Cost Analysis of Bajaj Pulsar

The fall in operating profit margin compared to 2011-12 needs explanation. In the first half of the year, sales boomed; yet profit margins were lower due to huge pressure on raw material costs. While the raw material prices stabilized in the second half, the industry as a whole was hit by slackening demand growth - thanks to tightening of non-food credit, successive hikes in interest rates on consumer loans, slowing economy and impeding Eurozone crisis. Thus, in a milieu of lower sales growth and tighter credit, the Company offered subventions to finance companies to make its vehicles affordable to consumers - especially so in the lower-end models. This disproportionate increase in sales and after sales costs. Together, these two forces reduced operating EBITDA margin to15 per cent. Even so, it needs to be emphasized that Bajaj Autos EBITDA margin continues to be by far the highest in the industry. Given the hardening of input prices (which we expect to continue in the near future), the competitive scenario, the possibility of lower overall demand growth at least in the first half of 2012-13, and Bajaj Autos ambitious growth targets, any operating margin in the region of13 per cent to 15 per cent should be considered as par for the course

Labour Cost
Labour costs as a share of sales and other operating income reduced from 3.6 per cent in 201112 to 3.2 per cent in 2006-07. This has been driven by productivity improvements, which has doubled labour productivity from 132 vehicles per person per year in 2010-11 to 266 in 201112- without a doubling of the wages and salaries bill. This has been a huge improvement compared to the recent past, where labour cost was close to7 per cent of net sales. Factory and administration costs were 3.4 per cent of sales and other operating income in 2006-07, versus 3.7 per cent last year.

Materials, Stores and Tools

The share of materials to net sales and other operating income in 2011-12 was 72.2 per cent,as against 69.1 per cent in 2011-12. This is entirely due to the factor stated earlier - a disproportionate rise in raw materials and intermediates prices in the first half of 201112.Stores and tools was 0.8 per cent of net sales and other operating income in 2011-12

R&D Cost
R&D has been working on improving its operations in a number of areas as listed below: Manpower: R&D has been expanding its team size in areas of design, analysis and validation in order to keep up with the rapidly expanding aspirations of the Company. This year, R&D expanded its manpower strength by about 12%.

Facilities: R&D continued to enhance its design, computing and validation facilities. The efforts on the establishment of validation facilities have enabled R&D to develop durable and refined products like the new Pulsar 200 NS. Total Productivity Management (TPM): R&D continues to vigorously pursue the TPM way of thinking and working. This has yielded excellent results in quality management of design and validation process. The TPM approach has also been effective in the lead time reduction on the various critical processes in R&D by elimination of waste.
Particulars i. Capital (Including technical know-how) ii. Recurring iii. Total research and development expenditure as a percentage of sales, net of excise duty

2012
42.22 113.70 155.92 0.83%

2011
11.65 112.95 124.60 0.78%