Bajaj Auto net up 11%, semiconductor supplies improving

As part of the AI initiative, Bajaj said it would be launching a new product in FY24 in the under-125 cc segment in India, where the company continued to lag behind the leader.

Bajaj Auto net up 11%, semiconductor supplies improving
The company would also be participating across all levels that Austrian partner company, Pierer Bajaj AG operated in, including KTM, Husqvarna, GasGas and e-bikes. (IE)

Bajaj Auto on Tuesday reported a profit of Rs 1,173 crore for the three months ended June, an increase of 11% year-on-year (y-o-y) while the revenue rose 8% y-o-y to Rs 8,005 crore. The volumes dipped 7% y-o-y during the quarter. Price increases, better forex realisations and a favourable product mix helped the company post good numbers; the operating profit margin expanded 100 bps to 16.6% pushing up the Ebitda by 15% to Rs 1,328 crore.

Rajiv Bajaj, MD and CEO, Bajaj Auto said the business has faced turbulent times in the last 18 months with the supply chain challenges, followed by a rise in commodity prices, inflation, geo-political challenges with markets running out of money and distributors short of funds. The company said the shortage of semi-conductors eased in the latter part as the new semi-conductor supply sources were developed. However, the company expects the shortages to continue till the end of 2023.

Speaking to shareholders at the company’s AGM, Bajaj quoted marketing guru, Jack Trout, saying, “‘You cannot sell. You have to supply a reason to buy even in difficult times’.”

Bajaj’s formula is AI – ‘Affordable Inspiration’, and it about providing the customer with an irresistible offer to open their wallets, Bajaj said.

As part of the AI initiative, Bajaj said it would be launching a new product in FY24 in the under-125 cc segment in India, where the company continued to lag behind the leader. It was looking at something dramatically different to carve out a sizeable share in this segment. Bajaj would also be coming up with at least one new Chetak every year and these products would not just be for the Indian market but for global markets. During Q1FY23, 6,200 units of the Chetak were sold and the company has received 16,000 bookings for the Chetak.

The company would also be participating across all levels that Austrian partner company, Pierer Bajaj AG operated in, including KTM, Husqvarna, GasGas and e-bikes. Over the next 20 months, the entire portfolio of KTM and Husqvarna would be progressively renewed, Bajaj said. They could also introduce GasGas motorcycles and e-bikes. The Triumph motorcycles they were working on had progressed and would be introduced in 2023, for which a new factory was coming up at Chakan.

In the CV segment, Bajaj urged the government to consider CNG at par with electric vehicles and promote it more aggressively and enthusiastically. Bajaj would be bringing in an electric three-wheeler to the market in October this year. Bajaj said they had taken time but this was because they did not want to pick up EV aggregates, assemble and distribute them as it would not make for a distinct, differentiated profitable business in the future. So it was important for them to go into every detail of the electric powertrain they would install in their EV portfolio and be in full control of its performance and cost structure. The company had developed the entire EV system for the 3-W in-house.

Speaking on the outlook for FY23, Rakesh Sharma, executive director, Bajaj Auto said the effort to broaden their vendor network for semiconductors would lead to an improvement in supply in July and August. They would work on replenishing the depleting stock at dealerships at a rapid pace. The worst is already over with May being the lowest point, Sharma said. The expectation of a normal monsoon and fintech expansion made him cautiously optimistic about a steady gentle improvement in FY23.

On the export front, the dollar movement had impacted even countries with stable currencies and currencies everywhere had taken a tumble. There was also a shortage of dollar availability which could impact Bajaj’s shipments in Q2FY22. Sharma expected a recovery in the second half of FY23. On the positive side, the company got better realisation for exports at Rs 77.4 to the dollar during Q1FY23 compared to Rs 74.9 in Q1FY22. Bajaj’s annual exports were at $2 billion plus and every rupee movement put in Rs 200 crore into the bottom line on an annualised basis which has a dramatic impact as 55% of the company’s top-line was from exports, Sharma said.

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