Exclusive | Rajiv Bajaj on share buyback, new Triumph, Pulsar launches, and more

The Bajaj Auto buyback is set to commence on March 6. In an exclusive interview with CNBC-TV18, Rajiv Bajaj, Managing Director of the two-wheeler giant, discussed his evaluation of the company's stock value and outlined future plans for the business.

Bajaj believes the stock has a fair value of ₹12,000 apiece given the company is firing on all cylinders. The Bajaj Auto share buyback is priced at ₹10,000 apiece.   

Rajiv Bajaj sees fair value of Bajaj Auto stock at ₹12,000 apiece

Bajaj also discussed the expansion plans for its premium bike brand, Triumph.

The company currently plans to ramp-up Triumph production to about 30,000 vehicles per quarter, from 20,000 now. It also plans to introduce at least one new Triumph model annually, focused around the 400 cc engine.

Rajiv Bajaj is also confident about launching the biggest Pulsar ever by the end of the current financial year (FY24) or early in the next financial year (FY25).

Chetak, he said, is growing between three and five times year-on-year in any given month, in recent months. "So that's struck a rhythm."

A: The two-wheeler industry in general is doing rather well. Let me take the second part of your question first on exports. This quarter last year was the worst for exports, for the industry and also for ourselves. So the short answer would be that this high growth that you referred to of 45% is coming on the back of a relatively low base. That's the fundamental reason for that growth. Having said that, export markets are a lot more stable now in several respects than they were six months ago. So, month-on-month, we will not see that kind of an increment, because we are still only at about 70% of our peak exports, which was pre-COVID. So, it will take some time to get there. But yes, for now, the YoY growth is good. As far as domestic growth is concerned, again, the industry is doing well, and if I may say so, so is Bajaj. Particularly as you know, our area of focus is the 125 cc plus motorcycle segment where we are growing at about 30% to 40% YoY depending on the month in question and of course, our other businesses like the premium motorcycles, Chetak, three-wheeler all are doing very well right now.

A: I don't know. I have realised after 33 years of being here that I understand the motorcycle market a little bit, but I still haven't figured the stock market out at all. Why is our market cap double what it was a year ago, I have no clue. But as I've said to you before, when we spoke in January, I think we are just firing on all cylinders right now. Very quickly, if I give you the narrative, it would be that in the domestic motorcycles with the Pulsar brand, you would have seen even through this quarter, that we are launching new products virtually every fortnight. And if you're tempted to think that we are overpopulating the market, we are not because rather than premiumisation, I like to use the term super-segmentation. We can see that the segment that Pulsar participates in, which is about 400,000 motorcycles every month, is massive, it is perhaps bigger than the industry size of most other markets in the world. So there's a great opportunity to super-segment this and that's exactly what we're doing with the Pulsar.

We will continue to do that through this quarter. And, as I've said to you before, by the end of this year, very early into the next financial year, we will launch the biggest Pulsar ever. So Pulsar is driving a lot of our performance for the last few months.

Then with the premium motorcycles, our own Dominar brand, and KTM between domestic and exports, we do almost 15,000-20,000 a month. We are again, neck to neck with the leader Yamaha over there. So that's doing well for us.

Triumph, as all of you have been reporting, we're typically hitting 20,000 a quarter which most people including ourselves, didn’t entirely expect. So that's doing very well.

Chetak is growing between three and five times YoY in any given month, in recent months. So that's struck a rhythm.

On the three-wheeler business, it's not just the electric vehicle (EV) that we introduced last May, but even our internal combustion engine (ICE) business primarily CNG, is very strong, we're up to almost 70-80% market share of this industry, which is the biggest three-wheeler industry in the world. So again, and that's very profitable for us.

And finally in exports, as I said, while it's slow and steady, to be honest, it's not the kind of growth that we're expecting in the other verticals. But what is solid for us in exports is A] our market share which is very solid in the markets that we are in, and B] pricing power, which is great for our earnings before interest, taxes, depreciation, and amortization (EBITDA), and of course, the rupee at 83 is a wonderful thing. So that's the good news on exports. So on all six cylinders, we're doing well at this point.

A: Yes and no, I would say in the sense that the response has been tremendous. It's like people respond to a closing down sale. Hopefully, we're not closing down anytime soon. But the buyback has closed down. And it's reflected in the fact that I think when we announced it, the stock price was about ₹6,000. I remember I was on CNBC-TV18, a particular day, speaking with some of you, and it was inching towards ₹7,000 and now it's in the ₹8,000 region. So obviously, I'd like to believe the buyback has been very well received.

In terms of fair valuation, without taking any names, all I would say is that in my head, I have a basket of companies that I think Bajaj Auto can be compared with, in terms of its performance, in terms of its price-to-earnings ratio (P/E), in terms of its prospects, etc. And frankly, to me, although the stock has moved up from ₹4,000 to ₹8,000, in my head - and as I said, I'm a layman in these matters - something closer to ₹12,000 sounds fair value, as you call it. So who knows, there might be another buyback shortly.

A: That's my estimate. And semi-humorously I said that there might be one and don't hold me to that.

A: Let me clarify what we meant in terms of our portfolio. See, the motorcycle market is polarised around displacements, the most popular being 100-125, and the 150 to 160 displacement. So we believe that a CNG motorcycle should appeal to consumers at each of these three displacement points and that allows us to build a portfolio as opposed to just one motorcycle of a particular displacement. So that's the answer to the portfolio question.

The last time we spoke, if you remember, I said to you that, it's the first time in the world, somebody's trying to develop a CNG motorcycle, and it's not a trivial problem to package a CNG cylinder in a motorcycle, which unlike a scooter has no obvious storage space. And if I may just dwell on this for a little longer, the motivation is two-fold. One is from the point of view of the environment because now, we are well into testing and we can see that compared to a gasoline motorcycle, Co2 is down by almost 50%, Co is down by like 75% and non-methane hydrocarbons are down by like 90%. So, this is a motorcycle that's potentially fantastic for the environment. But equally, it promises to do what Hero Honda did 40 years ago, which was effectively to double mileage or halve the cost of fuel for the Aam Aadmi, which I think has a fantastic impact on the wallets of those consumers.

So now, coming more directly to your question, I have said to you that within the calendar year 2025, we hope to be the first in the world to launch a motorcycle. But today I'm going to tell you we are so encouraged by the results we've seen from the testing, that we can prepone that by a whole year. So within this calendar year 2024 very shortly, you will see us announce the world's first CNG motorcycle.

A: I know you will keep pushing till I am more specific. So I'll even tell you within the next quarter, we will launch the world's first CNG motorcycle.

A: Of course, we have to start with one, one of the displacements that I referred to, we have to get that right. And then from there to expand is easy, but as you can imagine, it's been the same with electric vehicles, that you have to get the technology right, you have to get the dealer piece and the service right, the service quality right, and of course irrespective of how much we anticipate, and prepare for, there is always some surprise from a consumer experience point of view. I'm told CNG pumps are not the most accessible, for example. So, we have to get all of this experience in the first few months, and then we can expand the portfolio.

A: For Triumph, the last two quarters, we have been fortunate, we've been doing about 20,000 a quarter, so about 6,000-7,000 a month - domestic and exports. Our capacity is not even that much and when I say our capacity, I mean not just Bajaj but the entire supply chain, because we were frankly a little conservative in planning that capacity. So, we have to stretch ourselves a bit to deliver this volume. We are now obviously investing to expand that capacity and I would be correct if I said that we should be able to take it to the next level, which means about 30,000 vehicles a quarter or 10,000 Triumph motorcycles a month in the next few months. I think by July the entire supply chain should be there.

Also in terms of distribution, we are doing our best to expand it's not the easiest thing because Triumph dealer standards are very high, and very expensive investments as well. So it takes time to expand the network also. So I think we are readying ourselves basically for the festive season so that by September, let's say can we be in a position to make, deliver, and distribute 10,000 Triumph motorcycles a month between domestic and exports.

A: To be very candid, as of now we have no such plans. We will of course - I don't know if we are already doing it. But if we are not, we will be of course putting together SKDs and CKDs for Triumph for sales in this market. It’s what Triumph used to do on its own and that is to be handed over to Bajaj. So that of course we will be doing.

But in terms of displacement as of now, we stay in the 400 cc zone. In the premium classic segment - where Enfield is, of course, the overwhelming leader - that one single displacement covers most of that segment. So for now, we are in a good place with that. And I stand by the statement that you refer to that every year there should be at least one, not just one, new distinct new Triumph motorcycle centered around the 400 cc displacement engine. And for sure it will be there. We expect a new motorcycle this year. And indeed for the next three years at least, there are several products in development right now.

A: Let me just make the point that there are three different figures. There is the billing, which is the wholesale. Then there's retail, which is what our dealers report to us as original equipment manufacturers (OEMs). And then finally there is VAHAN (Vehicle Automated and Healthcare Administrative Network), which probably you refer to as retail but there's the actual VAHAN or the registration. So the reason I feel a need to clarify this is that a brand like Chetak, which is growing by leaps and bounds as I say three to five times YoY, MoM, there is always a difference between what we bill, what our dealer retails and then VAHAN eventually catches up two to four weeks later.

So for example, in February, I believe we have in the domestic market bill close to 14,000 vehicles somewhere between 13,500 and 14,000 vehicles. And you will see this reflected in retail and VAHAN over the next four weeks. So yes, we are still number three, TVS is ahead of us and Ola is way ahead of both of us. But, we are moving ahead very rapidly. And I'm happy to also share that as volume is growing, we are not being complacent. We are refreshing very significantly both our current offerings that exist in the marketplace. So I believe the new refresh will be in the market next quarter again. So a lot of action next quarter, Chetaks and CNG motorcycle, Triumph, and we will also add a brand new stock keeping unit (SKU). So that will make it the third product in our portfolio, which should help us to further energise this growth rate of ours. So, I think we can keep this momentum going for now, with these new products.