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B. Krishnakumar

THE market leader in the motorcycle segment Hero Honda Ltd has reported improved performance for the year ended March 2004.

Helped by a 23-per cent increase in motorcycle sales volume, turnover increased by about 14 per cent to Rs 5,832 crore.

Factors such as availability of cheap credit, plentiful rain, successful new model launches played a part in driving sales volume.

The successful monsoon in 2003 played a key role in bolstering rural demand for motorcycles.

Besides, the company's new launches such as the CD-Dawn, Splendor+ and Passion Plus have been favourably received by the market.

This has resulted in a 23-per cent growth in motorcycle sales for 2003-04 and an impressive 50 per cent growth in volume in the fourth quarter.

The relatively lower base owing to a slowdown in sales growth in 2002-03 is another factor that has propped up the company's performance in 2003-04. The growth rate achieved in 2003-04 has to be, however, viewed in the backdrop of a slowdown in growth rate in 2002-2003.

However, much of the improvement in sales has to be attributed to the phenomenal success of new model launches Splendor+ and Passion Plus. This has helped the company re-establish itself position in the executive segment of motorcycle market.

Though the entry-level model CD Dawn too fared well, the contribution to margins would have accrued from the Splendor+ and Passion Plus. The success of these models has altered the product matrix of the company in favour of higher valued executive segment models.

Despite the promotional offers and discounts offered last year, it is creditable to note that the company has managed to sustain profitability levels.

The thrust towards indigenisation, focus on cost control and change in product mix have helped the company record an improved operating profit margin of 19.1 per cent (18.1 per cent)

Helped by increased sales, improvement in profitability and more importantly - a 77-per cent increase in income from other sources, the post-tax earnings increased 25 per cent to Rs 728 crore. The total investment portfolio of Rs 1,193 crore (as on March 2003) and the spectacular bull-run in the stock market last year explains the 77 per cent rise in other income.

Much of the growth in performance appears to have accrued in the fourth quarter of the previous fiscal.

The company notched up an impressive 50 per cent rise in sales volume. The company recorded a 38 per cent increase in turnover to Rs 1,680.22 crore and while post-tax earnings rose 42 per cent to Rs 211.3 crore. Going forward, the impending entry of Honda Motorcycle and Scooter's entry into the motorcycle market is a major cause of concern.

Besides, it remains to be seen for how long the company manages to extend its recent successful run in new model launches. The degree of success in future product launches and the impact of Honda's entry into motorcycle market would have critical impact on the performance of not only Hero Honda but the motorcycle market as a whole.

More Stories on : Performance | Microscope | Two/Three Wheelers

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