Slowdown bites: HMSI reports 10% year-on-year decline in profit

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Updated: August 3, 2019 7:11:02 AM

Honda Motorcycle and Scooter India (HMSI) reported a 10% year-on-year decline in profits to Rs 1,779 crore during 2018-19 mainly due to slowdown in scooters sales, according to its filing with the ministry of corporate affairs.

Domestic two-wheeler demand has contracted since October 2018 due to rise in vehicle costs, insurance premium and less availability of credit from NBFCs.

Honda Motorcycle and Scooter India (HMSI) reported a 10% year-on-year decline in profits to Rs 1,779 crore during 2018-19 mainly due to slowdown in scooters sales, according to its filing with the ministry of corporate affairs (MCA).

Operating revenues for the Indian subsidiary of Honda Motor Company, Japan, fell 2% y-o-y to Rs 25,920 crore as its two-wheeler sales skid 4.5% y-o-y to 5.52 million units in FY19. Both PAT and operating revenue contracted for HMSI for the first time in at least five years.

Domestic two-wheeler demand has contracted since October 2018 due to rise in vehicle costs, insurance premium and less availability of credit from NBFCs.

The dip in profits was in line with Hero MotoCorp, the largest domestic two-wheeler manufacturer, which reported an 8.5% y-o-y dip in net profits to Rs 3,385 crore in FY19 while its operating revenues expanded 2.5% y-o-y to Rs 33,650 crore. Other major manufacturers like Bajaj Auto and TVS Motor, which also produce three-wheelers, witnessed 15% y-o-y and 1.2% y-o-y rise in net profits, respectively, in 2018-19.

Scooters comprise two-third of HMSI’s overall domestic two-wheeler sales. While HMSI sold 3.7% less scooters in FY19 compared to FY18, motorcycle sales slipped 5.8% from FY18 to FY19.

“A sustained slowdown in domestic market post festival contributed by various reasons like significant insurance premium hike saw Honda pro-actively moderate its production and dispatch,” the company said in the MCA filing while explaining its performance for 2018-19.

Analysts at ICICI Securities pointed out that HMSI continues to struggle in stirring demand in its key 110cc scooter segment

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