Shares of Hero MotoCorp rose nearly 4% to Rs 2,803.15 on the BSE in intraday trade on Monday after the two-wheeler specialist said it would hike prices of its motorcycles and scooters by up to Rs 1,500 from December 1 due to inflationary cost pressures.

Shares of the two- and three-wheeler company have risen 5.5% over the past three sessions. In contrast, the S&P BSE Sensex was down 0.04% at 62,271 at 9:26 am.

Looking ahead, management said economic indicators point to demand growth, and management expects industry volumes to pick up in the coming quarters.

“Hero MotoCorp will increase the pre-showroom prices of its motorcycles and scooters effective December 1, 2022. The price increase will be up to Rs 1,500, and the increase will vary by model and market,” the company said in regulatory filings.

Niranjan Gupta, Chief Financial Officer of Hero MotoCorp, said that the price increase of our motorcycles and scooters is necessary due to the overall inflationary cost.

According to ICICI Securities, this was a positive surprise. In the second quarter of fiscal 2023, the company reported an increase in gross margin of about 80 basis points and a decrease of about 30-40 basis points in gross margin related to decreasing commodity prices. “This new price hike will further boost the company’s margins (beyond the savings already guided for H2FY3), thereby boosting already solid returns,” the brokerage said in a note.

Analysts at Prabhudas Lilladher believe that Hero will be a significant beneficiary of positive demand from the rural recovery and the upcoming wedding season. “It will benefit from its increasing focus on exports and premiumisation. Also, lower input costs and its Leap savings program could lead to margin expansion,” the brokerage said.