Bajaj Auto net profit dips 19% to Rs 1,138 crore in Q2

Bajaj Auto’s net profit declined 19% year-on-year to Rs 1,138 crore in the September quarter, with profitability hit by lower treasury income and reversal of export incentives.

A tight control on costs helped the company improve EBITDA margins, which rose to 17.7% compared to 16.6% in the comparable quarter last year. Revenues were down 8% year-on-year to Rs 7,156 crore for the September quarter.

The company said it was witnessing a shift towards the premium segment, with record sales of the Pulsar, KTM and Husqvarna bikes. The margin performance improved on expansion of the premium bike portfolio, the company said. Demand has returned to 90% of what it was in the same period last year. However, recovery in the passenger three-wheeler segment has been slow.

The government is expected to launch a Remission of Duties or Taxes on Export Products Scheme from January 2021 and the company is awaiting some clarity, chief financial officer Soumen Ray said. If these incentives are not restored, exporters will have to take a hit on their margin or pass on the cost in the export market, Ray said.

Last year, Bajaj Auto received around Rs 300 crore through this export incentive scheme.

Another reason for lower profit after tax (PAT) was lower treasury income, mainly due to renewal of investments at a lower interest rate and lower level of investment during the September quarter because of dividend payout, Ray said. The company also received a one-time benefit of `182 crore on reduction in corporate taxes in the second quarter of FY20.

If all this were taken into consideration, Bajaj Auto’s net profits would have been nearly flat, as the company’s operations have been robust, Ray said. “Despite an 8% drop in the top-line, we were able to hold on to margins and increase EBITDA to 17.7%,” he said. The company’s market share is currently at 18.2%.

Rakesh Sharma, ED, Bajaj Auto, said financing has become easier at the top end but cautious for entry level vehicles, which has aided the shift to premium bikes. “We are pleasantly surprised that the Pulsar 125 has outperformed, despite being the most expensive 125 cc in the market,” Sharma said. The growth in Pulsar was a pan-India phenomena, he said.

The company registered sales of 10,53,337 units in the September quarter, with the highest ever Pulsar, KTM and Husqvarna sales. It sold 3.48 lakh Pulsars and 20,200 units of KTM and Husqvarna.

Sharma said the first few days of the festive season indicated positive signs and they expect to do better in October and November in the domestic market. In the export market too, the company expects to sell 2,00,000 units in October and continue it in November, indicating recovery in the global markets barring some markets in ASEAN countries and Sri Lanka, where imports have been banned. A revival of the three-wheeler business would depend largely on normalcy returning and government policy, Sharma said.