Hero Honda Motors was southward bound on Tuesday on selling pressure.

Shares of the motorcycle major were down by 1.4 per cent to Rs 244.70 on the BSE by first half of the trading session. They hit a low of Rs 242.90, slipping from the day's high of Rs 250.

The Hero Honda scrip has shed 2.3 per cent in two sessions since the announcement of the quarterly results during trading hours last Friday (10 January 2003). The scrip gained slightly to Rs 250.50 on Friday from its Thursday's (9 January 2003)'s close of Rs 249.70.

The scrip had shed 10.9 per cent in a few sessions in the run-up to the results - from a recent high of Rs 280.45 on 19 December 2002 to Rs 249.70 on 9 January 2003.

For Q3 ended December 2003, the company posted a 15 per cent growth in net profit to Rs 152.80 crore on a top-line growth of 13 per cent to Rs 1,376.04 crore.

While top-line was in the higher range of analysts' expectations, the bottom-line was in the lower range. As per capitalmarket.com poll, analysts had expected the company's sales to be in the range of Rs 1,340.3 to Rs 1,392.8 crore, a gain of 9.9 per cent to 14.2 per cent.

Regarding bottom-line, their estimates were between Rs 150.77 to Rs 161.6 crore, a gain of 13 per cent to 21 per cent.

During the third quarter ended December 2002, in terms of sales volume, the company reported an increase of 16.1 per cent, while the its sales realisation declined by 2.8 per cent.

The Q3 results reflect the slowdown in earnings and top-line growth.

The effect of fierce competition from Bajaj Auto and TVS Motor along with the slowdown in the motorcycle segment due to monsoon failure (60 per cent sales from rural markets) is evident from Hero Honda's results, according to analysts.

The company registered a token 1 per cent rise in domestic sales in December 2002 at 1,22,848 units as against 1,21,601 units in the same month last year. The company's discount schemes had ended around 15th December 2002 and this put pressure on sales.

Analysts said that it will be perhaps difficult for Hero Honda to achieve its full year (2002-03) target of 18 lakh bikes.

It will have to sell 1.73 lakh vehicles per month for the next three months to meet its FY 2002-03 sales target. In the last nine months (April-December 2002), the company registered sales of 12.81 lakh motorcycles.

Earlier, there were fears that the company's profit margin may be hit due to the increased royalty payment of Rs 630 per vehicle to the Japanese collaborator, Honda Motor Company, as against the flat royalty of Rs 200 on existing models like Splendor and Passion.

However, the company has been able to absorb the increased royalty payment by cutting down on raw material costs through the use of indigenous parts, etc.

With the launch of high-end bike Ambition, Hero Honda is getting hold on the premium end of the market but is losing its grip on the lower end of the market against Boxer and Victor from Bajaj Auto and TVS Motor, respectively.

The 133cc motorcycle, Ambition, reached the 10,000 sales-mark in November '02, just two months since its launch. The company raised the current year's sales target for Ambition by 50 per cent, following better-than-expected early sales.