Record Sales Help Hero MotoCorp As It Awaits GST Refund

Hero MotoCorp Ltd. reported a flat profit growth as input costs rose and India’s largest two-wheeler maker accounted for only part of the incentive available under the Goods and Services Tax.

Net profit increased 0.6 percent year-on-year to Rs 1,010 crore in the quarter ended September, according to its stock exchange filing. The consensus estimate of analysts tracked by Bloomberg stood at Rs 1,035 crore.

Revenue increased 7.3 percent over the year-ago period to Rs 8,362 crore. That missed the Rs 8,815 crore forecast. Other income stood at Rs 118 crore.

The maker of Splendor motorcycle and Hero Electric scooters sold more than 20.2 lakh units during the period, its highest-ever quarterly sales, the company said in a media statement. That included a record 7.2 lakh units in September alone.

The industry rebounded in the festive quarter, largely aided by the positive sentiment in the urban and rural markets, Pawan Munjal, chairman and managing director at Hero MotoCorp, said. With a series of new products and brand-building initiatives in the global markets, the company is confident of carrying the momentum in the second half, he said.

Hero MotoCorp’s operating income, or earnings before interest, tax, depreciation and amortisation grew 6 percent to Rs 1,456 crore. Operating margin narrowed 20 basis points to 17.4 percent due to higher aluminum and steel prices. Raw material costs rose 9.89 percent to Rs 5,625.8 crore.

The company factored in only 58 percent, or the central government’s share, of the incentive available under the GST for its Haridwar plant, the company said in a statement. It awaits a notification for the rest from the state government. The new nationwide tax regime allows tax refunds to industries in hill states and the northeast for 10 years, a benefit that was available to them in the pre-GST regime.

Also, the effective tax rate for the quarter was higher as investment allowance was phased out and the deduction allowed for R&D expenditure also declined under GST, it said.