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Bajaj Auto edges out Hero Honda in market cap race

February 15, 2003 16:18 IST

Bajaj Auto has raced ahead of Hero Honda Motors in terms of market capitalisation following the recent drubbing received by the latter, while the former managed gains in a weak market. 

As on 14 February 2003, Bajaj Auto's market cap at Rs 5,312.146 crore, was Rs 1,200.64 crore higher than Hero Honda's Rs 4,111.82 crore.

From its 52-week high of Rs 402 touched on 27 February 2002, the Hero Honda stock has lost 48.78 per cent to Rs 206 on 14 February on sustained selling pressure.

In the same time, Bajaj Auto managed to gain a little over 10 per cent from Rs 477 to Rs 525. Interestingly, the 30-share BSE Sensitive Index (Sensex) has lost 13.01 per cent during the same period.

The stock of No 1 motorcycles maker in the world, Hero Honda, has lost ground sharply in the recent past following slowing growth rate, while others like Bajaj Auto have managed to gain on accelerating sales growth.

There were reports last week that Hero Honda had scaled down its FY 2002-03 sales target to 1.7-1.725 million units from 1.8 million.

The Hero Honda stock has been losing ground since the last few sessions amid numerous rumours on the counter. One of them being the company may consider a cut in production on account of rising inventory at the dealers' end.

Another rumour has it that the company's technological and equity partner Honda Motor Company may not renew the tie-up with the company.

Earlier, there were reports last week that rivals like Bajaj Auto, TVS Motor and Japanese major Yamaha have eroded the company's market share through new launches and aggressive marketing strategies.

According to the Society of Indian Automobile Manufacturers, Hero Honda's market share in motorcycles has steadily fallen in the recent past to 45 per cent in April-December 2002 period from 49.6 per cent in the year-ago period.

In the same period, Bajaj Auto's market share has risen from 21.7 per cent to 23 per cent and TVS Motor's share from 14.4 per cent to 19 per cent.

For the month of January 2003, Hero Honda registered a 6.3 per cent rise in motorcycle sales to 1.45 lakh units compared to the same month in the previous year.

But compared to the December 2002 sales figures of 1.25 lakh units, the growth rate of 16 per cent is redeeming.

Even as the motorcycle sales for January are being deemed modest, the market has been disappointed that the company's own target of 1.73 lakh units for the month has been missed.

The company has set out a full year (FY 2002-03) target of 18 lakh vehicles. Hero Honda will have to sell over 1.86 lakh vehicles over the next two months to fulfill that sales target.

Meanwhile, Bajaj Auto recorded a 20 per cent jump in motorcycle sales to 75,059 units in January 2003 from 62,640 units in the same month of the previous year. Month-on-month, motorcycle sales rose by 9 per cent from 68,998 units in December 2002.

{However, overall sales (including two-wheelers and three-wheelers) just about inched up by 3.6 per cent to 1.21 lakh units from 1.17 lakh units in the same period of the previous year.

The small growth was due to the 33 per cent drop in sales of geared scooters to 20,211 units (30,233 units).}

Market players still deem Bajaj Auto as a value buy as the company's medium-term prospects seem enticing. BAL's bike Pulsar continues to dominate the performance and power segment of the motorcycle market.

Within a short span of time, Pulsar has achieved sales of around 15,000 units per month. With the Pulsar now going national, a significant increase in sales is expected. Pulsar has already completed the first 1,00,000 sales within a short period of 12 months.

An average of 17,000 vehicles have been sold every month in the last quarter and the company expects to sell 25,000 vehicles per month by March 2003.

BAL continues to be a market leader in the entry level and performance segment in respect of bikes, with a greater product and marketing focus being brought in the executive segment - which is represented by the Caliber and Croma.

A new 100 cc bike BYK (code named CBM) is slated for a national launch soon. There are expectations that by this month, BAL will launch this new bike, which is placed in the executive segment.

The bike is expected to attract a whole new set of young and first-time buyers of two-wheelers. Also, the 125 cc World Bike is being jointly developed with Kawasaki.

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Source: www.capitalmarket.com

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