The company's net profit in the first half of the current financial year has risen 54 per cent to Rs 81.30 crore from Rs 52.70 crore in the corresponding half of 1998-99 while turnover has appreciated 46 per cent to Rs 1039.30 crore from Rs 710.29 crore. The financial results were approved by the company's board of directors on Tuesday.

Hero Honda sold 3,38,326 motorcycles in the first half of the current year compared to 2,46,536 motorcycles in the first half of 1998-99. The company's market share has increased to 43 per cent from 37 per cent in the first half.

Gross profit after interest but before depreciation and tax in the second quarter of the current year has risen to Rs 70.14 crore from Rs 46.54 crore in the corresponding quarter of previous year. Profit before tax has gone up to Rs 62.44 crore from Rs 41.02 crore.

Speaking after the board meeting, chairman and managing director Brijmohal Lall said, "The Indian market is fast responding to international trends and motorcycles have taken the lead over scooters and mopeds. Our focus on this segment, our technological edge and synergy among stakeholders contribute to these results."

The company hopes to cross the Rs 2000-crore turnover mark during the current financial year. The company sold 61,007 vehicles in September and hopes to increase it market share in future.

Hero Honda has a turnover of Rs 1552.90 crore with a profit after tax of Rs 121.37 crore in the year ended March 1999.

Hero Honda is investing Rs 100 crore in capacity expansion and technological upgradation in the current year. The investment is being funded through internal accruals.

Insight

Sustained volume growth fuels growth

A sustained volume growth of 37 per cent has once again fuelled the first half growth story at Hero Honda Motors. Volume sales of 3.38 lakh units at Hero Honda were aided by the capacity expansion of the Gurgaon facility.

Another factor that continues to help Hero Honda has been the swing in two-wheeler demand from scooters to motorcycles. Additionally, the company is also enjoying huge success (constrained only by low production) of the recently launched CBZ model, which is currently the only two-wheeler selling for on-money over and above the price tag.

Stringent cost control has also helped buoy the operating margins which improved from 12.49 per cent to 13.35 per cent. Lower interest costs which dipped 11.63 per cent have given a further boost to the bottom line.

Enthused by this performance, the company's scrip at Rs 1,300 has once again started northward ascent. More importantly Hero Honda's concious decision to keep out of the scooter market for the time being and concentrate on the motorcycle segment augurs well for the future.

Percy Dubash