Hero MotoCorp may be the market leader in the entry-level bikes segment with about 69 per cent market share. But it is the middle-of-the-road segment bikes and scooters that came to its rescue in the June quarter.
Sales volume for the entry segment bikes (Dawn, Deluxe, Splendor, Passion) dropped by almost 10 per cent in the current quarter compared with the same quarter last year.
But the Super Splendor, Glamour and Ignitor as well as scooters such as the Pleasure and Maestro stood the company in good stead with robust volume growth of 18 per cent and 49 per cent respectively.
The superior product mix , coupled with a price increase in the range of Rs 500-Rs 1,500 in May, moved up average realisations for the company. It stood at Rs 39,300 in the quarter ended June vis-à-vis Rs 37,800 last year. Hence, despite a 5 per cent drop in overall sales volume, the fall in net sales was restricted to about 1 per cent. This was further aided by a drop in raw material expenses, which helped the company hold on to the same operating margins of 14.8 per cent as in the June 2012 quarter.
Despite lower depreciation and amortisation charges and higher other income, net profit declined by 11 per cent to Rs 548 crore as tax expenses shot up.
Outlook
In the months to come, good monsoons could boost rural demand for the entry-level bikes, giving volumes a leg up.
The company is also coming out with about 10 refreshments/re-launches/model variants beginning with the festival season. Two new bikes from its own stable are expected to be out in 2014.
Any traction in the export markets will also benefit the company which has recently set foot in select Africa and Latin American countries.