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HeroMoto's surprisingly poor show :

The domestic two-wheeler industry reported strong wholesale volume growth in December 2020.

Hero MotoCorp’s volumes increased by 5% YoY in December 2020 while Bajaj Auto reported a strong 11% rise in sales. Royal Enfield's volumes increased by 37% Y0Y and TVS Motors’ total volumes increased by 18% in December 2020.

The overall trend appears positive but we are a little surprised by the comparatively muted numbers of HeroMoto Corp. The company was expected to perform better than its peers, helped by its deep rural penetration and strong presence in the entry-level bike segment.

This poor performance is also an indication of growing traction towards the premium biking segment which is not the strongest domain of HeroMoto. However, the numbers of Bajaj Auto and Eicher Motors truly capture these trends. Both companies are extensively focused on the premium biking segment.

E-commerce growth in a fast lane for FMCGs:

Post-Covid, E-commerce has emerged as the fastest-growing channel for FMCGs. For larger FMCGs, this trend has sustained even as normality continues to return.

As per an article by Economic Times, E-commerce is now about 6% of sales of HUL, up from 3% pre-Covid. Even for ITC, E-commerce sales have doubled from 2.6% to 5% by the end of 2020. Nestlé also witnessed its e-commerce business grow by 97% in the September quarter, comprising 4% of domestic sales. Apart from that, brands like Pepsico, Marico, P&G, and Bisleri also launched their web stores.

The E-commerce market for FMCGs is set to expand further with even local Kirana stores adopting digitization. JioMart for instance is processing on average 50,000/per day since its beta launch in December 2019.

However, we believe the spread of the online channels is going to be restricted only to the metro and Tier-1 cities for now. For Tier-II and beyond, traditional channels will continue to dominate the trade practices.

Fuel consumption grew in 2020 despite lockdown:

Indian Oil recorded strong growth in sales of motor spirits and diesel in 2020 despite the disruptions in commercial activities.

During 2020, sales of motor spirits have increased by 108% and diesel by 96% on a yearly basis. Domestic LPG demand also increased by 10% during the lockdown months.

Fuel consumption is directly related to the level of activities in an economy. Hence, these numbers speak the volume of recovery in the economy.

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