HMM expects sales growth in hard time

Agencies

Mumbai: Hero Honda Motors Ltd expects sales to continue to grow in the 2009/10 fiscal year, in spite of economic slowdown.

Hero Honda, 26-percent owned by Japan's Honda Motor Co, expects revenue growth to slow in the fourth quarter of the 2008/09 fiscal year, from 11 percent in April-December to "high single digits" for the full year, Managing Director and Chief Executive Pawan Munjal told Reuters.

The firm is looking to maintain growth and continue to gain market share in the fiscal year starting in April by focusing on the rural market and continuing to carry out an aggressive marketing campaign, Munjal said.

One of the biggest problems Hero Honda faces is banks' unwillingness to lend to people who purchase two-wheelers, Munjal said.

"This is a big one for us. The banks are very, very risk averse," he said, noting that whereas two years ago around 50-60 percent of its sales were on credit, that proportion had fallen to 30-40 percent, he said.

Hero Honda reported a forecast-beating 7.1 percent rise in net profit for the December quarter, helped by falling commodity prices, a cut in excise duties and sales in rural areas.

"I think we'll be maintaining a pretty healthy margin," Munjal said, declining to give a full-year profit outlook.

The company does not plan to cut staff or, conversely, to invest in new capacity, Munjal said.

It will continue to target rural markets, he said.

"I believe that's where more of the growth is going to come from. The government's policies over the last couple of years have been to grow the agricultural sector, to take infrastructure into the rural areas, so there is money getting to the rural consumer."