Weak domestic demand in April and May, coupled with the de-stocking by dealers in June ahead of the transition to GST, saw Bajaj Auto post a 10 per cent fall in overall volumes for the quarter ended June 2017.

However, the fall in revenues (₹5,740 crore ) was contained to 3.7 per cent as average realisations improved from ₹59,955 per vehicle a year ago to ₹64,608 now. A richer product mix with bikes such as KTM 250, Dominar, etc, helped shore up the top-line a bit.

At the operating level, the company bore the brunt of rise in input costs. Raw material cost as a percentage of sales inched up from 62.8 per cent in the June 2016 quarter to 65.4 per cent now. Weak volumes coupled with higher input prices took a toll on the operating margins, which contracted from 19.4 per cent a year ago to 16.1 per cent now. Other income grew 71 per cent to ₹457 crore, giving some respite to the bottom-line. Thus, the fall in profits (₹924 crore) was contained at 5.5 per cent. The fall could have been even lower if not for the ₹32-crore hit (exceptional item) the firm took on account of compensating dealers for the loss on pre-GST stocks.

Outlook

With domestic off takes nothing to write home about, exports have helped the company in the first quarter. But this pick-up remains at best tentative. After showing good growth in February, March and April, export volumes slipped into the red in May and June. The only solace here is that the company is diversifying from its core export markets of Sri Lanka and Nigeria, where it was facing strong headwinds until recently, into other countries. On the domestic front, with the upsets caused by demonetisation, the BS IV transition and the GST now behind them, the company is betting on bettering rural and urban consumption to favour them. The opening up of three-wheeler permits in Maharashtra, Delhi and Bengaluru will also favour volume growth on the commercial vehicle side in the near term.

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