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Mahindra ‘s quarter (Q1) result

Mahindra and Mahindra

Like the two wheeler majors, high interest rate, strengthening of indian rupee and high input cost has bitten scorpio maker Mahindra and Mahindra(M&M). Mahindra posted a 6.36 per cent decline in net profit of Rs 191.17 crore for the first quarter against Rs 204.17 crore last year. Mahindra’s operating margin, a key gauge of profitability, fell to 10.6 percent from 11.3 percent a year earlier. Mahindra’s sales rose to Rs2613 crore rupees from Rs2236 crores.

lags behind the expectation:

*missed to meet the Reuters poll forecast of a net profit of Rs209 crore on sales of Rs2544 crores.

*missed the Rs211 crore median profit estimate in a Bloomberg survey of 15 analysts

good show in automotive segment:

Mahindra reported an increase of 37 per cent in sales growth of vehicles (excluding tractors) during the quarter, selling 46,356 unit.Besides Logan, the all-new Scorpio range and the Bolero also helped the automotive sectors post positive results. The UV segment grew by 23 per cent during the quarter. Automotive segment, which includes utility vehicle (UV), commercial vehicles and passenger cars, contributed Rs 1,504 crore towards sales of the company, a growth of 21 per cent over Rs 1,243 crore last year. But since tractors are more profitable than SUVs when its sales fall Mahindra’s margins are affected.

dip in tractor sales:

Sales of tractors fell by 4 per cent to 75,340 units during the quarter. The farm equipment segment, which includes tractors, tractor engines and other parts, recorded a growth of 9.72 per cent to Rs 1,038 crore for the quarter compared with Rs 946 crore reported during the same period last year. M&M is the market leader in the tractor segment with over 43 per cent market share. High interest rate has slowdown the demand for Mahindra’s Arjun and Shaan tractors(all of which are bought on credit). Mahindra’s tractor sales fell to 27,291 in the past quarter, from 27,358 a year earlier.Other income also fell to Rs31.6 crore in the quarter from RS45.4 crores a year earlier as it received less in dividends from its units,

Word from M&M on dip and its guidance:

Mahindra’s spending on raw materials, its biggest expense, rose 19 percent in the last quarter to Rs1798 crores, it said in a statement. Labor costs rose 16 percent.

The strengthening rupee and the consequent lower export realisation affected the profit growth during the quarter ..however, the outlook for the rest of the year remains positive,” Mahindra said in a statement.Mahindra also said that it expects tractor sales to grow as much as 8 percent in the year that started April.

M&M stock movement:

Mahindra’s stock has fallen 16 percent this year, compared with the 11 percent gain in the benchmark Sensitive Index.M&M shares fell 7.3 percent during the April-June quarter, trailing a 2.7 percent loss for the Auto index. Mahindra share trade at 19.5 times forecast earnings, compared to 13.65 times for top vehicle maker Tata Motors Ltd. Shares of Mahindra fell 3 percent to 752.55 rupees on the Bombay Stock Exchange on 30th july after falling as much as 4.8 percent in earlier trade.

Mahindra’s investment plans and strategies:

M&M has proposed to spend Rs 6,400 crore in the next three years. The amount will be spent on expansion of capacities and research and development and product development. Mahindra is developing an automatic transmission for its scorpio to facilitate its foray into US market(where margins are higher). Mahindra is also developing a hydrigen powered scorpio regarding the same. Mahindra aims to quadruple exports and double domestic sales by 2010, with four new platforms and 10 new product launches.On the domestic front Mahindra will roll out 2.2L Scorpio eagle in this year. Mahindra also plans to rival Tata motors by making trucks and buses with a unit of Navistar Inc. Mahindra is investing around 2000crore rupees for a manufacturing plant in chennai in alliance with Renault – Nissan. But Mahindra refused to participate in Renault’s low cost project citing poor margins.Mahindra is reported to be bidding for Ford Motor’s premium Jaguar and Land Rover brands.

Tata winger – Pictorial Review

1) Tata winger front view – india’s first maxi van build on Renault’s traffic available in silver,white and red colour

2) Tata magic side view available in three variants -Standard, Deluxe and Luxury with AC and Non AC also with flat roof and high roof. A 68hp engine for standard and 90hp for deluxe and luxury variant

3) Tata winger boxy rear available in three seating options (12+1), (13+1) and (9+1) bench seats in standard variant, bucket seat in deluxe variant and bucket seat with armrest in luxury variant of winger

4) Tata winger drivers zone – dashboard, storage space and instrument panel. Winger features 6 speed gearbox and has a special lock for reverse.

5) Tata winger luxurious door trim and driver’s seat with AC controls but sadly no provision for TV

6) Tata winger steps for driver’s entry and SUV type seating for passengers

7) Tata winger omni type sliding door for passenger and split doors at rear. Winger’s price ranges from Rs4.90 to 6.65 lakhs

8) Tata winger passenger cabin of standard variant. Winger is for your family tour, pickup and drop of software/BPO employees and school bus

P.S: Our sincere thanks to Popular Mega Motors (chnsales@pmml.in), Ashok Nagar, hennai (9282240462)

Tata magic – Pictorial review

1) Tata’s magic – developed on the platform of India’s first mini truck ‘ace’ available with a 16hp diesel engine complying Bharat II and III norms

2) Tata magic – as magic is developed on ace – front, drivers cabin a nd tyres almost everything is retained.

3) Tata magic is available in three seating options i.e. 4+D(driver), 6+D and 7+D

4) Tata magic side panel – magic is available in red, arctic white and jet black colour

5) Tata magic doors and luggage space in 7 seater

6) Tata magic interiors – magic has a payload 600kg and floor height of 450mm

7) Tata magic side panels from inside – magic has a maximum speed of 64kmph and its maximum gradeability of 22% while its grade restartability is 21%

8) Tata magic 2nd row seat – magic’s passenger seats are bench type while the driver’s and co-passenger’s seats are bucket type

9) Tata magic driver’s cabin : magic is priced Rs2,66,862(BS II) and Rs2,76,862 (BS III which is mandatory for running in metro cities)

P.S: Our sincere thanks to Popular Mega Motors (chnsales@pmml.in), Ashok Nagar, hennai (9282240462)

Hero Honda’s new super splendor, passion plus & pleasure – Pictorial review

1) Hero Honda’s new passion plus

2) Hero Honda’s new passion plus embraces the contemporary black theme but now it looks more like a glamour

3) Hero Honda’s new passion plus is available in six colours – sports red, Black & sports red, Force silver, Vibrant blue, palace maroon and Black & Frost blue

4) Hero Honda’s new passion plus features new graphics, body coloured rear grip, 5 spoke alloy wheels, all black engine and yellow black instrument panel like new karizma

5) Hero Honda’s all new stylish super splendor

6) Hero Honda’s new super splendor with new graphics and new alloy wheels

7) Hero Honda’s new pleasure with new body graphics

8) Hero Honda’s new pleasure available in nine colours laced with shades of grey

Hero Honda’s CD series( CD deluxe and CD dawn) with alloy wheels and exciting body graphics is expected in August 2007.

P.S: Our sincere thanks to Vishnu Motorplaza Pvt Ltd, Ekkattuthangal, Chennai

TVS quarter (Q1) result

A result to worry:

TVS Motor Company Ltd posted a net profit of Rs 7.55 crore for the quarter ended June 30, 2007, against Rs 21.26 crore in the same month last year. Total income for the April-June period was Rs 801.56 crore compared with Rs 939.62 crore in the quarter ended June 30, 2006.

TVS observed pressure on operating margin, which fell 207 basis points to 2.44%. This and the drop in sales have contributed to the fall in earnings of the company. Earnings per share (EPS) reduced to Rs0.32 from Rs0.09.

TVS and its rivals:

TVS sold 320,178 units in the quarter, a 15 percent fall from the same period a year before, and the sharpest decline compared to rivals Hero Honda Motors and Bajaj Auto.Market leader Hero Honda earlier reported a less-than-expected 20 percent fall in net profit to Rs190 crore, while Bajaj reported a worse-than-expected 18 percent fall to 226 crore. Shares of the TVS motors closed at Rs 59.65, down 3.89 per cent on the BSE. They trade at 7.6 times forecast earnings, compared to 14.5 times for Hero Honda and 16 times for Bajaj.

Reasons cited for the dip in sales:

TVS has attributed the decline in sales to, reduced availability of finance, increased cost and stricter lending norms exercised by the financiers. Higher material costs including steel, aluminium and rubber have also impacted margins. Higher interest costs were on behalf of increased level of borrowing for the new projects.

Guidance:

The company believes pressure on margins will continue in the first half of 2007/08 due to high cost of raw-material and intense competitive activity,” TVS said in a statement.

“In the second half of the year, the company expects pressure to ease with the launch of new products and other (cost-cutting) initiatives,” TVS said.

Happenings in the quarter:

* During the quarter TVS relaunched an upgraded version of the Apache, christened the Apache RTR, in the premium segment and stopped selling 110cc victor due to slump in sales of the product.

* TVS had cut production by 5,000 units for June and July

* TVS opened a new two-wheeler plant in Himachal Pradesh in April, and commenced operations at PT TVS Motor Co. Indonesia, a wholly-owned unit, in July with an annual capacity of 300,000 units.

Planned launches:

TVS said it would launch two new motorcycles in the executive segment, a new variant of Star, its 100 cc entry-level bike, as well as its first motorised three-wheeler. The launch of new star variant is expected during the coming festival season. The executive motorcycle which will be launched in the second half of this year. TVS’s three-wheeler plant will make 90,000 units annually. Three-wheelers enjoy higher margins than motorbikes, which compete in a highly price-sensitive market. Totally TVS Motor will launch at least six to seven products during the current fiscal,an electric bike,a 100cc scooter, two new motorcycles in the executive category, two high-end Apache models. TVS is confident that this motorcycle will redefine the segment by setting a new benchmark in the industry in terms of its technology, performance and style. TVS Motor Company also plans to launch an electric bike at the end of this year and introduce two to three variants next year. TVS is also in the process of developing bigger engine capacity bikes to match competition.

Maruti-Suzuki Quarter (Q1) result:

Maruthi vrooms again

It’s the 16th consecutive quarter of growth in profit from the maker of Maruthi 800, Esteem sedan and Swift. Yes, Maruti has done it again – Maruti Udyog posted a 35.2% increase in net profit at Rs 499.60 crore for the first quarter ended June 30, 2007 when compared with Rs 369.57 crore in Q1FY07. Maruti’s total income increased 27% to Rs 4,154.07 crore in Q1FY08 from Rs 3,268.77 crore in Q1FY07. Maruti’s operating margin, a key gauge of profitability, was 14.6 percent, unchanged from a year earlier.These figures are incredible because in a period of volatile raw material costs and higher interest rates that are slowing sales india’s largest car maker continues to meet the investore expectations.Maruthi also beats the 3.7 billion rupees median estimate in a Bloomberg survey of 16 analysts and a forecast for a net profit of 3.69 billion rupees and net sales of 37.59 billion in a Reuters poll of 10 analysts.Profit was also bolstered by revenue from businesses other than manufacturing. The company’s other income gained 56 percent to 22.3 crore rupees.

During the quarter April-June 2007, the company’s sales in the domestic market, was 160,604 units, a growth of 17.1 per cent over the corresponding period last year. Total sales, including exports, during the April-June 2007 period was 169,669 units, up 17.1 per cent over April-June 2006.

Shares of Maruti rose 3.9 percent to 841 rupees at the close of trading on the Bombay Stock Exchange. The stock rose as much as 6 percent after the earnings were detailed. Maruti shares had fallen 9.4 percent in the April-June quarter, trailing a 2.7 percent decline on the Auto sector index and a 12 percent gain for the Sensex.
Reasons for the rise in profit:

Interesting launches and innovative marketing schemes has yielded the Maruti, the desired gain when its peers are suffering a setback in sales because of increase in price of raw materials and higher interest rate.

* Maruti has launched two new models in this quarter, the SX4 sedan and Grand Vitara SUV to attract buyers and counter higher loan rates in India.

* Maruti’s high margin cars have sold well, cars like the Swift and the new SX4 worked well for the maruti. It’s also benefited as a result of its Yen imports from Japan though spending on raw materials increased 30 percent to 31 billion rupees. The strengthening of the Indian currency against the Japanese yen and the U.S. dollar helped Maruti cut the cost of imports. The rupee gained 12 percent against the yen and 6.8 percent against the dollar in the last quarter.

* Maruthi has tied up with the State Bank of India Ltd. and ICICI Bank Ltd – India’s two- largest lenders, to offer loans to customers in towns and villages, where credit wasn’t previously available, to boost vehicle sales.

For investors:

* `Car sales will continue to grow and Maruti will be one of its major beneficiaries,” Amar Ambani, an analyst at Indiainfoline Ltd., a Mumbai-based brokerage said to Bloomberg. “High interest rates are a temporary setback for automobile companies,” said A.K. Sridhar, chief executive officer of UTI Asset Management Co. in Mumbai. “Sales should pick up from the third quarter,” he added.

* Maruti has been trying to expand its export markets aggressively Maruti aims to export 55,000 units in the current fiscal, up nearly 45% over the 38,000 units shipped last fiscal and from 18,000 units two years ago.

* Maruti Suzuki which is aiming to produce 1 million units by 2010, plans to invest as much as $2 billion by 2012 to counter the competition from minicars of General Motors, Renault-Nissan, Tata Motors and hatchbacks from Volkswagen AG, Honda and Toyota.

* Maruti Suzuki is planning 12 model ranges on four platforms for India by 2010. The future launches will feature the next generation M and K series engine replacing the existing F and G series engine. Maruti might launch a diesel variant of its existing line up (zen,wagonR, Alto,omni,versa or SX4) in this year. Esteem may replaced in the form of three box swift that will get the Fiat’s Multijet engine and it will be launched by January 2008. New WagonR plus and an alto successor is also on its cards.

* No longer investores have to worry about the hefty discounts and its impact on Maruti’s margin, because of the Incredible result and the fact that car sales grew 17 per cent in the june quarter could mean that Maruti will now withdraw the discounts and incentives from its dealerships until the festive season next quarter.

Suzuki sheds Maruti -an image makeover:

Come September and India’s largest carmaker may cease to be Maruti Udyog Ltd. As globally Suzuki is seeking a larger image makeover- Suzuki no longer wants to be small car maker and it has recently positioned itself as a complete car maker with the success of its globally strategic models like Swift, SX4 and Grand Vitara. Hence in India – one of the Suzuki’s largest market, the company steps up its new image campaign with a proposed new name “Maruti Suzuki India” instead of Maruti Udyog ltd. This is also in line with its shareholding pattern Maruti Udyog Limited. Suzuki which owns 54 percent stake in the company decides to retain the name Maruti only because of the name “Maruti” has a strong branding in the passenger car segment and has just substituted Udyog with Suzuki and add India. Suzuki says the new name would help launch Maruti vehicles in overseas markets. The company will be launching a model for European exports in the next couple of years and is also developing capabilities to become Suzuki’s research and development hub for Asia outside Japan. However the new name is subject to approval by shareholders The new name will come into effect only after it is approved by shareholders at the Annual General Meeting, and thereafter by the Registrar of Companies. It it important to recall that the Indian government in May sold its residual 10.27 percent stake in Maruti to banks, insurance firms and mutual funds.

Revai – Reva’s new electric car

Reva Electric Car Company has launched an advanced version of its electric car, Reva-I which uses AC drive train to give better speed, range and acceleration.The technologically advanced car is also equipped with a `boost’ mode for short-term acceleration and power. Revai also has a “hill restraint” feature which allows enhanced negotiation on slopes. Revai costs Rs 3.49 lakh. As an eco-friendly and economical car, it offers ease of driving without clutch and gears. Its small size makes parking hassle-free and manoeuvrable for safe driving on city roads. Revai – the new model can drive at 80 km per hour as compared to 65 km per hour by its earlier models, with acceleration from 0-40 km in seven seconds as against 10 seconds earlier. The capacity of its torque has been increased by 40 percent for quicker acceleration, climbing and negotiating slopes. With trip odometer and automatic computer controlled indicator for power consumption and regeneration and electronic control panels, Revai will have more battery life to cover about 200 km without recharging as against 80-100 km by its earlier models.

Reva has so far sold around 2,000 units of Reva, of which 70 per cent have been exported. Over 1,000 units of Reva car have been sold in the UK market. Reva said part of the $20 million funding it received from Global Environment Fund (GEF) and Draper Fisher Jurveston (DFJ) would be utilised for increasing the capacity of the plant. Reva has a production capacity of 6,000 vehicles a year, which would be expanded to manufacture 30,000 vehicles. During 2006, Reva sold around 600 cars and with the launch of the new model RevaI, it plans to sell about 3,000 cars this year. Reva is foraying into Norway and Spain to spread our footprints in the European markets. Set up as a joint venture with the US-based AEV LLC in 1994, Reva has 10 patents to its credit in the manufacture of eco-friendly and cost-effective electric cars. Its plant on the city’s outskirts has an installed capacity of 6,000 units per annum.

source: Reva India

Mitsubishi’s cedia select LPG

Hindustan Motors (HM) – Mitsubishi has launched a factory fitted dual fuel Cedia under the name’cedia select’. Cedia Select incorporates ‘Sequent’ type technology for effective performance on LPG. This technology from BRC Italy uses32 bit microprocessor that synchronizes on real time with engine ECU. The controls are precise and automatic, delivering great performance, be it on petrol or on auto LPG. The driver enjoys the performance while the microprocessor & ECU take care of fuel efficiency. With a “full tank”, 50 Lt petrol and 48-63 litreLPG, the Cedia Select is capable of cruising well over 1000km at a stretch! This Cedia variant, with all premium features (air bags, ABS with EBD, MP3 CD player, wood and titanium finish, chrome door handles, windshield antennae, alloy wheels) ,is priced at Rs 8.60 lakh (ex showroom Delhi). Cedia Select is the first amongst premium cars to offer a dual fuel product that is environment friendly on both fuels. Over the next few days , Cedia Selcect – with the factory fitted Dual Fuel Option- will become available for test drive at all major dealerships all across the country.According to the Mitsubishi, the dual fuel model will be just as powerful and fuel efficient on both petrol & LPG and is emission happy to boot. Advanced microprocessor controlled technology makes it possible for the Cedia Select to deliver good fuel efficiency on two different fuels without any compromise on performance. Mitsubishi says that the cedia select will offer a fuel economy/mileage of Rs 3/ km in city driving on ALPG. The fuel economy on highways will be even better. According to Hindustan Motors’ MD R Santhanam: “The new duel fuel Cedia variant is targeted at the premium car buyers, who seek both the driving pleasure and operating economy at the same time and are also environment conscious.”

source: Hindustan motors

Tata’s one lakh car – Part 3

Tata one lakh car peers — Renault-Nissan, Bajaj Auto, Hero Group, Xenitis, Maruthi and Reva:

# Maruti-Suzuki will completely reskin Maruti 800 (similar to what the company recently did with Zen-Estilo) next year. The company will rebrand it and even power it with a 600cc engine against the current 800cc.

# The Munjal family behind Hero Honda, india’s largest two wheeler maker, which is mulling a foray into the four-wheeler segment .is said to be in talks with BRP (Bombardier Recreational Products) for developing a 500cc small car to rival Tata’s one lakh car. Hero Group was reported to have been closely monitoring the Rs one lakh project by Tata Motors and learn from it to de-risk its own endeavour.

# Renault Nissan is the first one to come up with a idea to rival Tata’s car it plans to produce a car priced at below $3,000 (Rs 1.30 lakh) in India. As Renault’s local partner Mahindra is not interested in making such a low cost car, Renault- Nissan may settle with india’s robust two wheeler manufacturer. Incidentally Bajaj is also planning to foray into four wheeler through a smart car. More are chances for a new JV between Bajaj and Renault – Nissan to rival Tata’s one lakh car.

# India’s lone electric vehicle maker is believed to be developing a small car based on its Reva platform for the redhot Rs 1-lakh car market. Reva’s one lakh car would be a four-seater , four-door model and will be powered by heavy batteries than its existing line-up and the new car can reach a top speed of 100-120kph (80kph for the current Reva products) . Reva’s low cost car is expected by 2010. The current Reva range comes in three variants priced in the range of Rs 3.3-4 .3 lakh in India.

# Chinese manufacturers like chery which are scouting to enter the indian market may use this opportunity for their debut since they already products in this price range. These subcompact car segment may also attract new indian players like ICML and Xenitis.

# Global auto a JV of Xentis Group and China’s Guangzhou Automobile Industry based in bengal plans to introduce a “people’s car that would be in sync with the affordability factor”. Xenitis signed a Memorandum of Understanding (MoU) with GAIG to manufacture four-wheelers. The proposed xenitis small car is likely to go on sale by the end of October 2008. Global Auto has launched a motorcycle called Xpression early this year.

Manufacturers Word on Tata one lakh car:

# The auto manufacturers all over the world are preparing to counter the tata’s assault. Some manufactures have decided to follow the Tata’s footstep while others doubted the possibility of manufacturing a car at such a price very few like opts the both.

# Bajaj says a USD 3,000 car project is simply not a profitable proposition. “I would personally think it’s impossible. You know while there might be some people who say they are going to put out a car for a lakh of rupees or thereabouts or USD 3,000 for example, that’s always possible. It’s a manufacturer’s prerogative to give a product away for free if they want to. But I haven’t heard anybody say, explicitly atleast, that it will have a reasonable return like say 10%,” Rajiv Bajaj explained.

# Carlos Ghoshn CEO, Renault & Nissan said, “If we do it, I’m pretty confident. But if we come to a conclusion that we can make a USD 3,000 car but we can’t make money out of it, we are not going to do it”.“We are always focused on what our consumers want… if our consumer comes back and says here are the trade-offs, I am willing to make ($3,000 car) and this is what I will accept and live with,” Ford India managing director and president Arvind Mathew said. “At the moment, I am very curious to see how this car(tata’s one lakh car) looks like,” Mathew added.

# Hyundai India VP (marketing & sales) Arvind Saxena said: “It’s not just the price that a consumer is concerned with. Power, performance, space and fuel efficiency are all important factors that score with consumers.”

# Honda’s India chief M Takedagawa wonders about the one lakh project and said it would be a “three-wheeler with an extra tyre”.

Tata One lakh car’s Launch and the price:

The one lakh car will be launched before Tata Motors next AGM (Annual General Meeting) i.e in the 2nd half of 2008.

Maruthi believes that tata’s car will be around 1.25-1.5 lakh.many analyst support the view. but tata is confident and firm in their price tag. Some believe given the high expectations in the market, Tata will stick to its highly-touted Rs 100,000 price, at least initially, as a matter of pride. We could see a higher price after a month, two months, but at least at launch they will absorb the additional cost,” said Mohit Arora, director for India at J D Power Asia-Pacific.

But Tata’s are singing a different tune “I hope so. Just like people ate their words on Indica, they would realise that there is something (Rs 1-lakh car) that can be done,” Tata told on whether the launch would be an answer to the sceptics.

Who should worry and what they are doing to counter it?

* Two wheeler manufacturers especially the Bajaj Auto, the international consultancy firm JD Power had said that the Tatas’ people’s car would severely affect the top-end motorcycle segment in which Bajaj is the market leader with Pulsar. Analyst are expecting 40% drop in volumes in two wheeler sales after the launch of the one lakh car. But Bajaj is
confident about its products and it says top end bike users will not go for a low cost car also it plans to foray into four wheeler industry.

* The country’s largest car manufacturer Maruti-Suzuki MD Jagdish Khattar has said new launches in the sub- compact small car will reduce the price gap and affect two-wheeler companies more. He has the proof too Maruti Udyog Ltd’s (MUL) True Value initiative has already dented the domestic high-end motorcycle market. Under True Value, Maruti dealers sell used car certified by the company at a considerably lower price compared with a new one. Maruti sells around 75,000 used cars a year under this initiative.

* But things are going to be critical even for the Maruti’s true value initiative as the tata’s one lakh car may turn out to be a nightmare for used-car dealers. Second hand car buyers who spends between 1.5-2.5lakh may move easily for the new Tata’s one lakh car. Used car dealers say the launch of the tata’s one lakh car will cause a 40% drop in volumes in the pre-owned car. Used car dealers are planning to face the Tata’s assault through new ways – they plan to shift focus on more upmarket cars. Dealers are planning to step up warranty and guarantee schemes to attract buyers. some dealers are planning to tie up with banks for inventory funding and consumer loans at competitive rates.

* Prominent small car players such Maruti, Hyundai and General Motors may get a heavy beating if the Tata’s much hyped one lakh car meets the expectation.

Hero Honda’s Q1 – quarter results:

yet another bad quarter:

Hero Honda joins the rival Bajaj Auto Ltd. in reporting a drop in first- quarter profit. Hero Honda’s profit fell for the fourth straight quarter the company reported a 20.14 per cent decline in net profit in the first quarter ended June 30 as a result of drop in sales. The company said its net profit stood at Rs 189.84 crore for the first quarter as against Rs 237.74 crore for the same period l.ast year. Total income (net of excise), however, increased marginally by 2.90 per cent to Rs 2,486.90 crore for the June quarter, compared to Rs 2,416.65 crore in the corresponding period a year ago. The company’s EBIDTA margin during the quarter stood at to 10.76 per cent. Hero Honda clocked a total sales of 8,02,853 units of two wheelers a fell of 3.6 percent.

Income from business other than manufacturing, such as returns on investments in stocks, mutual funds and bonds, was 389.1 million rupees, lower than the 522.8 million rupees in the same quarter a year earlier, Hero Honda said.

Reasons for the dip:

* As Hero Honda followed its rivals Bajaj Auto Ltd. and TVS Motor Co. in offering discounts to win buyers in June even as the company paid more to buy steel, aluminum and other raw material.

* Aluminum prices were 5 percent higher on an average in the quarter compared with a year earlier also the Steel prices in India were 10 percent higher on average. Because of this spending on raw material, Hero Honda’s biggest expense, grew 4.3 percent to 17.97 billion rupees.

* Higher interest rates eroded most of Hero Honda’s sales as half of sales in india are made through credit. The company acknowledged “The first quarter of this financial year has not been encouraging for the auto industry in general, with uncertainty over interest rates making customers postpone their purchases,” Hero Honda Motor Ltd (HHML) Chairman Brijmohan Lall Munjal said.

Better than the expectations:

Profit beat the 1.84 billion rupee median profit estimate in a Bloomberg survey of 16 analysts. Sales rose 3.6 percent to 24.48 billion rupees. The result was slightly better than a consensus forecast of Rs 1.84 billion in a Reuters poll of 10 analysts.

Shares of Hero Honda, gained 0.5 per cent in the quarter, compared with a 2.7 per cent decline for the auto share index and a 12 per cent gain for the main share index. Shares of Hero Honda, a unit of Japan’s Honda Motor Co., have declined 8.8 percent this year, lagging behind the 15 percent gain in the benchmark Sensex Index. The shares closed 9.8 rupees, or 1.4 percent lower, at 695 rupees in Mumbai.

Guidance for the second and third quarter:

It’s a reserved guidance for the second quarter and an enthusiastic one for the third quarter from the company. Hero Honda said the company did not foresee much of a change in the scenario for at least the next two months. `We don’t expect our sales to improve in the second quarter as it’s traditionally a lean season due to monsoons,” Sud said. However Hero Honda’s Chief Financial Officer Ravi Sud predicted sales should pick up from the third quarter when the festival season starts and as interest rates begins to soften from an eight-year high. Usually indian motorcycle companies reduce production as monsoon rains deter buyers through the July to September quarter. Hero Honda planned to cut production starting in June. “Two-wheeler sales should improve because of the onset of the harvest and festival seasons,” Amitabh Chakraborty, president of Religare Securities Ltd., a Mumbai-based brokerage, said to Bloomberg.

Here’s the indian cycle

Sowing of the monsoon crop begins in June. Harvesting begins in mid-September and ends in November. That enables more people in rural areas to buy motorcycles and other consumer goods. Sales will also rise from October each year because of the start of festivals across the country.

Happenings in the first quarter:

During the quarter the company has launched two new products – Splendor NXG and a refreshed model of its scooter Pleasure. Hero Honda has delayed start of production at a new plant in northern Uttarakhand state to the new fiscal year starting April 2008 because of softer demand. The plant will have an initial annual capacity of 500,000 units, which will eventually be tripled.

Two new variants

Hero Honda on 25^th july announced the launch of two new variants – Passion Plus (100 cc) and Super Splendor (125 cc). Passion Plus is priced at Rs 42,750 (ex-showroom Delhi) while Super Splendor comes for Rs 44,150 for drum brake and Rs 44,900 for disc brake (ex-showroom Delhi).