India’s largest two wheeler company Hero Motocorp raised its motorcycle prices just after announcing its result for financial year 2011-12 on the 2nd May 2012. For the fourth quarter the company posted net profit of Rs. 6.03 billion which is lower than estimated profit of Rs. 6.15 billion guessed by major brokerage houses and investment banks. The company admitted that the rising input cost has hurt the profit of the company.
The company said that rising input cost is due to inflation, depreciation in Rs. currency and rising wages. All these has affected the profitability of the company in the fourth quarter. The company’s 15% parts are imported and due to which import bill remained higher for the fourth quarter. The company said that its focus would be accelerating the growth of number of two wheeler sold and managing key input cost for the financial year 12-13.
To raise the sales the company is planning to add 400 new touch points in the financial year 12-13 coupled with many product launches. The company has raised its product prices by Rs. 500-1000 on major products to offset the rising input cost. That will help the company to post better realization in terms of sales and defending its operating margin.
Hero Motocorp has ambitious target of 7 million units for the financial year 12-13. The company has also increased its capacity to 7 million units in order to achieve the target. The company currently holds market share of 46% in the domestic two wheeler segment which is expected to go down as HMSI is becoming aggressive; Bajaj is defending its market share in the domestic market and entry of new competitors such as Piaggio in the market. Let’s see how the financial year 12-13 goes.