Bajaj Auto shares slump 12% over poor festive sales outlook, drags down market

Bajaj Auto's shares tumbled 12 per cent on Thursday after the Indian motorcycle maker said it anticipated weak festive season sales, a warning that slammed other automakers and also pulled down the broader market.

India's third-biggest motorcycle maker by sales said festive sales of motorcycles had grown only about 1 per cent-2 per cent so far this month, falling short of market expectations of 5 per cent- 6 per cent.

This indicated that the season, which runs from October to November and when Indians generally make big-ticket purchases, would see sales growth of just 3 per cent-5 per cent, well below industry expectations of at least 8 per cent.

Sales of vehicles, including motorcycles, generally peak during the festive period.

The warning by Bajaj, the first automaker to report its results, weighed on the broader market, which fell 0.7 per cent, as the forecast all but confirmed that high inflation, especially in food prices, forced consumers to limit expensive purchases in the roughly month-long season that started in early October.

It also sharply contrasts the overall 13.4 per cent growth in domestic motorcycle sales from April to September and Bajaj's own 9 per cent rise during that period.

"Contrary to our expectations, the festive season has started on a weaker note and we do see a downside risk to the domestic two-wheeler industry growth assumptions if demand trends do not see a pick-up during the Diwali festival," Kotak Institutional Equities said in a note.

The brokerage expects two-wheeler makers to report festive season sales growth in the low-double digit range.

The day's fall wiped out 383.02 billion rupees ($4.56 billion) from Bajaj Auto's market cap, which is also India's top two-wheeler exporter.

Its warning dragged down its bigger two-wheeler rivals Hero MotoCorp and TVS Motor by about 4 per cent each. The Nifty Auto index tumbled 3 per cent.

While Bajaj Auto's quarterly profit growth and margins largely met expectations, analysts said the stock's current valuation appeared to have priced in all positives.

($1 = 83.9930 Indian rupees)

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