Hero Honda slipped on across-the-board selling pressure on Monday, especially from institutions, following growth pangs.
By 14:35 IST, the scrip of the motorcycle major was down by 2.22% to Rs 239.85 on the BSE. A relatively higher volume of over 460,000 shares was recorded on the counter. In the last one month, the Hero Honda scrip shed 15.5%, from Rs 283.60 on 19 December 2002.
Monday's fall on the counter was due to heavy offloading by institutions. There were concerns over the company's future growth. As per market buzz, College Retirement Fund was an active seller on the counter, 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 offloading its stake.
Meanwhile analysts said the Hero Honda stock also slipped on reports that the company may not meet its target of selling 1.8 million motorcycles in the current fiscal ending 31 March 2003. Analysts said there were also rumours 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 125,000 units in December 2002, which was far below market expectations. The company sold 122,000 bikes in the domestic market, while exports surged 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 161,000 motorcycles in November 2002.
Analysts said the real impact of the monsoon is being reflected in the company's sales now. In this back-drop, 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 a pile-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 its 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 also 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 and Rs 161.6 crore (Rs 1.61 billion). Sales were estimated between Rs 1,340.3 crore (Rs 13.4 billion) to 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
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