Hit hard by demonetization and by BS-III regulation implementation, Hero MotorCorp on Wednesday reported a 14% year-on-year decline in its January-March quarter net profit at Rs 717.75 crore.
“In the last two days of the month (March), the company took some tactical steps to assist it dealers and incentivise the customers with an objective to liquidate the remaining BS-III stocks, resulting in one-time impact on the margins of the fourth quarter,” the company said in a statement. The company offered benefits up to Rs 12,500, including free insurance and cash discounts, on its range of scooters and motorcycles.
The company also announced an investment of around Rs 2,500 crore in developing new products, digitisation, phase-wise capacity expansion and upgradation of plant machinery up to fiscal 2019.
As per the declared results, with the sales of 16,21,805 units of two-wheelers during the quarter of January-March, 2017
Total income dropped 7.55% year on year to Rs 7,606.31 crore.
The earnings before interest, depreciation, tax and amortisation (Ebidta) margins at 12.79% as against 14.66% a year ago.
According to a recent Icra report, the estimated costs associated with the heavy discounting during the March 30-31 period would have a 150-165 bps impact on the operating profitability of two-wheeler OEMs during the fourth quarter of fiscal 2017.
“The total loss for the two-wheeler industry on account of the discounts offered during March 30-31, 2017 is estimated to be around Rs 600 crore, sizeable share of which would be borne by the OEMs.” Subrata Ray, senior group vice-president, Icra had said.
As per data submitted by the OEMs to Society of Indian Automobile Manufacturers (SIAM), the unsold BS III two-wheeler inventory levels as on March 20, 2017, was around 6.71 lakh, which is close to half the monthly sales of the overall two-wheeler industry.
India is the largest market for two-wheelers with over 17.7 million units being sold last year and the industry expected to grow 9-11% for next coming few years, as good monsoon, rising economy, especially in the rural sector, easy availability of loan is pushing its sale.
...& ANALYSIS
- In the last two days of March, the company had offered benefits up to Rs 12,500 on its BS-III models
- It sold 16,21,805 unitsduring quarter and its total income dropped 7.55% yoy to Rs 7,606.31 crore
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As per the declared results, with the sales of 16,21,805 units of two-wheelers during the quarter of January-March, 2017
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