Mumbai: Bajaj Auto has reported a 15 per cent drop in net profit for the first quarter of this financial year due to increasing competition, slowing demand for motorcycles and rising interest rates.

Bajaj Auto saw its net profit for the first quarter of the current fiscal drop by 15 per cent to Rs 226.5 crore from Rs 266 crore in the same period last year.

Meanwhile the industry slowdown witnessed from January continued. Net sales for the quarter ended June 2007 dropped to Rs 2,109.1 crore from Rs 2,202.6 crore.

Two-wheeler sales have dropped 13 per cent to 4,94,042 units, though exports of 1,49,804 two- and three-wheelers registered a healthy 52 per cent growth.

During the quarter, the company initiated structural changes in distribution, which has resulted in reduction of inventory at dealers by around 45,000 motorcycles.

The company's total income, net of excise, fell nearly 4 per cent to Rs 2,212 crore.
It sold 494,042 motorcycles in April-June this year, a drop of 13 per cent which is sharper than the 11 per cent decline in all motorcycle sales.

The company contained the erosion in its margin, caused by rising raw material cost, by selling more high-value products. The EBIDTA margin for the quarter was 13.2 per cent compared with the last financial year's 15 per cent. The industry average is about 10 per cent.

The company is increasing exports to Indonesia and Latin America to cut its dependence on India. Exports in the last quarter rose 52 per cent to 149,804 vehicles.