Maintaining margins difficult: Bajaj Auto

India’s second largest bike maker, Bajaj Auto, has said that maintaining profit margin at the present high level would be a big challenge. Bajaj quarterly profit ending March more than quadrupled. Bajaj registered a net profit of Rs 5.29 billion for the final quarter as compared to the Rs 1.3 billion a year ago.

The company’s operating margin shot to 22.9 percent from 14.2 percent a year ago. The rising prices of raw materials have been negated by the strong sales.

“On the material costs, side there will definitely be an increase,” Kevin D’sa, vice president, finance, Bajaj Auto, said. “If you take a longer term view and don’t look at it quarter on quarter, the margin of 22.9 percent will be a challenge to maintain.” He said pressure on margins could be offset to some extent by higher margins from more powerful bikes such as the Pulsar and other high-end bikes, and increased exports.

Along with Pulsar, Bajaj also manufactures and sells more popular brands including 100-cc Discover. These two bikes are expected to sell more than 1 million units annually in the upcoming years. In the March quarter, Bajaj sold 712,410 motorcycles, almost double from the previous year.

Bajaj is also ready with the engine for its ultra low cost small car that it is building in alliance with Renault and Nissan. The small car would directly compete with Tata Nano as the world’s cheapest car.