Bajaj Auto Q2 Profit Rises Just 6% on Forex Losses

But the company posts highest-ever quarterly revenue of . 5,342 crore

OUR BUREAU MUMBAI

    Bajaj Auto, India’s second-biggest two-wheeler maker, posted a lower-than-expected 6% rise in second quarter profit as mark-to-market foreign exchange losses robbed the sheen off an otherwise robust sales performance.
The maker of popular bike models, such as Pulsar and Discover, reported a net profit of . 726 crore in the July-September quarter, compared with . 682 crore a year earlier. But the firm’s revenue rose 21% to its highest-ever at . 5,342 crore on strong sales volume in India and overseas. Analysts said that the company had reported a “good set of earnings”. “The margins are slightly better than our expectations and realisations too have improved,” said Nikhil Deshpande, research analyst at PINC Research. The brokerage sees strong growth for the rest of the fiscal year with high sales volume and profitability.
Bajaj incurred a mark-tomarket loss of . 95 crore during the quarter, which it termed as a ‘notional loss’ and attributed it to forward contracts entered into to protect future export realisations.
“This is a purely notional loss and would get reversed on maturity of the underlying contracts,” said chief financial officer Kevin D’Sa.
But shares of the company fell as much as 5% on the results, before paring losses to end 1.3% down at . 1,616.
Earlier this week, Bajaj Auto’s rival and the country’s largest two-wheeler maker Hero MotoCorp posted a betterthan-estimated 19% increase in second quarter profit.
Going ahead, high interest rates, which are weighing on car sales, are expected to benefit two-wheeler makers as some buyers could opt for cheaper options. Industry body Society of Indian Automobile Manufacturers (SIAM) estimates the twowheeler market to grow 12-14% this fiscal year.
Bajaj’s earnings before interest, tax, depreciation and amortization (EBITDA) margin rose to 20.1% from 19.1%, driven by higher realisation from exports and lower sales promotion spends.
“The results are pretty good in the context of higher raw material prices, the company has managed to maintain the margins at over 20% and the margin picture is likely to be better in the second half,” said D’Sa.
Margins would get a boost with 1% additional incentive extended by the government as part of its new trade policy, he said. Exports, which constitute 36% of its overall sales, surged 38% year-onyear to 4.24 lakh units in the second quarter. In value terms, exports jumped 50% to . 1,733 crore in the quarter.