Companies' Group Structures

Bajaj Auto: Future Ahead !

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(A) Introduction

  • Bajaj Auto Ltd. (BAL) is one of the leading two & three wheeler manufacturers in India. The company is the largest exporter of two and three-wheelers in India.
  • Eventually, BAL successfully changed its image from a scooter manufacturer to a motorcycle manufacturer. Vespa (under license of Piaggio) and Chetak are the popular scooters of BAL. CT, Pulsar, Platina, Discover, Boxer and Avenger are the popular brand names of motorcycles by them.
  • 4th generation of Bajaj Family manages the company at present. Mr. Rajiv Bajaj (MD & CEO) is the son of Mr. Rahul Bajaj. Rahul Bajaj is the leader of the Bajaj Group (Read the complete structure) and Group Chairman.

(B) About the Executive Management

(i) Mr. Rahul Bajaj (Chairman)

Mr Rahul Bajaj is the Chairman of the Bajaj Auto and also of Bajaj Group. He is MBA from Harvard University. His remuneration for FY19 is 11.42 crore.

(ii) Mr. Rajiv Bajaj (Managing Director)

Mr. Rajiv Bajaj is son of Mr. Rahul Bajaj. He is managing director of Bajaj Auto since 2005. His education includes bachelor degree in mechanical engineering from the College of Engineering, Pune, and a master degree in manufacturing systems engineering from the University of Warwick, UK. Mr. Rajiv received remuneration of 32.31 crore in FY19.

(iii) Mr. Pradeep Shrivastava (Managing Director)

Mr. Pradeep Shrivastav is B.Tech (Mechanical Engineering) from IIT, Delhi in 1981. Also, he holds PGDM from IIM, Bangalore. After completing his engineering he started his career as Assistant Engineer (Maintenance) in Tata Motors worked here for around 4 years. He joined Bajaj Auto in April 1986. His remuneration is 6.65 crore for FY19.

(iv) Mr. Rakesh Sharma (Executive Director)

Mr. Rakesh was appointed executive director on 1 January 2019. Rakesh Sharma is a Commerce (Honours) graduate from the Delhi University and an M.B.A from IIM, Ahmedabad. Prior to joining Bajaj Auto Ltd., he worked for over 20 years with the British ICI Group in multiple roles. Also, Mr Rakesh is chairman of the Exports Council of SIAM (Society of Indian Automobile Manufacturers). His remuneration for the FY19 is 5.48 crore.

(C) Major Events of Bajaj Auto

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Bajaj Auto research report all event 2019 updated
Bajaj Auto research report all event 2019 updated

(D) Shareholding Pattern

As on 30th June 2019, the Promoters of BAL held 53.52% of the total shares of the company. Institutional shareholding is 23.18% and balance 23.3% are held by Non-Institutional shareholders. Click to enlarge image

Analysis of shareholding pattern of bajaj auto
Analysis of shareholding pattern of bajaj auto

Shareholders holding more than 1%

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Analysis of shareholding pattern of bajaj auto
Analysis of shareholding pattern of bajaj auto

(E) Product Categories of Bajaj Auto Ltd

The products of BAL can be classified according to their price, features and positioning.

(a) Motorcycles

(i) Entry Level Segment:

This is the product segment where the price is low and mileage is high. Company has ~35.4% market share in this segment for FY19. Bike brands under this category are CT100, Platina, Discover 100, and Discover 110.

(ii) Commuter and Commuter Deluxe:

The company has not so strong brand position in this segment. The market share in this segment is declining in the past few years. Therefore, this segment affects the overall growth.  Discover 125 and V come under this category.

(iii) Sports Segment:

This category is for young generation. Pulsar and Avenger are the brands under this category. Market share of the segment is ~44% for FY19.

(iv) Super Sports Segment:

This includes the premium bikes. KTM, Pulsar RS 200 and Dominar 400 are under this segment. The market share of this segment is ~7%.

(b) Commercial Vehicles

(i) Passenger Carriers:

Bajaj Maxima comes under this category. Bajaj Maxima is a very popular three wheeler in India and Abroad. The market share is 64.3%

(ii) Goods Carriers:

BAL also manufactures carriers for transporting of goods within city. The market share is 23.8%.

*market share stated above is in terms of volume sold by as a % of total industry units sold domestic and exports.

(F) Revenue from Operations

Revenue of BAL is categorized on the following basis:

(a) On the basis of Geography

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bajaj auto research report with geographical market coverage
bajaj auto research report with geographical market coverage

(b) On the basis of Business Segment

BAL reports Automotive and Investment as two segments for segment reporting. Firstly, Automotive (96% of the revenue) includes revenue from production and sale of Two-wheeler/Three Wheelers which is the core business activity. Secondly, Investment (4% of total revenue) includes revenue from interest/Dividend and profit/loss on sale of investments.

(G) Sales Volume

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bajaj auto research report detail of domestic and export sales
bajaj auto research report detail of domestic and export sales

Number of Motorcycles sold in FY19 totaled 42,36,873 and 33,69,334 in FY18, thus increase by 25%. On the other hand, Sale of commercial vehicles in number is 7,82,630 for FY19 and 6,37,457 in FY18. Thus rise of 22%.

(H) Production Facilities

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research report bajaj auto manufacturing facilities
research report bajaj auto manufacturing facilities

(I) Production Capacity & New Projects

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research report bajaj auto manufacturing capacity 2019
research report bajaj auto manufacturing capacity 2019

Currently the ongoing newest project is Quadricycle – QUTE. The company sold 4,400 (nos.) of Qute in various international markets and 627 (nos.) of in domestic markets during the year 2018-19.

For FY19, Bajaj Auto’s installed capacity for Commercial Vehicles was 9,30,000 units which stood at 8,40,000 for FY18.

(J) International Business

In revenue and sales volume nearly half is contributed by exports. Thus, international business is a major part Bajaj Auto’s core business. BAL sold 4400 units of ‘QUTE’ in international market in FY19. Motorcycle exports increased by 21%. Above all, CV exports increased by 43% in FY19. Total exports rose by 17.8%. The company has a huge potential in export market. With Exports in 79 countries including Latin America, Africa, South Asia, Middle East, Asia Pacific and Europe, the company is market leader for export of 3 wheelers. BAL has 2/3rd market share in 3-wheeler exports. Click to enlarge image

research report bajaj auto international presence and business
research report bajaj auto international presence and business

(K) Market Share of Bajaj Auto

Market Share is the portion of the whole market served by a company. Segment wise Market Share of Bajaj Auto Ltd: Click to enlarge image

Current market share of bajaj auto
Current market share of bajaj auto

(L) Foreign Earnings of Bajaj Auto

The net foreign earnings are positive because of huge exports. The foreign earnings are nearly 12 times the foreign outgo. Click to enlarge image

bajaj auto research report with details of foreign earnings
bajaj auto research report with details of foreign earnings

(M) R&D

Bajaj Auto incurs expenditure on R&D to improve its products performance over competitors and maintain market position. Click to enlarge image

bajaj auto research report with details of research and development
bajaj auto research report with details of research and development

Capital expenditure includes technical know-how expenditure also.

(N) Group Structure

Bajaj Auto has 2 subsidiaries and no holding or associate company. Click to enlarge image

bajaj auto research report with details of group structure
bajaj auto research report with details of group structure

(O) Competitors

Segment wise competitors (listed entities):

competitors of bajaj auto
competitors of bajaj auto

(P) Competitive Advantage (Moat) for Bajaj Auto

Bajaj group has a good brand reputation in the market. BAL has experienced management team, as they are in this field for many years. So they know the needs of market. Their tie up with KTM also gives them advantage over competitors. Brands like CT100. Discover, Pulsar and Platina are really famous in India. Bajaj Maxima in three wheeler category is also a successful product.

(Q) Distribution Network

BAL has a strong dealer base in India. With 700 dealers and 3000 sub-dealers their presence is very strong. Further, BAL is planning to add 40-50 dealers and 400 sub-dealers till Dec 2019.

(R) Bajaj Auto Concall Highlights

For the Quarter 4 FY19:

  1. As, EV is the future of vehicle market in India in next few upcoming years. The company is working on the prototypes of Electric Vehicle Three Wheeler.
  2. Receivables increased quite significantly in this quarter. This is because of extending more credit period to the dealers.
  3. Avenger 160 and new version of Dominar will soon be launched in market.
  4. No new brand will be launched by the company. But existing brands’ expansion is in focus.

For the Quarter 1 FY20:

  1. Discover is performing poorly from past some years but company has no plan to discard it in future. Because of the good followership.
  2. There is increase in average selling price (ASP) by 1.5 to 2 percentage points.
  3. BAL is ready with its BS-VI vehicles. Further, the launching depends on external factors.

(S) Opportunities and Risks

Opportunities

  1. Huge Domestic market: BAL is operating in India which will see a huge growth in the upcoming years. With the increase in national income and per-capita income, more and more people will buy motorcycles. BAL has strong position in entry level segment. In addition, 3-wheelers shall also see this type of growth.
  2. Export Potential: The company is presently exporting 40-45% of their total sales. Though there is downturn in some countries like Egypt, Sri Lanka, Iran and other African countries. But in future when they come out of this there will be huge opportunities for them.

Risks/Concerns

  1. Economic Downturn: There is downturn in India and Automobile sector is declining from last 10 months. Due to this, Bajaj Auto’s sales growth also reduced. But this is temporary.
  2. BS-VI: Government of India announced the BS-VI implementation. So the manufacturers have to make their products according to BS-VI rules and specification. This has been a challenge for the industry as whole and resulted in a great downturn.
  3. Electrification of vehicles: With reduction in GST rates on Electric Vehicle and Charging stations and extra incentives in the form of cheap loan, interest deduction, the Modi Government is promoting the use Electric Vehicles. Thus, it is a major modification and challenge for automobile manufacturers.

(T) Future Course of Action of Bajaj Auto

The company is exploring more and more export opportunities. Egypt is a good market for them but the sales are slow at present because of regulatory environment. When the rules get simpler and license can be easily received for three wheelers, their export to Egypt will see a rise. Due to large available opportunity, Bajaj Auto wants to earn more from exports. W.r.t. R&D Bajaj Auto is working on Electric Vehicles. Also, BAL is planning to launch E-Scooter Urbanite in FY20.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. The report & references mentioned are only for the information of the readers about the industry stated.

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