BAJAJ AUTO LIMITED (FINANCIAL RESULTS – Q2, 2008-09)

BAL is the second largest 2-wheeler player in India. The new BAL represents themanufacturing business of the erstwhile BAL post the demerger under a Scheme ofArrangement. The strategic business undertaking consisting of wind farm andfinancial services business has been vested with Bajaj Finserv Limited (BFS) whileall the businesses and all properties, assets, investments and liabilities of erstwhileBAL, other than the manufacturing undertaking, the strategic business undertakingand part of the investments transferred to BAL and BFS, remain vested with TheBajaj Holdings & Investment Limited [(BHIL) – erstwhile Bajaj Auto Limited (BAL).The said scheme became effective with effect from 20 February 2008 (the effectivedate), but operative with retrospective effect from 1 April 2007 (the appointed date).Pursuant to the Scheme, shares were allotted to the shareholders of erstwhile BALon 3 April 2008 and the new shares got listed in BSE and NSE on 26 May 2008

PERFORMANCE
In the quarter ended Sept ’08, the company’s total operating income grew by8% to Rs 2548.43 crore owing to its net sales. Its net sales grew by 9% to Rs2450.73 crore driven by low sales volume growth. Out of this, its exportssurged by robust 44% to Rs 744 crore. Its other operating income declined by17% to Rs 97.70 crore.Its total sales volume grew by meager 4% to 640042 units on back of flat 3wheeler sales volume and marginal improvement in 2 wheeler sales volume.Its 2 wheeler sales volume, that contributes close to 88% to total salesvolume, grew by 5% to 565098 units. Out of this, its motorcycle sales volumethat represents 99% of 2 wheeler sales volume, increased by 6% to 561477units. Its 3 wheeler sales volume were flat at 74944 units, up by only 63 units.Its total exports grew by 31% to 206930 units. Its contribution to the total salesvolume has drastically increased by 600 bps to 32%.Its operating profit margin (OPM) declined notably by 270 bps to 13.5% owingto increase in raw material cost and purchase of traded goods. Thus itsoperating profit reduced by 10% to Rs 343.86 crore. Its raw material cost, as% to sales net stock adjusted, rose by 240 bps to 72%. Also its purchase oftraded goods rose by 60 bps to 4%. Its other expenditure rose by 20 bps to9%. Its staff cost declined by 20 bps to 3%
On the non operating front, its other income slipped by 15% to Rs 22.10 crore.Further its interest cost increased by whopping 332% to Rs 5.87 crore.However decline in its depreciation cost by 33% to Rs 33.08 crore partiallyarrested the degrowth in the profit levels. Its PBT before EO reduced by 9% toRs 327.01 crore. It registered EO expense of Rs 61.10 crore representingVRS compensation for the workers at Akrudi plant in quarter ended Sept ’08against nil in quarter ended Sept ’07. In the current fiscal, the company hasdecided to recognize expenditure such as VRS over an appropriate period incompliance with provisions of AS – 15 Employee benefits in line with specialtransition provision option (which allows such expenses to be deferred forrecognition over payback period but not exceeding 1st Apr 10). Thus it pulleddown the PBT after EO notably by 26% to Rs 265.91 crore. Its tax provisionslipped by 32% to Rs 81 crore owing to both low profit base and decline ineffective tax rate by 300 bps to 30%. Its net profit declined by 23% to Rs184.91 crore.