Noor

It's not yet a hero, but by making stylish vehicles profitably Bajaj Auto (BAL) has succeeded in mustering up a fan following not just amongst bike aficionados but investors, too.

The Pune-headquartered maker of twoand three-wheelers lags leader Hero Moto-Corp by a fair distance - almost one in two two-wheelers sold in the country is a Hero, while one in five is a Bajaj. In just motorcycles, 56% of buyers ride Hero bikes; BAL's share is less than half that at 25.6%. But where the Rajiv Bajaj-managed company scores is on the profitability front.

Operating margins have been in the 20% region for five quarters now, making BAL easily the most profitable two-wheeler manufacturer in India. For Hero, the corresponding figure is a little under 15%, and for TVS, operating margins are in single digits. So if BAL is ET's Company of the Year, it's for its ability to combine robust growth - sales grew by 35% in the last fiscal year, 11 percentage points faster than the industry growth - with chunky margins.

"The award is a well deserved recognition for what BAL has achieved over the past 2-3 years. The company has managed an outstanding turnaround, led by new variants, a surge in exports, and increased rural penetration," says chairman Rahul Bajaj.

To be sure, over the past few years, BAL has wooed consumers with sporty and stylish versions of the Pulsar and the Discover. Exports and rural sales account for some 30% and 35% of its total sales, respectively. In September, for the first time, BAL's sales crossed the 4 lakh mark. The 75-year-old company is the world's fourth largest two-wheeler maker by volume. Its success, though, lies in its ability to create game-changing brands that attract loyal customers.

When BAL launched the Pulsar in 2001, it set a new benchmark in the space for premium - and powerful - bikes. Four years later it created another segment with the Discover - with 100 and 150 cc engines - for the more conservative consumer with the proposition of fuel efficiency thrown in. The dual-bike strategy has helped the company hold on to its position as India's second-largest bike-maker by volume. And a couple of months ago BAL launched a sporty, rugged avatar of one its earlier models called the Boxer to drive rural sales.

Such market-driven activity is launched with a conscious and constant watch on costs so that profitability is maintained. For instance, analysts point out that whilst rivals court customers with promotions and discounts, BAL counts on the sheer strength of the product to keep the wind in the sales.

BAL has also done well to rein in one of the biggest bugbears of auto makers - high raw material costs thanks to spiralling prices of commodities. If BAL has succeeded in sustaining its robust margin levels, it's because of its focus on high-end bikes like the Pulsar, which ranges from 135 cc to 220 cc.

The 220 cc, for instance, has a price tag of Rs 84,000 (on road in Delhi), two times what the mass market two-wheelers cost. Yet, the Pulsar is also a volume player in its own right, with the entire range accounting for some 30% of BAL's total volumes. Such a product mix explains, to a large extent, BAL's superior margins and higher realisations in what is otherwise a highly-competitive, price-sensitive market.

Yet, BAL has its task cut out if it has to come anywhere close to leader Hero Moto-Corp. The decision to move away from scooters - which have made a strong comeback - may be a decision that may haunt Rajiv Bajaj in the years ahead. Scooters today account for some 18% of all twowheeler sales.

"There are a couple of mistakes BAL has made in terms of new models and discontinuing a few prematurely. But things are looking good for us," says Rahul Bajaj. Also, BAL has a trump card that none of its rivals can boast - it is the world's largest producer of three-wheelers where margins are even higher than in two-wheelers.

Source - ET Awards: Bajaj Auto is Company of the Year - The Economic Times

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uppad1

Bajaj is playing nowadays only by their cheap pricing... they hv powerful bikes but its difficult to call them premium..they r not Honda or yamaha...but they could be... if they improve quality....

inflammable

YAWN.. Atleast the quality is far better than your SO CALLED HONDA... I LOVE Quality ERRR... I LOVE PROFIT... HONDA 250 CBR... Parts falling OFF. Engine seizures.. Paint peeling off.

YAWN again

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--HunK--

Yes they are premium considering the pethatic situation of our roads, and availability of parts, quality service from foreign players..!!! Atleast Bajaj has shown excellence with their engines and world class design ..if not look for monoshocks an exception which i seriously want in my P220 to add style.

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princesirohi

Mr. uppad1:- please do not quote such a lengthy post, while you only have to write two lines, makes it difficult to read the thread and occupies unneccessary space.

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NikhilB

A humble request,

Please don't go around Bajaj quality-bashing on this thread. If you have a beef with any of their bike, complain on the respective threads.

The award seems to have been given to BAL as an Indian Company, so don't go around comparing it with Japs/Italians.
Those guys have been around for more than a century, while BAL is only a few decades old.

Additionally, one cannot deny that as an Indian motorcycle manufacturer (who is going solo) it is the most successful company. The company has dramatically outperformed any other solo Indian manufacturers like TVS and RE.
No, HH does not qualify as an Indian motorcycle manufacturer since the quality and technology is purely Honda's.

That said, BAL sure has some catching up to do. But, do not use that to trounce the fact that they have come a long way.

Over and Out.

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darkknight

I was just going to put this up & surprised that how it wasn't put up on xbhp yet ---

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satyenpoojary

Below the belt hit. OR. A Compliment. I think its NOT the later


Kudos to Bajaj!

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payeng

The major contribution to profitability comes from the fact that the Advertising spends of BAL is negligible compared to others.

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