Bajaj Auto posted its Q2FY20 earnings and it seems to be a top down beat for the company. Net profit is boosted by lower tax expenses while margins have also expanded this time around.
Speaking to CNBC-TV18, Rakesh Sharma, ED, Bajaj Auto, spoke about the results and gave his outlook for the future.
“Q2 was difficult to navigate, particularly July and August. But we started to see some signs of revival in September itself and with a lot of dust settling down on discussion around tax cuts, and triggers of the festive season, things have improved, though I am not saying that we are back to the growth period of last year first half. But certainly things are much better than what they were in July and August,” said Sharma.
Sharma said there is a significant change in the company's portfolio. "At entry level we have upgraded our portfolio. For example, at the entry level 100cc segment where 95 percent of our sales came from 100cc and 5 percent from 110cc. today that ratio is 55 percent of our change at the entry level segment coming from better price, better proposition variant of 110cc. So it’s a 5 percent to a 55 percent change,” he noted.
“The second thing which has happened is that recognising the fact that 125cc segment is now enjoying some tailwind because higher cc segments are more expensive because of anti-lock braking system which has become mandatory,” he added.
Bajaj Auto's discounts would be in the range of Rs 1,500 to Rs 5,000 depending on which model one chooses and would be given in the form of direct discounts, free services and warranties.
Since March there has been a gentle destocking and the company is currently at 60 plus days of inventory.
“However, this is not out of the norm because if I compare inventory on October 1 last year to this year, it is almost quite similar and in October we are looking at a much higher level of retail compared to last year, the calendar month because last year Diwali was 10 days later. But our opening stock is exactly the same opening stock as we had last year and this is the month where we correct stock; all the dealerships etc., we are already halfway into the season and we can see that correction occurring. So after first week of November when all this is done and dusted, we should be getting back to normal level inventory,” Sharma pointed out.