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Why Pawan Munjal is 'more optimistic' on two-wheelers

Pawan Munjal, Chairman and Managing Director of the country's largest two-wheeler maker tells Business Standard his outlook on the two-wheeler business has now turned from "cautiously optimistic" to "more optimistic" now as things are going to get much better this year.

September 20, 2016 / 12:16 PM IST
 
 
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Moneycontrol BureauA good monsoon this year coupled with Pay Commission implementation has boosted sentiment for consumption-driven sectors like auto. Along with a spate of other automotive stocks Hero MotoCorp's shares hit record high early this month.

Pawan Munjal, Chairman and Managing Director of the country's largest two-wheeler maker tells Business Standard his outlook on the two-wheeler business has now turned from "cautiously optimistic" to "more optimistic" now as things are going to get much better this year.

Last September the company had launched two in-house developed scooters – Maestro Edge and Duet – that have helped the company gain market share in the scooters segment. While the focus remains on the scooters segment, the company plans new launches both in the scooters as well as motorcycles segments this year.

Besides, with Goods and Services Tax (GST) implementation making taxation policies simpler, the company plans to revive its used two-wheeler business – Sure – which had been closed down due to complicated tax issues.

Munjal, who is also the Chairman of the USD 5-billion Hero Group, talked about other businesses like Hero FinCorp the retail lending arm and second biggest business of the Group.

Hero FinCorp recently raised Rs 1,000 crore to expand retail consumer loans to expand portfolio to retail and corporate customers. Munjal said FinCorp is using Hero MotoCorp’s vast network of 6,000 touch points to become a complete financial services provider.A Bank of America Merrill Lynch (BofML) report on Hero MotoCorp flags growth concerns for the two-wheeler maker. Competition from Honda in the executive motorcycles segment which constitutes 72 percent share of Hero, it says, will make it difficult for Hero to ring in price increases to offset cost increases.  BofML has an 'underperform' rating on the company with a price objective of Rs 3300. It sees strong cost headwinds from three key areas: 1) excise benefits for Haridwar plant will end in FY18/19E; 2) higher R&D spends and 3) BS4 emission-related costs along with higher raw material costs in FY18E.

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