Bajaj Auto, that stock is down around 12 odd percent. Now, obviously, one of the major reasons behind this fall is the fact that the management commentary, which suggested that the festive demand sales were quite weak. What other reasons could be the factor behind this 12% fall that we are seeing in the share prices?
Mayur Milak: I do not know really to comment on the 12% thing, but I think two things that I would like to highlight. One, of course, that valuations in this sector have continued to be rich, on the rich side for quite some time now. A lot was really looked forward to in terms of how the festive demand would look like, not to take away the fact that last year we were already on a high base, so really expecting a 10% to 20% kind of growth on that high base was really impossible task to achieve.
So, that really has come to the fore right now. People are realising that this is going to end like a 2% to 5% kind of growth for which these kind of valuations are really not justified in the long run.
So, I would say this is more like a value correction than anything particularly for Bajaj Auto whose 500 crore loss that they have provided for, I think that also should not be really overlooked.
This is really coming from one of their overseas associates. Now, if you made a 2,000 crore profit for yourself and you are registering a 500 crore associate loss, I think that would have also had some kind of impact on this individual shortfall.
What are your channel checks suggesting? How have been the early trends for auto companies and what are dealers suggesting to you?
Mayur Milak: From what we gathered, we are looking at more like a 5% kind of growth is what we have kind of calculated. I am not too sure how the data pans out in future. But yes, I would rather treat it like this that.
As pointed out, last year was a very good season and if you are doing that kind of growth of 4-5% growth also, should not really be super disappointing, at least not to the disappointment that we are seeing in the stock price. But I think the stock price correction is more to do with value correction rather than a particular event.
Do you believe that for the full financial year also, all the auto companies will be able to meet their sales volume guidance?
Mayur Milak: So, by and large, the large anticipation is about 6% to 8% volume growth. In India, last two-three years, we have seen more of a value growth preposition than a volume growth. We have been on the premiumisation path. We have actually given a better realisation growth to the companies than overall volume growth. So, I think that trend seems to be maintained. I am not seeing a huge risk of a serious down cut. By and large, the Street was anticipating about 6% to 8% and this is where we should be.
