Hero Honda’s Q3 PAT decelerates 20%

Does the profit de-growth signal that India’s largest two-wheeler maker has hit the bumps?

Hero Honda has been in the news for all the wrong reasons in recent times. First, it was the break-up with the Japanese partner which came as a major shocker, and then uncertainty over royalty payments followed by a host of other news that hit confidence in the country’s largest two-wheeler maker. And now the news about its lower profits in the December 2010 quarter further disappoints.

The company which makes popular models such as Passion, Karizma and hugely successful Splendor, today said that its net profit fell by 20% on a year-on-year basis to Rs 429 crore during the Q3FY11, compared to Rs 535.7 crore in the same quarter a year ago, led by a sharper decline in margins to 11.2% from 17.2%, during the said period.

Reportedly, the management has warned that the company’s margins would remain under pressure in the short-term.

In contrast, arch rival, Bajaj Auto had earlier reported strong Q3 numbers for FY11, with its net profits recording y-o-y growth of over 40% to Rs 667 crore and top line jumping nearly 27% to Rs 4177 crore. This was despite a rise in the company’s raw material cost during the December 2010 quarter. 

A section of market analysts have expressed concern over Hero Honda’s growth post-the termination of the 26 years long joint venture between India’s Hero Group and Japanese auto giant Honda. These have also been reports in the media about the Indian partner seeking to dilute its stake in the company. 

-      Amy, Chief Editor

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Tags: Hero Honda, Two-Wheeler,  Honda, world's largest motorcycle company, Third quarter results, Q3, 2011.