Hero MotoCorp net dips 14% on one-time write-off
NEW DELHI: India’s largest two wheeler manufacturer Hero MotoCorp reported a 14% decline in net profit at `476.53 crore for the quarter ended March 3, pulled down by the `155-crore impairment charge over its US-based technology partner Erik Buell Racing’s bankruptcy last month.
The company’s net profit in the year-ago period was `554.43 crore. Hero had invested `155 crore for a 49.2% stake in EBR in 2013 as it sought partners to shore up its technology, after parting ways with Japan’s Honda Motor Corp late in 2010. The provision for the steep impairment charge means that Hero is hedging for a write off of the entire investment in EBR.
“The net profit is after impairment of `155.04 crore of equity investment in Erik Buell Racing,” the company said in a statement to the Bombay Stock Exchange.
Hero was banking on EBR’s distribution and network to foray into the US market, but the bankruptcy is likely to delay those plans.
The board of directors has approved setting up a wholly owned subsidiary in the US for providing research, development and consulting services, distribution, marketing and promotion of two-wheeler vehicles and other ancillary activities. An initial corpus of `35 crore has also been set aside that could entail purchase of assets.
The fir m’s tur nover during the quarter grew 4.3% at `6793.87 crore even as its sales suffered a near 1% drop on the back of unseasonal rains that hampered farm incomes. For the full financial year, the firm’s net profit grew 13.1% at `2,385.64 crore, while turnover grew 9.1% at `27,585.30 crore.
“The industry has remained sluggish due to the slowing rural economy on account of poor crop realisation and moderating wages in the rural markets. Going forward, we remain cautiously optimistic in our near to medium-term outlook,” said Pawan Munjal, vice chairman, chief executive officer and managing director, Hero MotoCorp.
Munjal said an overall improvement in the economy and positive market sentiments were necessary to get the industry back on the track of double-digit growth.