Hero Honda eyes double-digit growth

Ruling out setting up its third plant in the near future, India's biggest motorcycle maker Hero Honda said on Thursday that production capacity was sufficient to clock double digit growth this fiscal.

"The third plant will come up at the right time. We are confident of posting a double-digit sales growth by the end of this fiscal," Hero Honda chairman Brijmohan Lall Munjal said.

Earlier, the company had announced that the feasibility study to set up the third plant would be out by December 2003, as the two existing facilities in Haryana were functioning at optimum level.

Production capacity at both the plants was recently augmented to 2.4 million units annually from 2.2 million units earlier, he said.

Asked to quantify the increase in sales during this fiscal, Mumjal said, "We will post double digit (10-20 per cent) this year".

The bountiful monsoon gave a major boost to sales this year, especially in September, he said adding there has been strong demand from rural areas.

The company, which earmarked Rs 80-100 crore (Rs 800 million-Rs 1 billion) for product development and expansion, had announced it would need the third plant in view of growing sales but put the idea on the backburner as motorcycle sales slowed down during the fourth quarter of last fiscal.

Queried about any price hike in view of escalating input costs like steel and rubber, Munjal said there was no need to increase prices at this stage.

"We will try to absorb costs as far as possible," he said.

Munjal said the combined sales of the company's entry-level motorcycles like 'CD Dawn', 'CD100', and 'CD100SS' have gone up significantly.

Motorcycle sales, which went into an overdrive for the better part of 2002-03, hit a speed breaker during the last quarter, mainly due to deficient monsoon, petrol price hike and the value added tax regime imbroglio.

Buoyed by good monsoon and increase in rural income, coupled with the just-concluded festival and marriage seasons, motorcycle sales would get a major boost by the third quarter this year, Munjal said.