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Corporate tax rate cuts: FM Sitharaman's decision has reimbursed all discounts we gave to consumers, says Rajiv Bajaj

Updated : September 23, 2019 09:30 PM IST

Following months of flagging growth and tepid market performance, finance minister Nirmala Sitharaman announced a raft of measures on Friday that ultimately saw the BSE Sensex and Nifty achieve record highs by the time the markets closed.

Rajiv Bajaj, managing director of Bajaj Auto, in an interview with CNBC-TV18 shared his views on the government's latest attempt to stimulate the economy.

“This has been extremely positive. As much as everyone else has also said, this is outstanding for the long-term and that was always my contention that whatever is done should be done for long-term competitiveness and to make strong companies even stronger. So with this kind of a windfall, the ability of a company like Bajaj to invest in technology for the future, electric vehicles (EVs), in particularm is bolstered. You will see in a matter of weeks the impact of that,” he said.

“I have no argument with the math that RC Bhargava [chairman of Maruti Suzuki] or Pawan Goenka [managing director of Mahindra and Mahindra (M&M)] has presented. That is absolutely perfect but there is another way to look at it also.

"Bajaj has put out very aggressive festive offer and in one stroke, the FM has reimbursed to us all the money that we are putting out both in terms of a consumer offer and also the media spend that is behind it. So if you look at it that way, it is not insignificant. Let me finish by saying that we had already planned to do this and the tax rate will not take care of anything that EBITDA dilutive.

"So as a prudent company, we have budgeted ourselves keeping an eye on our EBITDA but ultimately, your ability to pay out dividends or your ability to invest in the future depends on what you make after tax. So if the FM has taken care of your entire marketing budget for the quarter, I don’t think that is small,” he added.

“This translates into Rs 460-470 crore for the year. so simplistically if you divide it between four quarters, that is about Rs 115-120 crore and I would only say that this kind of a gain in a quarter is not very different from what we are going to have to spend or would like to spend in this festive both invest in the consumer offer as also in the media spend behind that.

“September is better than August, which was bit of a surprise because I didn’t see any obvious reason for the uptick. It is marginal so far but keep in mind also that we are now still in the so-called inauspicious Pitrupaksh period. So from this point of view, it is promising. I believe RC Bhargava said something similar.

“In terms of the festive season itself — all of which is captured in the month of October — we are at a monthly rate of about 2 lakh or just under 2 lakh motorcycles a month in the domestic market. In the interest of stirring growth and more importantly and specifically in the interest of liquidating the dealer stock and being prepared for BS-VI, our aim was to try and double that to about 400,000 vehicles. There is good reason to believe that this will happen now because general sentiment is up,” he said.
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