Hero Honda plunged on Wednesday on sustained selling pressure, following reports that competitors have eroded its market share in the bike segment through new launches and aggressive marketing.
By 11:55 IST, the stock of the motorcycle major was the biggest loser among the BSE Sensex constituents, tumbling by 4.05% to Rs 244.20. A volume of 58,003 shares was recorded on the counter. In six sessions between 27 January to 4 February 2003, the scrip rose by 8.4% to 254.50 from Rs 234.75, following hopes that the company may declare a substantial dividend, of Rs 17-18 for the current financial year.
Today's fall on the counter was mainly on reports that the company's market share has witnessed a sustained erosion, following intense competition from other motorcycle majors. According to data from the Society of Indian Automobile Manufacturers, Hero Honda's market share in motorcycles has steadily fallen to 45% in the April-December 2002 period from 49.6% in the year-ago period. In the same period, Bajaj Auto's market share rose from 21.7% to 23% and TVS Motor's share improved from 14% to 19%.
Analysts said the development does not come as a surprise as it is clearly evident from the company's bike sales figures over the last few months. The company is facing cut-throat competition from Bajaj Auto and TVS Motor, they said, adding that the competitors are aggressive in launching new bikes and possess better marketing strategies.
Analysts said the only way the company can beat competition and increase its profitability is by continuously increasing its sales volumes.
Meanwhile, in January 2003, Hero Honda registered a 6.3% rise in motorcycle sales to 145,000 units. But compared to the December 2002 sales figure of 125,000 units, the growth rate of 16% is redeeming. In the April 2002-January 2003 period (10 months), sales rose by 22.7% to 1.42 million units from 1.16 million in the year-ago period.
Even as the motorcycle sales figure for January 2003 is being termed modest, players are disappointed that the company's own target of 173,000 units for the month has been missed. Hero Honda has set out a full year (FY 2002-03) target of 1.8 million vehicles. It will have to sell over 186,000 vehicles over the next two months to achieve that target.
On 31 January 2003, the Hero Honda scrip was included in the derivatives segment of the BSE as well as NSE. The inclusion in the derivatives list is expected to generate more interest in the stock.
Earlier, on 10 January 2003, Hero Honda unveiled its third quarter (ended 31 December 2002) results. It 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 sales were 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 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%.
FIIs have a substantial holding of 23.23% in Hero Honda, while domestic funds have 5.68%. The Indian public owns 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
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