MUMBAI (NewsRise) - Bajaj Auto, India's second-largest two-wheeler maker, posted a better-than-expected 6.7% increase in second-quarter profit, aided by a surge in demand ahead of the festive season.
Net income in the three months to Sept. 30 was 11.22 billion rupees ($168 million), compared with 10.52 billion rupees a year earlier, the company said in a statement on Friday. Analysts had expected a profit of 10.32 billion rupees. Net revenue remained little changed at 64.32 billion rupees.
Total two- and three-wheeler sales declined 2% to 1.03 million units, weighed by a 27% drop in exports to 378,017 units.
Bajaj has been struggling to expand its international business over the past several months amid currency volatility in key markets such as Nigeria and Egypt. Its business in Nigeria shrank after an economic turmoil led to a devaluation of its currency and unavailability of dollars.
The company had earlier forecast exports to touch 1.60 million units by the end of this fiscal year. In the first six months of this year, exports fell 25% to 748,666 units.
S. Ravikumar, president for business development and assurance, said he expects exports to grow in the second half, even as he conceded that achieving the target "looks tough."
"There are lots of things which are outside our control," Ravikumar told television channel CNBC TV18. Still, exports of three-wheelers are clawing back some of the losses in traditional markets starting this month, which may help expand overall export volumes, he said.
Bajaj's strong performance comes in the backdrop of a revival in domestic market as an above-normal monsoon, along with the government move to increase salaries and pensions for millions of its employees and pensioners boosted demand. Further, an increase in inventory at dealerships before the Hindu festivals of Dussehra and Diwali this month -when Indians consider it auspicious to purchase vehicles - has also helped drive domestic growth.
On Thursday, Hero MotoCorp, India's largest two-wheeler maker, said its quarterly sales was the best-ever driven by a revival in domestic demand. Hero said profit jumped 28% to 10.04 billion rupees, while revenue grew 15%.
However, Hero and Bajaj face stiff competition from Honda Motor and Yamaha that have been present in India for decades and are now expanding their two-wheeler business in the world's second-most populous country. Hero is a former partner of Honda.
A rise in commodity prices, including steel, is also likely to pose challenges. Bajaj's operating margins expanded to 22.3% in July-September from 21.2% in the previous quarter.
Ravikumar said the company will continue to maintain its operating margins above 20% levels in spite of the commodity price increase.
Bajaj Auto shares closed 3.35% higher at 2,856.90 rupees in Mumbai trading on Friday, compared with a 0.09% gain in the benchmark S&P BSE Sensex index.