Bajaj Auto Q4 net dips 13% on discounting, note ban

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Despite the impact on volumes in the company was been able to report 21.2% EBITDA as the product mix had improved and realization during the quarter was up by 450 points. (Reuters)

Heavy discounting to get rid of BS III motorcycle stocks and the impact of demonetisation has hit Bajaj Auto’s domestic volumes hard while exports suffered due to turmoil in the international markets leading to a drop in both stand-alone and consolidate profits during Q4FY17. Margins also reduced on account of increase in costs of transition from BSIII to BSIV compliant vehicles and rise in input material cost. Bajaj Auto reported a 13.44 % fall in consolidated net profits to Rs 862.25 crore while total revenue from operations fell by 8.70% to Rs 5,212.83 crore during Q4FY17.

Bajaj Auto’s stand-alone profit was down 15.5% Y-o-Y to Rs 801.82 crore. Total income during the quarter was at Rs 5,506.46 crore, which was lower by 7.7% compared to same quarter in PY. Operating EBITDA reduced to 21.2% in March ’17 quarter compared to 23.3% in the same quarter in PY. Total sales during Q4FY17 dipped 9.72% to 7,87,627 units S Ravi Kumar, president, business development, Bajaj Auto, said that the during first seven months of FY17 motorcycle sales for Bajaj Auto grew at 15 % but the next five months post demonetization witnessed a degrowth of around 25%. Despite the impact on volumes in the company was been able to report 21.2% EBITDA as the product mix had improved and realization during the quarter was up by 450 points.

Unlike competition, Bajaj Auto did not offer heavy discounts, barring a limited offer on the last two days of the year, so they do not see any impact because of this on their profitability, Kumar said. In contrast discounting by competition was done at a very high cost of Rs 200 crore to Rs 250 crore, Ravi Kumar pointed out. But Bajaj Auto numbers took a hit as a result of discounting by competition, he said. This impact would continue in April and May ’17, he said. Bajaj Auto’s market share was at 18% but this is not an accurate figure as market was skewed due to heavy discounting, Ravi Kumar said.

Kumar was confident of getting back market share when normalcy returned. On the export front after an up and down year, the company was cautiously optimistic about prospects in FY18. Outlook in Latin America, Bangladesh, Philippines was getting better and was seeing an increase in sales of Pulsars and Avengers. This has changed the export mix and higher realization, he said. In the South East, Malaysia has gone on stream while Indonesian foray is with KTM while sales was happening in Polland and Hungary. Africa was getting better and Sri Lankan market was at a lower level because of duty and financing issues.