Hero MotoCorp expects demand to pick up in H2 of 2019

New Delhi: The country’s largest two-wheeler maker Hero Moto-Corp expects demand to pick up in the second half of the year on back of favourable monsoons and improved liquidity in the market. “The liquidity situation in the market is improving. The RBI has cut rates by 50 basis points. The market expects another round of rate cut. Along with good monsoons and prebuying ahead of the festive season, it should put us back on the growth path second quarter onwards,” said Niranjan Gupta, chief financial officer, Hero MotoCorp.
Gupta, however, cautioned the wholesale volumes in the first quarter would continue to remain weak with manufacturers correcting production to rationalise inventory. Hero, which itself has inventory of 45-50 days, aims to improve stock levels by 5-10 days in the first quarter of the current fiscal.

“Overall for the year, we do expect industry growth to be around midsingle digits… The first half will probably be flattish, the second half closer to 10% growth, 5-7% one would see. And on the back of our launches, we would expect ourselves to do better than industry,” said Gupta to investors in a call after the company’s results.

Hero MotoCorp recently launched three new products in the premium motorcycle segment. The products will be available in the market by the end of the month. The company has also readied for introduction of a scooter in the 125-cc segment.

Gupta said, “The 110-cc scooter segment is declining. The 125-cc scooter segment has grown by 50%. Currently, it accounts for 25% of scooter sales and we expect this to increase to 50% going ahead. We will focus on this segment with Destini and Maestro Edge.” Hero Moto-Corp has a market share of 10% in the entry-scooter segment and of around 20% in the 125-cc segment. To meet future demand, Hero MotoCorp has lined up capex of Rs 1,500 crore in the ongoing financial year to complete construction of its manufacturing facility in Chittoor, Andhra Pradesh and to upgrade products to meet BS VI emission standards. The facility — ninth for the company — will take total installed capacity to 11 million units. Hero MotoCorp sold 7.8 million units in FY19.

Separately, the company said it is 'on-track' to upgrade its two-wheelers to meet BS VI emission standards. Hero MotoCorp will soon launch its first BS VI ready motorcycle. Additional products will be launched sequentially, ahead of the deadline of April 1, 2020. Gupta said he does not see any volume impact on account of the transition in the current fiscal.