Honda Motorcycle FY21 profit drops 87% to Rs 152 crore, lowest in six years – ET Auto

The operating profit fell 36 per cent year on year to Rs 1,396 crore last fiscal as the raw material to sales increased to 73.8 per cent, an increase of 488 basis points over FY20.

Honda Motorcycle and Scooter India (HMSI) has posted an 87 per cent drop in its net profit for 2020-21 at Rs 152 crore, registering its lowest net income in six years, while its revenue fell 5 per cent year on year to Rs 22,423 crore.

The net profit has dropped to almost one-thirteenth of what the Indian unit of Japan’s largest two wheeler maker Honda Motor Company generated just four years back at Rs 1,983 crore in FY18.

The lower operating leverage due to falling volumes, rising raw material costs and exceptional cost related to VRS weighed on the financials of HMSI, which was severely hit by the first wave of Covid-19 and resultant economic impact on urban markets.

The operating profit margin of HMSI was 6.22 per cent in FY21, one the lowest among the major two-wheeler makers, according to the company’s filing with the Ministry of Corporate Affairs shared with ET by business research platform Tofler.

The operating profit fell 36 per cent year on year to Rs 1,396 crore last fiscal as the raw material to sales increased to 73.8 per cent, an increase of 488 basis points over FY20.

An email sent to Honda Motorcycle & Scooters India did not elicit any response as of press time Wednesday. Reviewing the business in FY21, HMSI directors report said the unprecedented pandemic impacted not only the global and Indian economy but also the two-wheeler industry in India.

“While the first quarter put business on pause mode, the second quarter was about stabilising the ecosystem and meeting the pent-up demand,” the report said. “Driven by the demand recovery in the third and fourth quarters, Honda 2Wheelers India closed FY20-21 with total sales of 4,073,182 two-wheelers,” the report said.

HMSI’s revenue is equivalent to about 71 per cent of the total revenue of the Hero MotoCorp, India’s largest two-wheeler company, in FY21 compared with about 80 per cent a year before and it accounts for one-fifth of the total Industry revenue.

The maker of Activa scooter witnessed volume sales drop of 19 per cent at 4.07 million in the last fiscal, one of the highest drop in percentage terms among the large mass market two-wheelers company in India. Domestic volume fell 18 per cent to 3.86 million, while export volume slid 36 per cent to 0.2 million.

HMSI’s market share in the domestic two-wheeler slid to 25.6 per cent in FY21, the lowest since FY14, while market leader Hero MotoCorp market share rose 1.3 per cent to 37 per cent, the highest since FY16.

HMSI was able to maintain one the highest realisations in the mass market two-wheeler segment that increased 17.5 per cent year on year to Rs 55,050 per unit on the back of increased prices mainly due to the BS6 transition and slightly richer portfolio.

This was the prime reason the company was able to restrict revenue drop to 5 per cent while volume fell 19 per cent. While the mainstream business was facing the heat, the company strengthened its game in the premium end (300 cc and above) of the market.

The premium bike division, Big Wing added five new models in the mid-size motorcycle segment, including all-new Hness CB350 and CB350 RS aimed at challenging Royal Enfield’s mainstay. HMSI was able to sell 10,000 units in just three months of its launch. The company expanded its BigWing touchpoints to 50 by the end of March.

It also beefed up with the Indian debut of CB500X, CB650R in addition to the 2021 CBR 650R. The company also launched 3 models in 1000cc+ segments – CBR1000RR-R Fireblade and Fireblade SP in the super-sports category and 2021 Africa Twin Adventure Sports in adventure category.

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