The fledgling export plans of Hero MotoCorp have received a setback with currency depreciation in Argentina and Mexico...
The fledgling export plans of Hero MotoCorp have received a setback with currency depreciation in Argentina and Mexico, where it planned to export its two- wheelers during the current fiscal. The company has postponed its plans to export to these two countries for the time being.
Export business is a very nascent business for Hero MotoCorp as it started only after its split with its Japanese partner Honda. During FY15, exports comprised only 3% of its total production. During the current fiscal, in the first nine months, it stood at 3.16% of its total production.
Hero, however will start exporting its products to Nigeria within this fiscal, which happens to be the largest two-wheeler market in Africa.
Addressing investors and analysts after announcing the company’s December quarter earnings, Hero MotoCorp’s chief financial officer Ravi Sud said, “We have already got the distributor in Nigeria and we will start (exports) before the quarter is over. As far as Argentina is concerned, we will pursue. In Mexico, we will identify the distributor before the quarter gets over and expect to start the operation in beginning of Q1 of next year.” While the Argentine Peso has depreciated over 41% since April 1, 2015, the Mexican Peso has depreciated close to 17% against the US Dollar. In the post-earnings call after the July-September quarter, the company management had said that it targets 250,000 units of total exports in the current financial year and entry in to three markets—Nigeria, Argentina and Mexico.
The three countries have a combined market of close to 2 million units. In the April-January period, Hero exported 1.73 lakh units of two-wheelers. Close to 60% of the total exports of Hero MotoCorp come from the neighbouring countries of Sri Lanka, Bangladesh and Nepal, the management had said in response to analyst queries earlier.
However, to offset the delay of its foray in to Argentina and Mexico, the company is now fast-tracking its entry in three other countries in West Africa, an industry source said. A Hero spokesperson declined to share any details, but said “We continue to expand our global presence across Asia, Africa and Central and South America. We will talk about specific markets as and when we finalize new markets.” In the overall two-wheeler exports, Bajaj Auto is the market leader.
Despite the stress on domestic sales, with volume growth of a meagre 2.5%, Hero MotoCorp’s net profit went up 36.51% to Rs 795.81 crore in the October-December period of 2015-16. This was due to higher realisation per unit, up 3%, due to lower input cost.