Bajaj Auto Ltd:Annual Report 2023-24 Analysis

Bajaj Auto Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Bajaj Auto Ltd. was established in 1945 by Jamnalal Bajaj as M/s Bachraj Trading Corporation Private Limited. Initially, the company imported and sold two- and three-wheelers. It began manufacturing operations in 1959 under the name Bajaj Auto Private Limited.

Headquarters Location and Global Presence:

The company’s headquarters are located in Pune, Maharashtra, India. Bajaj Auto has a significant global presence, exporting to numerous countries across Africa, Latin America, Southeast Asia, and the Middle East.

Company Vision and Mission:

• Vision: To be a global leader in mobility solutions, driven by innovation and customer centricity.
• Mission: To anticipate customer needs and exceed expectations by providing high-quality, reliable, and value-for-money mobility solutions.

Key Milestones in Their Growth Journey:

• 1959: Commenced manufacturing two- and three-wheelers in India.
• 1972: Launched the iconic Bajaj Chetak scooter, which became a household name in India.
• 1986: Became the world’s fourth-largest two- and three-wheeler manufacturer.
• 2007: Forayed into the motorcycle segment with the Pulsar range, which revolutionized the Indian motorcycle market.
• 2021: Launched Chetak Electric scooter, marking entry into electric vehicle segment.

Stock Exchange Listing Details and Market Capitalization:

Bajaj Auto Ltd. is listed on the Bombay Stock Exchange (BSE: 532977) and the National Stock Exchange (NSE: BAJAJ-AUTO).

Recent Financial Performance Highlights:

• Refer to Bajaj Auto’s official investor relations website or financial news sources for the most up-to-date financial performance data (revenue, profit, margins, etc.).

Management Team and Leadership Structure:

• Chairman Emeritus: Rahul Bajaj (Deceased)
• Chairman: Niraj Bajaj
• Managing Director: Rajiv Bajaj
• Details on other key management personnel can be found on the company’s official website.

Notable Awards or Recognitions:

• Bajaj Auto has received numerous awards and recognitions for its business performance, innovation, and sustainability efforts. Check the company’s website or press releases for specific examples.

Their Products #

Complete Product Portfolio with Categories:

• Motorcycles:
  • Commuter Motorcycles (e.g., Platina, CT100)
  • Premium Motorcycles (e.g., Pulsar, Dominar, Avenger)
• Scooters:
  • Electric Scooters (e.g., Chetak)
• Three-Wheelers:
  • Passenger Carriers (Auto Rickshaws)
  • Goods Carriers

Flagship or Signature Product Lines:

• Pulsar: The Pulsar range of motorcycles is a flagship product line known for its sporty design, performance, and technological features.
• Chetak: The original Chetak scooter was iconic; the revived Chetak electric represents Bajaj’s entry into the EV market.

Key Technological Innovations or Patents:

• DTS-i (Digital Twin Spark Ignition): A technology used in Bajaj motorcycles to improve engine performance and fuel efficiency.
• Triple Spark Technology: Further refinement of ignition technology, offering better combustion and power.
• ExhausTEC: Technology focusing on improved exhaust system performance for better engine efficiency.
• Electric vehicle technology for the Chetak electric scooter.

Manufacturing Facilities and Production Capacity:

Bajaj Auto has multiple manufacturing facilities in India. Major plants are located in:

• Chakan (Maharashtra)
• Waluj (Maharashtra)
• Pantnagar (Uttarakhand)
• Ranjangaon (Maharashtra)

Production capacity details should be sourced from the company’s annual reports or investor presentations.

Quality Certifications and Standards:

Bajaj Auto adheres to international quality standards such as ISO 9001.

Unique Selling Propositions or Technological Advantages:

• Value-for-money products.
• Strong brand reputation and customer trust.
• Wide distribution and service network.
• Focus on innovation and technology.

Recent Product Launches or R&D Initiatives:

• Refer to the company’s website and press releases for information on recent product launches and R&D initiatives.

Primary Customers #

Geographic Markets (Domestic vs. International):

Bajaj Auto has a strong presence in both the domestic Indian market and international markets. Key international markets include Africa, Latin America, Southeast Asia, and the Middle East.

Distribution Network and Sales Channels:

Bajaj Auto has a widespread distribution network across India and its export markets, including dealerships, service centers, and retail outlets. They also have a growing online presence.

Major Competitors #

Direct Competitors in India and Globally:

• India: Hero MotoCorp, TVS Motor Company, Royal Enfield, Honda Motorcycle & Scooter India (HMSI)
• Globally: Yamaha, Honda, Suzuki (depending on the specific product category and region)

Competitive Advantages and Disadvantages:

• Advantages: Strong brand, extensive distribution network, competitive pricing, good fuel efficiency.
• Disadvantages: Intense competition, fluctuating raw material prices, evolving consumer preferences.

How They Differentiate From Competitors:

• Focus on value engineering and affordability.
• Emphasis on sporty styling and performance (particularly in the Pulsar range).
• Growing presence in the electric scooter market.

Market Positioning Strategy:

Bajaj Auto positions itself as a provider of affordable, reliable, and technologically advanced two- and three-wheelers. They target a broad customer base, from budget-conscious commuters to performance-oriented riders.

Future Outlook #

Expansion Plans or Growth Strategy:

• Expanding its presence in international markets.
• Increasing its focus on the electric vehicle segment.
• Investing in research and development to develop new and innovative products.

Upcoming Products or Innovations:

• Electric scooters and motorcycles.
• New models and variants in existing product lines.
• Technological advancements in engine performance, safety, and connectivity.

Sustainability Initiatives or ESG Commitments:

Details on sustainability initiatives should be sourced from the company’s official reports.

Industry Trends Affecting Their Business:

• Growing demand for electric vehicles.
• Increasing urbanization and congestion.
• Rising fuel prices.
• Evolving consumer preferences for safety, comfort, and connectivity.

Long-Term Vision and Strategic Goals:

• To be a global leader in mobility solutions.
• To create sustainable and profitable growth.
• To enhance customer satisfaction.

Bajaj Auto Performance Overview: FY2024 #

3-Year Trend Analysis of Key Financial Metrics #

Revenue #

Bajaj Auto’s total operating income exhibited a consistent upward trend, increasing from ₹37,643 crore in FY2023 to ₹46,306 crore in FY2024, representing a growth of 23%.

EBITDA #

The company’s EBITDA has grown, reaching ₹8,825 crore in FY2024, up from ₹6,551 crore in FY2023 showing an increase by 35%.

Profit Before Tax (PBT) #

PBT increased from ₹7,842 crore in FY2023 to ₹10,040 crore in FY2024, reflecting a growth of 28%.

Profit After Tax (PAT) #

PAT showed a 27% increase, rising from ₹6,060 crore in FY2023 to ₹7,708 crore in FY2024.

Operating EBITDA Margin #

The operating EBITDA margin improved by 170 basis points, from 18.0% in FY2023 to 19.7% in FY2024.

Free Cash Flow #

The company generated nearly ₹6,600 crore of free cash flow in FY2024, up ~45% YoY.

Surplus Cash and Cash Equivalent #

Surplus cash and cash equivalents stood at ₹ 16,386 crore as of March 31, 2024.

Return on Equity #

Increased from 21.6% in FY2023 to 29.7% in FY2024, indicating improved profitability relative to shareholders’ equity.

Business Segment Performance #

Automotive Segment #

Revenue increased from ₹36,665 crore in FY2023 to ₹44,870 crore in FY2024. Segment results (Profit before tax) grew from ₹6,905 crore to ₹8,708 crore.

Domestic Motorcycles #

Domestic sales increased by 19.9% exceeding 2.1 million units with a market share gain of 90 bps.

Exports #

Exports, which account for over 40% of the total, were recorded at 1.64 million units in FY24 and 1.82 million in FY23.

Financing Segment #

Introduced in FY2024, this segment reported a revenue of ₹17 crore and a loss of ₹25 crore.

Investments and Others #

Revenue from this segment increased from ₹978 crore in FY2023 to ₹1,419 crore in FY2024, with a corresponding increase in segment results from ₹976 crore to ₹1,417 crore.

Major Strategic Initiatives and Their Progress #

Electric Vehicles (EVs) #

Chetak Technology Ltd. (CTL) sales saw substantial growth, with volumes tripling year-on-year. CTL is focusing on expanding its network and product innovation.

Captive Financing Arm #

Bajaj Auto Credit Ltd. (BACL) commenced operations in January 2024, aiming for national presence across the sales network by the end of March 2025. In its first three months, BACL financed 35,238 two-wheelers and 13,972 three-wheelers.

Triumph Motorcycles #

Post its launch, Triumph delivered over 40,000 units in eight months, with expansion across 56 cities in India and 16 export markets.

Risk Landscape Changes #

A dedicated Risk Management Committee oversees the risk management process, with policies covering identification, assessment, and mitigation of various risks, including financial, operational, sectoral, sustainability, information, and cyber security risks.

• The Company’s current Risk Managment Policy details, inter alia, the framework for identification of internal and external risks faced by the Company, measures for risk mitigation and reporting of critical risks.

ESG Initiatives and Metrics #

Environmental Initiatives #

Significant efforts in energy and water conservation, with a 2.50% reduction in electricity consumption and a 0.86%* reduction in water consumption.

Renewable Energy #

Increased use of rooftop solar plants, generating 155 lakh units per year.

Social Initiatives #

Focused on skill development, education, and environmental sustainability, with the launch of the ‘Bajaj Beyond’ program aimed at skill development.

Governance #

Compliance with corporate governance standards as per the Listing Regulations, 2015, with a strong focus on transparency, ethical business conduct, and stakeholder interests.

Management Outlook #

Domestic Business #

The management anticipates continued growth in the domestic market, driven by buoyant demand and a stable economic environment. Priorities include sustaining momentum, driving growth across segments, and maintaining competitive profitability.

Exports #

Efforts are focused on navigating challenging international landscapes and recovering export volumes, while maintaining the company.

Management Priorities #

The management will sustain momentum of domestic business, navigate challenging international landscape, maintaining the thrust on differentiated product innovation, expanding capacity, capabilities and network and continue to focus on dynamic financial management.

Detailed Analysis #

Bajaj Auto Ltd. Financial Analysis: 3-Year Comparative Review #

3-Year Comparative Analysis (Consolidated) #

(₹ In Crore)

Significant Changes in Major Line Items (>10% YoY) #

• Non-current Assets: Increased by 7.87% in FY24, primarily due to increases in ‘Property, plant, and equipment’, ‘Investments in subsidiaries’.
• Current Assets: Increased by 22.26% in FY24 due to a rise in Inventories, Trade receivables, and Investments.
• Non-current Liabilities: Increased by 155.89%, from an increase in short-term borrowings.
• Current Liabilities: Increased by 73.33%, driven by a rise in, trade payables and borrowings.
• Other Equity: Decreased by 1.36%. Primarily attributable to Share buyback.

Working Capital Trends #

(₹ In Crore)

• Net working capital (excluding investments) decreased in FY24, mainly because of higher Current liabilities.

Asset Quality Metrics #

(₹ In Crore)

• Gross NPA to total trade receivables shows good assets quality.
• Provision coverage ratio. Not applicabe as trade receivables impairment is measured as per lifetime expected credit losses.

Debt Structure and Maturity Profile #

(₹ In Crore)

• Short-term borrowing increased due to foreign currency loan, from a bank as packing credit facility against exports.
• The Sales Tax Deferral is interest-free, partially pre-paid, and repayable after 9 years.

Off-Balance Sheet Items #

• Contingent Liabilities:
  • Claims against the Company not acknowledged as debts: ₹ 208.27 crore (FY23: ₹ 205.04 crore)
  • Excise, Service tax, GST, and Customs matters under dispute: ₹ 355.20 crore (FY23: ₹ 341.75 crore)
  • Income-tax matters: ₹ 958.43 crore (FY23: ₹ 941.84 crore)
  • Value Added Tax (VAT)/Sales Tax matters under dispute: ₹ 101.03 crore (FY23: ₹ 126.62 crore)
• The above figures show an increase on all items, barring VAT/Sales Tax.

Bajaj Auto Ltd. Financial Analysis: FY2024 #

Revenue Breakdown by Segment/Geography #

• Automotive Segment: FY2024 revenue was ₹44,870 crore, up 22% from ₹36,665 crore in FY2023.
• Investment Segment: FY2024 revenue was ₹1,419 crore, up 45.1% from ₹978 crores.
• Financing Segment: FY2024 revenue was ₹17 crore (new segment).

Geographic Breakdown (FY2024) #

• India: ₹29,130.10 crore (66.9% of total product sales).
• Exports: ₹14,448.77 crore (33.1% of total product sales).

Export Performance #

• Total export units decreased by 10.2% YoY.
• Total Export Value: ₹14,449 crore vs. ₹14,458 crore, down by (0.1%).

Domestic Sales #

• Motorcycles: FY2024, domestic sales increased by 19.9%.
• Commercial Vehicles: Domestic sales grew by more than 50% YoY.

Cost Structure Analysis #

• Cost of Materials Consumed: 70.9% of total operating income (FY2024), down slightly from 71.4% in FY2023. Raw material spend was up 21.8%.
• Employee Cost: 3.4% of total operating income (FY2024), a decrease from 4.0% in FY2023. Employee cost was up 6.4%.
• Sales and After Sales Expenses: Down 12.5% of Revenue YoY.

Margin Analysis with Trends #

• Operating EBITDA Margin: FY2024 was 19.7%, up 180 basis points from 18.0% in FY2023.
• Operating Profit Margin: FY2024 was 18.8%, compared to 17.1% in FY2023.
• Net Profit Margin: FY2024 was 16.2%, up from 15.0% in FY2023.

EPS Analysis #

• Basic and Diluted EPS (Standalone): FY2024 was ₹264.60, up from ₹197.30 in FY2023.
• Basic and Diluted EPS (Consolidated): FY2024 was ₹272.70, up from ₹212.50 in FY2023.

Quarterly Trends #

• Consistant growth across all quarters.

Cash Management #

Cash Flow and Liquidity Analysis #

OCF, ICF, FCF Components (Consolidated, FY2024) #

• OCF: Increased to H 6,558.16 crore from H 5,277.42 crore in FY2023, driven by higher profit before tax and adjustments for non-cash items.
• ICF: Declined to H (139.22) crore, from H 1,333.81 crore in FY2023, attributed to changes in investment and increases in capital expenditure.
• FCF: Derived by adding OCF and ICF.

Working Capital Management Efficiency (Consolidated) #

• Net working capital decreased from H 3,672.36 crore (FY2023) to H 1,631.48 crore, signaling improvements.

Capex Analysis by Segment (Consolidated, FY2024) #

• Automotive: Incurred a capital expenditure of J 887.36 crore.

Dividend and Share Buyback Trends (Consolidated) #

• Dividend: A final dividend of J 80 per share was proposed for FY2024. Total dividends paid in FY2024 were H 3,961.40 crore.
• Share Buyback: The Company bought back 4,000,000 shares at J 10,000 each, with a total outlay, including tax, of J 4,932 crore.

Debt Service Coverage (Consolidated) #

• Debt service coverage ratio was reported as 147.33 for FY2024.

Liquidity Position and Cash Conversion Cycle (Consolidated) #

• Cash and Cash Equivalents: Increased to H 560.45 crore as on 31 March 2024, from H 241.62 crore as on 31 March 2023.
• Current Ratio decreased due to increased liabilities.

Bajaj Auto Segment-Wise Financial Analysis #

Profitability Ratios (3-Year Trend) #

• Return on Equity (ROE): FY2024: 29.7%, FY2023: 21.6%, FY2022: Not available. Significant increase indicating improved profitability relative to shareholders’ equity.
• Operating Profit Margin: FY2024: 18.8%, FY2023: 17.1%, FY2022: Not available. Positive trend demonstrating improved operational efficiency.
• Net Profit Margin: FY2024: 16.2%, FY2023: 15.0%, FY2022: Not available. Steady increase in the percentage of revenue translating into profit.

Liquidity Metrics #

• Current Ratio: FY2024: 1.19, FY2023: 1.71. Decrease indicates a lower, but still acceptable, level of current assets relative to current liabilities.

Efficiency Ratios #

• Inventory Turnover Ratio: FY2024: 20.52, FY2023: 19.83. Slight increase, demonstrating a high efficiency in managing inventory.
• Debtors Turnover Ratio: FY2024: 22.36, FY2023: 21.48. Increased ratio suggests efficient collection of receivables.

Leverage Metrics #

• Debt-Equity Ratio: FY2024: 0.03, FY2023: 0.0. Very low, indicating minimal reliance on debt financing.
• Interest Coverage Ratio: FY2024: 147.33 (Consolidated). Very high, suggesting strong ability to cover interest expenses.

Comparison with Industry Averages #

The provided data lacks industry averages for comparison. However, Bajaj’s high profitability ratios (ROE, margins), high turnover, low debt, and high-interest coverage generally position it favorably.

Bajaj Auto Ltd. Segment Performance Analysis FY2024 #

Revenue and Profitability Metrics with Growth Rates #

• Automotive: FY2024 revenue was ₹44,870 crore, up 22.4% year-on-year. Segment results (profit before tax) were ₹8,708 crore, representing a 26.1% growth.
• Investment and Others: FY2024 revenue was ₹1,419 crore, up 45.1%. Segment results was 1,417 crore, with growth 45.2%.

Market Share and Competitive Position #

• Domestic Motorcycles: Bajaj Auto’s market share increased by 90 basis points to 18.2% in FY2024.
• 125cc+ Domestic Motorcycle Segment: Bajaj Auto’s growth was eight times that of the rest of the industry, gaining a 26% market share.
• Commercial Vehicles (Domestic): Market share increased by 490 basis points to 77.9%.
• Chetak EV: Bajaj Auto attained the #3 position, up from #7 last year.
• Commercial vehicles exports: Maintained leadership in 11 of 12 countries.
• Motorcycles exports: Retained no.1 position in 9 out of 12 countries.

Key Products/Services Performance #

• Pulsar (Domestic): Grew by 37% in FY2024, selling over 1.4 million units, the highest ever.
• KTM (Domestic): Achieved its highest-ever sales in FY2024.
• Triumph (Domestic): Sold over 40,000 units in the first nine months post-launch.
• Chetak EV (Domestic): Sales tripled year-on-year, reaching 115,702 units in FY2024.
• Commercial Vehicles (Domestic ICE): Sales increased by 50% to 451,182 units.
• Exports: Overall Exports, revenue remained flat vs PY, Motorcycle exports value declined by 9.8%, commercial vehicle export declined 13.8% .
• Pulsar (Exports): Grew by 26%.
• Qute Export: Grew by 83%

Geographic Distribution and Market Penetration #

• Domestic: The company expanded Triumph’s presence to 56 cities and Chetak EV’s presence to over 160 cities.
• Exports: Faced challenges due to macroeconomic conditions, but saw robust growth in Latin America (LATAM) and the Middle East-North Africa (MENA) regions. Latin America recorded its highest-ever motorcycle sales.
• Brazil: Bajaj Auto is setting up its first overseas manufacturing facility in Manaus, Brazil, expected to be operational by mid-2024.
• Triumph: Expanded into 16 export markets.

Operational Efficiency Metrics #

• Inventory Turnover Ratio: Increased to 20.52 in FY2024 from 19.83 in FY2023, indicating improved inventory management.
• TPM: Chakan Plant received award for ‘World Class TPM Achievement’

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Expansion of premium motorcycle portfolio with KTM, Husqvarna, and Triumph.
  • Significant investment and expansion in the electric vehicle segment with Chetak.
  • Rollout of electric three-wheelers and expansion of the network.
  • Establishment of Bajaj Auto Credit Ltd. to provide captive financing.
  • Setting up a manufacturing facility in Brazil.
  • Partnership with Yulu Bikes for shared electric mobility.
• Challenges:
  • Geopolitical uncertainties and economic challenges in key export markets, including hyperinflation and currency constraints.

Risk Assessment Framework for Bajaj Auto #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing (premiumization)
• Mitigation Strategies: Diversification into EV (Chetak) and three-wheelers. Collaboration with Triumph for premium motorcycles.
• Control Effectiveness: Moderate. Domestic motorcycle sales grew by 19.9% indicating that the strategies are partially working, EV segment penetration is in its begining phases, and the Triumph collaboration is new.
• Potential Financial Impact: Significant revenue and profit impact is visible, as reflected by FY2024 record results.

Operational Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: TPM implementation, “Bajaj Production System” for better flow and quality, vendor TPM activities, and ESG practices in the supply chain.
• Control Effectiveness: High. Chakan plant received “World Class TPM Achievement” award, showcasing strong operational control.
• Potential Financial Impact: Moderate, controlled by robust operational practices and strong cost control, as indicated by the 180 basis point increase in EBITDA margin.

Financial Risks #

• Severity: Low
• Likelihood: Low
• Trend: Decreasing
• Mitigation Strategies: Dynamic financial management and a resilient business model. Prudent investment of surplus funds.
• Control Effectiveness: High, demonstrated by consistent growth across quarters. Strong cash flow generation, up 45% YoY.
• Potential Financial Impact: Minimal in the short term. Strong financial metrics, debt-equity ratio of 0.03.

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: R&D investment in new products and upgrades. Engagement with regulatory bodies.
• Control Effectiveness: High. The company maintains compliance reports, and the Board periodically reviews compliance. No instances of material non-compliance or penalties have been reported.
• Potential Financial Impact: Moderate. Investment in R&D, with an expenditure of J 520.18 crore in FY2024.

Emerging Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Establishment of Chetak Technology Ltd. (CTL) as a wholly-owned subsidiary to focus on EV technologies and products. Expansion of Chetak EV dealer network.
• Control Effectiveness: Moderate. Chetak EV achieved #3 position in the segment, up from #7. CTL focuses on R&D for disruptive and EV technology.
• Potential Financial Impact: High. While EV investments are currently absorbed, future profitability will depend on market adoption and competition.

Strategic and Management Analysis of Bajaj Auto Ltd. #

Long-Term Strategic Goals and Progress #

Automotive #

Focus on premiumization and expansion in the electric vehicle (EV) market with Chetak. Significant investments have been made in EV, demonstrating a long-term growth commitment.

Financing #

Bajaj Auto Credit Ltd. (BACL) aims for a nationwide presence by the end of March 2025, indicating aggressive expansion in captive financing.

Competitive Advantages and Market Positioning #

Automotive #

Bajaj Auto holds a substantial market presence in the domestic motorcycle, where the company emerged as the largest 125cc+ player for the year, with the help of the Pulsar, which achieved its highest sales in FY2024. Bajaj Auto continues to maintain its leadership position for commercial vehicles, with 80% market share, and has gained significant ground in the EV scooter market, ranking #3.

Financing #

Commenced operations in the year 2024.

Innovation Initiatives and R&D Effectiveness #

Automotive #

FY2024 saw a thrust on premium and sports category motorcycles, as well as in the EV portfolio of two- and three-wheelers. The introduction of new products and upgrades, like the Pulsar upgrades, new KTM Duke models, and electric three-wheelers, showcase R&D’s contribution to the Company’s overall positive performance. The expansion of the Chetak EV line and its significant volume growth (3x YoY) demonstrate a focus on future mobility solutions.

M&A Strategy and Execution #

Automotive #

Collaboration with Triumph Motorcycles Ltd. with two Triumph models jointly developed and produced in the new Chakan 2 plant.

Management’s Track Record in Execution #

Automotive #

Record revenue and EBITDA were achieved, and the Company has successfully navigated challenging export markets. Domestic business shows consistent growth. Successful rollout of electric three-wheelers.

Financing #

Bajaj Auto Credit Ltd. (BACL), a wholly-owned subsidiary, received its NBFC license and commenced operations, and reached Assets Under Management (AUM) of H 708 crore.

Capital Allocation Strategy #

Automotive #

Significant capital investments (~ H 800 crore) and a large shareholder payout (~ H 8,900 crore through dividends and share buyback) showcase a balanced approach of investing for growth and rewarding shareholders.

Financing #

CTL stands adequately funded with paid-up equity share capital of H470 crore as on March 31, 2024. BACL was funded with H295 crore in paid-up share capital.

Organizational Changes and Their Impact #

Automotive #

During the year action was taken to consolidate EV sales and manufacturing in the Company with a view to improving operational efficiencies, driving cost-effectiveness and eliminating complexities associated with operating multiple entities.

Financing #

Change of the name of the subsidiary from Bajaj Auto Consumer Finance Ltd to Bajaj Auto Credit Ltd.

Bajaj Auto Ltd.: ESG and Sustainability Analysis #

Environmental Metrics and Targets #

• Energy Consumption: Total energy consumed increased to 725,429,886 MJ in FY2024 from 504,983,010 MJ in FY2023. Energy intensity per rupee of turnover increased to 16,234 MJ/Crore in FY24, from 13,862 in FY23.
• Renewable Energy: 6.86% of total energy consumed was from renewable sources in FY2024.
• GHG Emissions: Scope 1 emissions increased significantly to 22,567 MT CO2e in FY2024 from 8,667 MT CO2e in FY2023. Scope 2 emissions decreased to 70,110 MT CO2e from 72,002 MT CO2e. Total Scope 1 and 2 emission intensity per rupee of turnover increased to 2.07 MT CO2e/Crore in FY24, from 2.21 in FY23.
• Water Withdrawal: Total water withdrawal increased to 1,244,970 KL in FY2024 from 1,110,906 KL in FY2023. Water intensity per rupee of turnover decreased to 27.6 KL/Crore.
• Waste Management: Waste intensity per rupee of turnover decreased to 0.29 MT/Crore.

Social Responsibility Programs #

• CSR Expenditure: The company spent ₹ 131.72 crore on CSR activities in FY2024, meeting the statutory requirement.
• Employee Well-being: The company provides health insurance and other benefits to 100% of its permanent and non-permanent employees and workers.
• Diversity: Female employees constitute 5% of total permanent workers.
• Training: The Company Provides 100% training on human rights and Safety.

Governance Structure and Effectiveness #

• Board Composition: As of March 31, 2024, the Board consisted of ten directors, with a mix of executive, non-executive, and independent directors, meeting the regulatory requirement of at least half of the Board comprising independent directors where the Chairman is non-executive.
• Board Committees: The Board has established Audit, Nomination and Remuneration, Stakeholders’ Relationship, Corporate Social Responsibility, Risk Management, and Duplicate Share Certificate Issuance Committees.
• Code of Conduct: The company has a Board-approved Code of Conduct for Board members and senior management, with 100% compliance affirmation for FY2024.
• Whistle Blower Policy: A vigil mechanism is in place, with one complaint received and resolved during the year.
• Related Party Transactions: All RPTs during FY2024 were conducted on an arm’s length basis and in the ordinary course of business, with prior omnibus approval of the Audit Committee.

Sustainability Investments and ROI #

• R&D Investment: 100% of R&D and Capex investments in FY2024 were directed towards improving environmental and social impacts.
• Capital Expenditure: 65.1% of capex investments were directed towards technologies that improve the environmental and social impact of the product and process.

Regulatory Compliance and Future Preparations #

• Compliance: The company reports compliance with all applicable environmental laws and regulations in India.
• No fines or penalties were reported related to environmental non-compliance.
• MSME Payments: No delays in payments to Micro, Small and Medium Enterprises were reported.
• Future Preparations: The company highlights its commitment to sustainability, with ongoing efforts in energy conservation, emissions reduction, and responsible sourcing.

Future Projections and Guidance #

Management Guidance and Assumptions #

• India’s Economic Outlook: Management anticipates India’s real GDP growth to exceed 7% in FY2024 and continue in FY2025, with stable CPI inflation around 5%, leading to a double-digit nominal GDP growth forecast.
• Domestic Demand: Domestic demand is expected to drive growth for Bajaj Auto in FY2025.
• Exports: Management aims to navigate challenges in international markets and recover export volumes.
• Financial management: A continued focus on “dynamic financial management” is anticipated.

Market Growth Forecasts #

• Domestic motorcycle industry grew by 13.9% in FY24.
• The 125cc and above segment grew by 21%.

Planned Strategic Initiatives #

• Domestic Business: Sustain momentum and drive growth across all segments (motorcycles, premium bikes, three-wheelers, and electric vehicles).
• Premiumization: Drive premiumization, with focus on Pulsar models to boost 125cc+ segment growth.
• Exports: Recover export volumes despite challenging international conditions. Focus on Latin America and Middle East.
• Product Innovation: Maintain a focus on differentiated product innovation and superior customer experience.
• New Businesses Expansion: Expand capacity, capabilities, and network for Chetak electric scooters, electric three-wheelers, and Triumph motorcycles.
• Subsidiary Development:
  • Chetak Technology Limited: Develop as a powerhouse for disruptive and EV technology.
  • Bajaj Auto Credit Limited: Expand as a captive financing arm, aiming for national presence by the end of March 2025.
• Dynamic Financial management: Ensure competitive and profitable growth with strong cash flow generation.

Capital Expenditure Plans #

• FY2024 capital investments were ~₹800 crore.
• Continue Sufficient Investments: The company, supported by substantial cash reserves, plans to continue investments for growth.

Efficiency Improvement Targets #

• Operational Efficiency: Action was taken during the reported period to consolidate EV sales and manufacturing within the company to improve operational efficiencies and drive cost-effectiveness.
• TPM Implementation: Continued practice of Total Productive Maintenance (TPM) methodologies across manufacturing, engineering, development, and materials functions, extended to vendors, dealers, and international distributors.
• Cost Optimizations: Cost optimization measures were taken, including ED bath voltage optimization, compressed air pressure optimization, and thermal loss reduction in paint ovens.
• Production System: Improve and excel the ‘Bajaj Production System (BPS)’, aiming for ‘Better Flow with Better Quality’.
• Safety, Health, and Environment Pillar: Continued focus and alignment on the pillars including Green policy.

Potential Challenges and Opportunities #

• Challenges:
  • Geopolitical uncertainties and economic challenges (hyper-inflation, dollar scarcity) in key export markets.
  • Intense competition in the domestic motorcycle market, particularly in the 100cc-110cc segment.
  • Managing currency constraints and market volatility in exports.
  • Navigating regulatory challenges.
• Opportunities:
  • India’s strong economic growth and positive consumer sentiment.
  • Growing premiumization trend in the domestic motorcycle market.
  • Expansion of the electric vehicle (EV) market, particularly for two and three-wheelers.
  • Growth potential in Latin American and Middle East markets.
  • Leveraging strategic partnerships (e.g., Triumph) for product development and market expansion.
  • Captive financing business.

Scenario Analysis and Sensitivity to Key Assumptions #

• Scenario 1: Slower-than-Expected Domestic Growth: If domestic GDP growth falls below projections, demand for motorcycles and commercial vehicles may be negatively impacted.
• Scenario 2: Increased Export Challenges: Intensified geopolitical or economic issues in key export markets could further depress export volumes and revenue.
• Sensitivity to Economic conditions: The Sensitivity to interest rate, currency and commodity fluctuations is not quantified, but it is noted that it exists.
• Sensitivity to Electric Vehicles: Increase or decrease in incentives, change of government policies, battery supply etc. will have an impact in the development and profitability of the electric vehicles business.
• Sensitivity to Market share: The level of competition in the industry can significantly impact market share and, as a result, profitability.

Audit and Compliance Analysis of Bajaj Auto Ltd. (FY2024) #

Auditor’s Opinion and Qualifications #

• The auditors, S R B C & CO LLP, issued an unmodified opinion on the consolidated financial statements, stating they give a true and fair view in conformity with generally accepted accounting principles in India.
• The auditors noted a modification regarding the maintenance of the audit trail in the SAP S4 Hana accounting software. While the system records an audit trail, unauthorized changes to the database by a super user do not have a concurrent real-time audit trail feature.

Key Accounting Policies and Changes #

• The financial statements comply with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013.
• There were no changes in accounting policies or prior period errors.
• The Company adopted amendments to Ind AS 1, which requires the disclosure of ‘material’ accounting policies instead of ‘significant’ accounting policies.

Internal Control Effectiveness #

• The auditors reported that the Company maintained, in all material respects, adequate internal financial controls with reference to the financial statements, and such controls were operating effectively.
• The Audit Committee reviews the adequacy of the internal audit function, significant findings, and internal control systems.

Regulatory Compliance Status #

• The Company is regular in depositing undisputed statutory dues.
• The Company has complied with the provisions of corporate governance as specified in the Listing Regulations, 2015.
• The company complied with SEBI regulations in regard to buyback of shares and employee stock options.
• The Company complied with applicable Secretarial Standards.
• The Company has reported that no director has been debarred or disqualified from being appointed or continuing as a director by the Ministry of Corporate Affairs or any statutory authority.

Legal Proceedings and Their Potential Impact #

• The Company has disclosed the impact of pending litigations on its financial position, including disputes related to excise duty, sales tax, income tax, and customs duty.
• Claims against the Company not acknowledged as debts amounted to H 208.27 crore. Other contingent liabilities relate to excise, service tax, GST, customs, income tax, and sales tax matters under dispute.

Related Party Transactions #

• All related party transactions during FY2024 were in the ordinary course of business and on an arm’s length basis.
• During the year under review, prior approval of the members was accorded to Rishabnayan Bajaj, a related party of the Company to hold and continue to hold office or place of profit in the Company for a period of five years effective from 1 April 2023 up to 31 March 2028 at a remuneration which would cross the applicable materiality threshold.
• Details of transactions with related parties are provided in the notes to the financial statements.

Subsequent Events #

• The Company reported no material changes and commitments affecting the financial position between the end of the financial year and the date of the report.

Analysis of Accounting Quality and Regulatory Risk Assessment #

Accounting Quality #

• Accounting policies have been consistently applied.
• Disclosures are made in accordance with Ind AS, including detailed notes on various financial statement items.
• Audit committee, independent directors and auditors ensure the fairness.

Regulatory Risk Assessment #

• The Company has demonstrated compliance with key regulations, including the Companies Act, SEBI regulations, and applicable accounting standards.
• The Company faces ongoing litigations, primarily related to tax matters, which represent a regulatory risk.
• Modification by the auditor’s regarding the audit trail.