Hero Honda was beset by institutional selling on Monday as concerns over its growth dominated the mindset.
By 14:35 IST, the scrip of the motorcycle major edged lower by 2.22% to Rs 239.85 on BSE. Volumes on the counter reached over 460,000 shares . The scrip has shed 15.5% from Rs 283.60 on 19 December 2002.
Institutions have been offloading heavily on the counter today. There's much concern about the company's future growth. As per market buzz, College Retirement Fund was an active seller on the counter today, offloading around 2.5 lakh shares. Prudential ICICI was believed to have acquired the stock.
Earlier, there were reports that an US- based fund with over 2% stake in Hero Honda, had plans to offload that stake.
Also, there have been reports in the media that Hero Honda may not meet its target of selling 1.8 million motorcycles in the current fiscal ending 31 March 2003. Analysts say rumours have been rife that the current month's figures may also be below the stipulated sales target. Hero Honda will have to sell 173,000 vehicles per month for three months to meet its FY 2002-03 sales target. In the last nine months (April-December 2002), the company registered sales of 1.28 million motorcycles.
Hero Honda recorded a marginal 2.14% rise in motorcycle sales to 1.25 lakh units in December 2002, which was far below market expectations. The company sold 122,000 bikes in the domestic market, while exports grew to 2,268 motorcycles. On a month-on-month basis, the situation was much worse as the company registered a huge 22.3% fall in vehicle sales, from 1.61 lakh motorcycles in November 2002.
Analysts say the real impact of the monsoon is being reflected in the company's sales now. In this backdrop, they are skeptical about the company achieving its sales target for FY 2002-03. Competition is another factor affecting sales. A price war, already on, is expected to hot up further in the coming months between Hero Honda and its rivals Bajaj Auto, TVS Motor, Kinetic and Yamaha in the motorcycle segment.
Earlier, there were reports that Hero Honda had piled up huge inventories at the dealer level, in excess of over 160,000 motorcycles (almost exactly one month's sales). Sluggish sales in December 2002 have led to the piling up of inventory.
On 10 January 2003, Hero Honda unveiled its third quarter (ended 31 December 2002) results. The world's largest motorcycle manufacturer registered a 14.7% rise in net profit to Rs 152.8 crore (Rs 1.52 billion), compared to Rs 133.22 crore (Rs 1.33 billion) in the corresponding period of the previous year. Net sales increased by 12.8% to Rs 1,376.04 crore (Rs 13.76 billion) from Rs 1,219.47 crore (Rs 12.19 billion). Both net profit and net sales fell in line with market expectations.
A capitalmarket.com poll of nine automobile analysts had projected the company's net profit growth in the range of 13.2% to 21.3% to somewhere between Rs 150.77 crore (Rs 1.5 billion) and Rs 161.6 crore (Rs 1.61 billion). Sales were estimated at between Rs 1,340.3 crore (Rs 13.4 billion) and Rs 1,392.8 crore (Rs 13.92 billion), up 9.9-14.2%. The company actually registered a 12.8% rise in sales to Rs 1,376.04 crore (Rs 13.76 billion) in DQ 2002.
Earlier, the company's scrip was included in the derivative segment of both BSE and NSE. The Securities and Exchange Board of India permitted derivatives trading in 31 additional scrips on the NSE, taking the total to 60 stocks and 21 additional scrips on the BSE, taking the total to 50 stocks. Till now, stocks of only 29 companies figure in the derivatives list. The inclusion in the derivatives list is expected to generate more interest in the Hero Honda stock.
FIIs have a substantial holding of 23.23% in Hero Honda, while domestic funds have 5.68%, the Indian public 17.32% and private corporate bodies and NRIs/OCBs 1.76%. The promoters - the Munjal group and Honda Motor Company of Japan - hold a 26% stake each in the company.
BSE Code: 500182