Though capital expenditure (capex) for FY21 will be revisited, the company won’t have any issues in providing for it if the situation demands, a top official of Bajaj Auto said on May 21.
The Pune-based company has restarted production in a limited manner at each of its three plants after keeping them shut for more than six weeks. About half of Bajaj’s dealerships have begun functioning.
Speaking to Moneycontrol Rakesh Sharma, executive director, Bajaj Auto said: "The capex is not such an issue at Bajaj in any case because of the already existing facilities. Even last year, the capex was Rs 211 crore and most of it were in things like dies and moulds. We were not required to have a heavy capex this year and therefore we are not required to cut it also."
Two other listed automotive companies, Maruti Suzuki and Apollo Tyres, have brought down their capex for the year by nearly half as there is a general tendency to conserve cash and raise working capital especially with the gradual restarting of business operations.
"There is a need for cash conservation whether it is revenue or capital so there would be a focus on doing what is must to be done. It is not as if we don't have cash. If capex is required, it will be done but if it can be deferred it will be deferred. So certainly, the capex is expected to come down this year. For the first three months, we won’t be able to do anything. We are concerned about getting our supply chain running and capex is not the focus. But directionally discretionary capex will be cut down," said Soumen Ray, Chief Financial Officer, Bajaj Auto.
The maker of Pulsar and Avenger, however, clarified that there will be no cutback on any of the ongoing product development projects. In addition to its own product pipeline, Bajaj Auto is working with KTM and Triumph for the next generation motorcycles that will be powered by internal combustion engines and electric batteries.
When asked if the company has suffered delays in projects because of the lockdown, Sharma said the interruption will likely last till June because of which there can be delays.
"It is very difficult to estimate. We have lost two precious months and one cannot do R&D work sitting at home. It terms of product development these two months and may be bit of June will be an interruption," Sharma said.
Bajaj, however, has put the research and development (R&D) work on the fast track with the opening of business operations as allowed by the local administration in Pune.
"I think the need of the hour is such as that we will probably have to work double the time to respond to this crisis and try to get the projects back on track as fast as possible. Even today, when we were allowed 33 percent attendance, we have maximised the R&D attendance and minimised the commercial side," Sharma added.
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