Hero MotoCorp Net Profit Slips 14 Per Cent

Hero MotoCorp intends to pump in Rs 2,500 crore over the next two years to develop new products and increase production capacity. As many as six new products are planned for this fiscal

By Carandbike Team

1 mins read

Published on May 11, 2017

Highlights

Hero plans Rs 2,500 crore capex in next two years
Six new products expected in FY 2017
16.21 lakh two-wheelers sold in the fourth quarter

The world's largest two-wheeler manufacturer, Hero MotoCorp has reported weak quarterly numbers, reporting a 14 per cent fall in net profit at Rs 717.75 crore for the fourth quarter which ended on 31 March 2017. Sluggish demands of two-wheelers, especially in rural areas after the government's demonetisation exercise and discounting of BS-III vehicles to liquidate stock are seen as reasons behind the weak numbers. Hero had registered a net profit of Rs 833.29 crore in the corresponding period of the last financial year. "The results indicate weak operating performance owing to the clearance of the BS-III inventory clearance in March-2017. The net realization during the quarter stood at INR 42,639 per vehicle vs. INR 43,192 in 3QFY17 and INR 43,603 in 4QFY16, indicating decline of 2.2% and 1.3% respectively on YoY and QoQ basis," said Shrikant Akolkar, Research Analyst, Angel Broking. Hero MotoCorp's total income also fell by 7.7 per cent to Rs 7,488 crore, and sales volumes in the quarter dropped by 5.8 per cent. In all, Hero sold over 16.21 lakh in the quarter compared to more than 17.21 lakh two-wheelers sold in the same period a year ago. Analysts believe that the current financial year will see more growth, particularly with a good monsoon being predicted, and considering the overall economic growth. "April 2017 is a good start for the Indian automotive industry. Many OEMs with a good product line have registered significant growth in April 2017. The pent up demand is driving the vehicle sales and the impact of demonetisation is wearing off. 2017-18 looks promising for the automotive industry considering the overall growth in the Indian economy. However, there are a few challenges such as smooth implementation of GST and monsoon that influences the generation of demand in the rural economy. The key to success depends on OEMs addressing the customer's changing preferences through new launches, exceptional customer experience, excellent distribution network and touch points with customers," said Abdul Majeed, Partner, Price Waterhouse. Hero MotoCorp plans to launch at least six new products in the current fiscal year (April 2017-March 2018) and intends to pump in Rs 2,500 crore over the next two years on new product development and capacity expansion.