Sri Lanka import rule to hit Bajaj

Published on : October 23, 2017 Topic : Import

NEW DELHI: Homegrown automaker Bajaj Auto’s results for the second quarter last week, despite a marginal fall in net profit, managed to incite interest from investors. Share prices jumped by three per cent as the firmrecorded its first positive year-on-year volume growth in a nearly five-month period at four per cent and revenues grew eight per cent.

Also driving sentiments was the gradual revival in overseas demand. The positive impact from this latter factor, however, could be threatened by the Sri Lankan government’s plans to begin restricting the import of three-wheelers -- a large portion of which is sold by the Bajaj group. “We have over a million trishaws and our roads cannot take any more,” Sri Lankan Transport Minister Nimal Siripala de Silva told the country’s Parliament. Sri Lanka has over 1.2 million three wheeler taxis, known as trishaws on roads.

While no firm decision has been taken by the island country’s government, any such move might affect Bajaj’s sales performance. According to available data, the company’s positive volume growth saw substantial contribution from the three-wheeler segment, which grew 14 per cent. The total contribution from this segment also grew by one per cent sequentially (100 basis points) to 14 per cent and its profitability has always been higher than two-wheelers. Three-wheelers, while comprising only 14 per cent of volumes, accounts for about 23 per cent of the firm’s operating profit.

Sri Lanka has traditionally been a strong export market for the company, including Bangladesh and Nepal. However, any restrictions on three-wheeler imports to Sri Lanka might be mitigated by its efforts to deleverage its dependence on such markets and increasing the share of newer markets like Iraq, Afghanistan, Turkey, Philippines etc.New markets now contribute 16 per cent of the total export volumes as compared with 10 per cent in the previous fiscal.

Source: The New Indian Express
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