. The automotive and two-wheeler demand have been under severe pressure. The two-wheeler demand is likely to remain within very low single digit at this moment. That is the best indication one can get at the current state in the economy.