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Hero MotoCorp, India’s largest two-wheeler manufacturer, has lined up a capital expenditure (Capex) in the range of Rs 800-1,000 crore for FY22 after it made a heavy cut on spending in the current year.
Its idea behind paring Capex for FY21 to Rs 600 crore was to cut costs and be demanding on cash spends after the COVID-19 pandemic wiped out all sales projections for the year. But following a better-than-expected recovery in demand in recent months, the maker of Splendor and Maestro has not only reinstated its annual Capex but is ready to make provisions for more spending if demanded by the market.
Speaking to analysts, Niranjan Gupta, chief financial officer, Hero MotoCorp, said: “We are going back to the Capex plans we had earlier because in the COVID period we had cut those down. For FY22, Capex probably would be more in the range of Rs 800-1,000 crore. We (will) keep calibrating it as we move forward, depending on the progress on the overall demand and supply-side”. In FY20, Hero MotoCorp had incurred a Capex of around Rs 1,000 crore.
From an average of 2.61 lakh units per month during April-July, Hero MotoCorp sales have more than doubled in the September-January period to 5.91 lakh units a month. Hero MotoCorp’s rivals, Bajaj Auto and TVS Motor Company are yet to firm up their Capex plans for the upcoming financial year. Eicher Motors-controlled Royal Enfield did not share its FY22 Capex plans during the December quarter results announcement.
Two-wheeler companies have ramped up production significantly over the past few months owing to a continued surge in retail demand. This surge has also allowed the companies to carry out multiple price hikes since December, which was the first since the Bharat Stage VI up-gradation in April 2020.
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