July industry sales may be down by 13 percent, says Rakesh Sharma of Bajaj Auto

Bajaj Auto has posted a good set of numbers. The company reported revenues higher than estimates and margins were in line with the expectations.

Bajaj Auto Executive Director Rakesh Sharma said that given the backdrop, the numbers were pretty satisfying, adding that declining volume trend will continue for the industry.

“June was worse than May and July numbers look worse than June. However, we will have the onset of the season which will mitigate the decline to some extent,” he said.

He said the company will continue to outperform the industry going ahead. “In this backdrop we have been outpacing the industry by about 10-12 percentage points. So, our own effort is to continue to do that. So whatever the industry is in Q2, we want to outpace it by a similar number,” Sharma said.

Speaking about July industry sales, he said, “The decline is in early teens, from single digits in June and Q1, it has moved to 12-13 percent. But sometimes, in the last couple of days there will be a flurry and it is difficult to guess, but it probably could be about 12-13 percent decline for the industry.”

On the inventory levels, Sharma said the channel stocks were a tad higher. "However, I must also point that this performance which you are seeing is after a gentle de-stocking. We never upstock too much and so we never had to take any production cuts,” he observed.

“The performance of Q1 is after a bit of destocking. However, still I would say the July opening stocks or the August opening stocks would be 7-8 weeks kind of thing, which for this period is probably three weeks too high. However, in about 30 days or so, by the time we enter September, we are going to get into a stock-up mode. So, from that perspective if I take a full-quarter perspective, at Bajaj Auto we are not feeling that we are wildly out of line given that there is an onset of season,” he added.

On the margins, Sharma said their margins have bottomed out at 15 percent. “We think that there is going to be a revival of the three-wheelers at least in the domestic business and marginally in the export business, which would be quite welcome. The exchange rate outlook is looking steady based on our hedging positions. So, I think here onwards if we also get some tailwinds of the festive kind, we should see a gentle improvement or at least they will stay

range bound,” he added.