Bajaj Auto expects recovery in H2 FY21: March quarter profit rises marginally

Bajaj's manufacturing facilities in Chakan, Waluj and Pantnagar had opened but were not working at full pace and in the near future, they are expected to continue to witness the impact of this lockdown.

By:Updated: May 21, 2020 9:51 AM

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Bajaj Auto reported a marginal 0.4% year-on-year rise in its net profit during the March quarter of FY20 to Rs 1.310.38 crore. The company’s revenues declined 8.2% during the quarter to Rs 6,815.85 crore. Bajaj Auto had a one-time gain of Rs 342 crore after it reversed a charge which it had made for an education cess and penalty imposed by the Uttarakhand government. The company challenged this in the Supreme Court and won the case. Bajaj also benefited from forex gains. There was also a 44% growth in other income Rs 532 crore during Q4FY20. Bajaj’s operating margin during the quarter grew to 18.4% compared to 16.5% in the corresponding quarter last year. The margin improvement was attributed to better mix between motorcycles, commercial vehicles and exports.

The company witnessed a 17% decline in total two and three wheeler volumes during Q4FY20 to 9.91 lakh units. The company had resumed operations after partial easing on lockdown. The manufacturing facilities in Chakan, Waluj and Pantnagar had opened but were not working at full pace and in the near future they are expected to continue to witness the impact of this lockdown. Rakesh Sharma, ED, Bajaj Auto, said there was a lockdown virtually in every market they sold in across the globe and it was difficult to predict how things would move and the first two quarters of FY21 would go in disentanglement and dealing with bottlenecks and new protocol. However, the second half of FY21 would see a smart recovery.

Dispatches would begin in June 2020 and the three plants would be at 50% to 70% productivity, but demand is expected to be in the 25% to 30% at present and go to about 50% next month.  According to Sharma, the two-wheelers were an essential product and while the demand was there, it was availability of retail finance and disentanglement of the supply chain that would play an important role in the recovery process. Their sales would depend on how soon the financing companies are able to get a grip of credit risk assessment in the new environment and come up with innovative products, Sharma said.

At the retail level, in the domestic market they were running at 25% of the normal rate, he said. The had opened up around 50% of the dealerships that were located in the green zones and expected to see some suppressed demand of April and May come in, Sharma said. He also expected a shift from public transport to motorcycles as a need for social distancing will be needed in the coming days. About support to dealerships to deal with the situation, Sharma said they would not be feudalistic about it. Bajaj Auto will not be subsidising the dealerships but would spend money in building new functionality to help dealers manage the future better, with digital capability and a more institutional way of managing exchange, Sharma said.

Consolidated profit for Bajaj Auto during Q4FY20 was Rs 1,354 crore on a revenue of Rs 1,816 crore and total turnover of Rs 7,349 crore. The company ended FY20 with a 1% decline in revenues to Rs 29,919 crore and a flat total turnover of Rs 31,652 crore with PAT at Rs 5,100 crore. Total volumes in FY20 fell by 8% to 46.15 lakh units. Bajaj’s domestic market share during FY20 was at 18.5% compared to 18.7% in FY19. The company exports in FY20 was at 2.17 million units and this was worth $ 1.642 billion.

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