A strong operating leverage that came on back of robust volumes, however, could not save the day for the company’s operating margin, which remained flat at 17 per cent over the year-ago quarter. A higher contribution of cheaper models weighed on margins, said S Ravikumar, president business development and assurance, Bajaj Auto. “Typically, low-end products have a larger weightage in the overall volumes because of the marriage season; this, too, impacted margins. Going forward, it will ease out,” he said.
In a bid to recoup market share the firm ceded over the past couple of years, the motorcycle maker cut the price of the CT100, its entry-level model, by almost Rs 2,000 in March. As a result, sales of the CT100, which accounts for around 35 per cent of monthly volumes, jumped 76 per cent in the June quarter over the year-ago period.
But the volume gains came at a price. “On a blended level, the company’s realisation has taken a hit of around Rs 770 over 1.2 million vehicles. It has been largely contributed by entry-level CT100, Platina and Boxer,” said Ravikumar.
“The disappointment on the margins front is quite high — against an expectation of 19 per cent, the company has delivered 17 per cent. Last quarter was an exception because of the goods and services tax. If you exclude that, the margins are the lowest in three years,” said Bharat Gianani, analyst at Sharekhan.
Meanwhile, a lower-than-expected exports realisation despite a depreciating rupee also disappointed analysts. The realisation has been muted quarter-on-quarter, Gianani said. “The gains are not commensurate with the rupee’s sharp depreciation against the dollar,” he said. In the June quarter, the rupee depreciated against the dollar by 5 per cent. Gianani expects firm’s margins to remain under pressure as it has chosen to chase volume and market share. Ravikumar said volumes in the domestic and export market could be strong in the months ahead. “We will also keep the heat on in the domestic motorcycle,” he said.