Hero MotoCorp Q1 net rises 33% to Rs 750 crore

NEW DELHI: Hero MotoCorp, India’s largest two-wheeler company, posted better than expected results, with net profit jumping 33 per cent to Rs 750 crore in the April-June quarter, driven by softening commodity prices, higher other income and benefits accrued from the end of royalty payments to its erstwhile Japanese partner. Earnings were driven largely by the strong performance of its margin-generating programme, which is expected to lead to a cumulative benefit of Rs 175 crore to Rs 200 crore in this financial year, chief financial officer Ravi Sud told ET. The company had posted a profit of Rs 562.7 crore in the quarter a year earlier.

Net sales declined 2 per cent to Rs 6,856 crore as the number of twowheelers sold dropped 5 per cent to 16.4 lakh units on sluggish demand in the rural areas, which account for almost half of its products. Three analysts ET spoke to had on average estimated net profit in the range of Rs 678 crore to Rs 715 crore. “The company benefitted from lower input costs and accrued benefits of controlled market expenses as there was no major launch or any sponsorship in the first quarter.



The quantum decrease in other expenses and depreciation also helped the company to exceed market expectations for the first quarter,” said an analyst with a leading Mumbai-based brokerage firm, who is not allowed to be identified. The company said high interest rates for vehicle loans along with slow domestic markets and could hurt revenue in the second quarter and the rest of the financial year.

“We expect the industry to move in an upward trend in the coming quarters, although a lot will depend on multiple factors, including good monsoon, rural income and overall market sentiments,” chairman and managing director Pawan Munjal said in a statement. “We have lined up a slew of new launches including scooters and motorcycles as we move into the festive season.” Slowing rural markets, high interest rates and intensifying competition from former partner Honda Motors affected demand for Hero MotoCorp’s two-wheelers. The market expanded 0.64 per cent in the first quarter and is likely to remain subdued for most of the financial year.