The company's net sales marginally declined to Rs 800.3 crore (including excise duty and income from operations) from Rs 810.9 crore. Gross profit (after interest but before depreciation and taxation) for the first quarter was lower at Rs 193.6 crore compared with Rs 202.84 crore in the same period last year.

First quarter production of two and three wheelers has increased to 3,32,974 compared with 316,664 for the corresponding period in the previous year, the company said in a release.

Expenditure was higher at Rs 681.9 crore as against Rs 677.2 crore while interest was down to Rs 0.51 crore from Rs 1.05 crore.

Depreciation was Rs 34.5 crore compared with Rs 31.4crore and Rs 48 crore has been provided for tax against Rs 51 crore in the last year.

Company chairman Rahul Bajaj told sharerhloders at the annual general meeting on Saturday that trial production of the 100 cc 4-stroke automatic Saffire started on July 17 at the company's new Plant at Chakan.

Commercial production and launch of Saffire is scheduled for October 1999. this product would contribute a total of 15,000 units by March 2000, the release said.

The company is introducing six new motor cycles next year--three each in the 100 cc, 125cc, and 125cc-250 cc range. The company has for the first time entrusted its collaborrator Kawasaki with the responsibility of quality assurance in order to match international standards, the release said. In view of this, Bajaj Auto is expanding its motorcycle capacity at Aurangabad to 0.5 million units. By December 1998, the company expects all its products to comply with the April 2000 exhaust emissions, said the release. The total sales and other income during theperiod was at Rs 876.0 crore against Rs 881.1 crore.

Decline in earnings temporary

Despite a 12 per cent dip in sales volumes, Bajaj Auto's sales turnover has showed only a marginal dip, indicating that higher realisations from new product launches have helped the company's topline. Operating margins fell from 16.4 per cent to 14.8, probably due to a new wage agreement signed by the company. Along with slightly higher fixed cost, the net profit of the company was lower. But scooter sales, which form a major portion of total sales turnover of the company, are still very price sensitive. Hence, inspite of the fact that company has lost market share to new entrants, being amongst the lowest cost producers in the world would ensure that the present dip in earnings is temporary. Especially since the company seems to have finally caught on to the fact that there has been a shift in consumer preference to motorcycles.

--Manish Saxena