Mumbai: Honda Cars India has posted a loss for the second consecutive year, hurt by a fall in sales on account of Covid-19, cost on employee separation and accelerated depreciation expenses.
The local passenger vehicle unit of Japan’s Honda Motor registered a net loss of Rs 1,588 crore for the fiscal year ended March 31, 2021, according to its filing with the Ministry of Corporate Affairs, shared with ET by business research platform Tofler. In the previous fiscal 2020, the manufacturer of the Honda City had posted a net loss of Rs 1,680 crore.
Revenue in fiscal 2021 fell by over 11% to Rs 9,624 crore. The company took a Rs 463 crore charge on the voluntary separation scheme offered to employees at its Greater Noida plant, which has been shut down. Accelerated depreciation was Rs 587 crore.
In the past five years, the company has posted a loss in three — besides FY20 and FY21, it posted a Rs 2,272 crore loss in FY17. The accumulated losses have been transferred to the balance sheet.
Honda Cars India’s revenue in FY21 was about 14% of market leader Maruti Suzuki’s and about 5% of the revenue in the passenger vehicle industry.
When contacted, a Honda Cars India spokesperson said: “As a policy, the company does not comment on financials.”
With consolidation of its manufacturing footprint to one facility in Rajasthan after the closure of the Greater Noida plant last year, Honda wants to come back to the growth trajectory, but not at the cost of profit.
Honda Cars India had told ET earlier that capacity utilisation at the Tapukara, Rajasthan, plant was expected to improve to 70% in the ongoing financial year, up from 30% in FY21. The company also expects to make a profit this fiscal year ending March 2022.
In a recent interview to ET, Honda Cars India chief executive Gaku Nakanishi said: “The priority is not to become big, but a solid, firm and flexible company. We were in red last year (FY21). But this year (FY22), we will be profitable.”
In fiscal 2021, when the industry volume declined 2.2%, the company’s sales fell by a fifth to 82,074 units. According to its production plan shared with component suppliers, Honda Cars India is now eyeing annual volumes of 120,000-125,000 units, which is still only more than half of the peak volumes it had delivered 4-5 years ago.
In fact, the company’s FY21 sales were the lowest since FY13. In the last five years, its volume has shrunk over 15% while the industry has remained steady. Consequently, its market share dropped to 3% in FY21 from a peak of 7% in FY16.
The company was able to control employee cost and other expenses in the challenging year of FY21, but the employee separation cost and accelerated depreciation expenses hurt the performance.
Higher fixed cost per unit due to lower production also weighed on the margin. Operating margin dropped to 0.84% in FY21 from the previous three-year average of 5.83%. Ebitda per car sold dropped to Rs 9,580 from Rs 61,665 in FY19.
According to the company, it has witnessed better-than-expected recovery in the local market post the second wave of the pandemic and is expecting sales to grow in double-digits in the ongoing financial year.
“We had expected the market to take 3-4 months to normalise after the second wave. In a good way, our forecast was wrong,” Nakanishi had said during the interview.
Honda is also increasing exports from India. While the company exported 5,364 units in FY21, posting growth of 48% year on year, with the addition of the Honda City list, the number is likely to quadruple in FY22.
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