Bajaj Auto speeds past forecasts with 22% revenue growth in Q2; to set up finance arm

Bajaj Auto Ltd posted better-than-expected revenue for the quarter ended September 30, aided by high growth of intra-city vehicles and strong exports of two-wheelers making up for a decline in demand domestically.

The company’s revenue rose 22.4% to Rs 8,768 crore for the quarter as against Rs 7,156 crore in the same period last year. On a sequential basis, revenue increased 18.6% quarter on quarter. Analysts were expecting double-digit growth but the media projections were around 15-16% rise in sales.

Meanwhile, even as the company faced higher cost of raw materials, Bajaj Auto posted a consolidated net profit of Rs 2,040 crore and a profit of Rs 1,539 crore before exceptional item. This compares with a profit of Rs 1,194 crore in the second quarter of last year.

Bajaj Auto International Holdings BV, a 100% subsidiary of the company, held a 47.99% stake in KTM AG. The arm swapped a 46.50% stake in KTM AG for a 49.90% stake in Pierer Bajaj AG and booked a gain in fair value of Rs 501.23 crore as a one-time exceptional item during the quarter.

On a standalone basis, net profit rose 12% to Rs 1,275 crore year-on-year.

Bajaj Auto’s shares, which had previously corrected from a high of Rs 4,365 apiece, closed at Rs 3,777.45 on Wednesday, down 0.38% in a weak Mumbai market. The company declared results after trading hours.

Bajaj Auto Q2: Other highlights

1) Overall volume growth was pegged at 9%, in line with expectations.

2) Domestic two-wheeler sales declined 11% but three-wheeler sales rocketed 88% YoY;

3) Exports of two-wheelers rose 31% while that of three-wheelers increased 8%.

4) The firm faced an increase in the cost of raw materials, which was partially offset by an increase in prices.

5) EBITDA margins declined from 18.2% in Q2 FY21 to 16.4% last quarter but improved on a sequential basis.

6) As on September 30, after payment of dividend of Rs 4,051 crore, surplus cash and cash equivalents stood at Rs 17,526 crore as against Rs 19,097 crore as on June 30.

New initiative

The company said Wednesday its board has approved a plan to create a new non-banking finance arm that would be a captive wholly owned subsidiary. The new company will finance vehicles and, in particular, the two-wheelers, three-wheelers and light four-wheelers manufactured and/or marketed by Bajaj Auto or its related firms.

This could be a big move to deploy extra cash of the company. The name of the proposed company is Bajaj Auto Consumer Finance.

Interestingly, the move would pitch it against Bajaj Finserv, a financial services firm run by Sanjiv Bajaj, brother of Rajiv Bajaj, who runs Bajaj Auto.