Hero MotoCorp’s lacklustre volume show since the demonetisation continued into the quarter ended March 2017, with the company recording a drop in volumes in both January and February (over the same period in 2016).

The only bright spot was the month of March in which volumes showed a marginal growth, thanks to the fire sale of BS III-compliant two-wheelers in the last two days of the month.

Hence, overall volumes for the quarter dropped by 5.7 per cent. Average realisations came down by 2 per cent to ₹46,170 per vehicle, due to huge discounts offered to liquidate the BS-III inventory.

The company has taken a one-time hit of ₹193 crore on the topline due to this discount.

These factors resulted in the revenue for operations dropping by 7.7 per cent to ₹7,488 crore for the three months ended March 2017, over the same period last year. The company did not find much solace at the operating level, although employee costs and other expenses came down by 6-10 per cent compared with the March 2016 quarter. This is because of the rise in input costs.

Raw material cost as a percentage of revenues inched up by a percentage point to 61 per cent.

The pressure from the top line as well as at the operating level showed in the operating margins.

The margin came in at 14.3 per cent, compared with 16.1 per cent a year ago.

Net profit fell by 13.8 per cent to ₹718 crore, notwithstanding the 38 per cent fall in tax outgo.

With several measures announced in the budget to boost rural consumption and expectations of a normal monsoon, much for the company hinges on how rural demand picks up in the months to come.

Success of recent launches such as the new Glamour, new Maestro Edge, Duet and Pleasure and that of half-a-dozen new launches slated for this fiscal, also remains key.

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