Net profit of Eicher Motors, the maker of Royal Enfield motorcycles, rose 62% year-on-year to ₹740.84 crore for the quarter ended December 31, 2022. The company had posted ₹465.13 crore profit in the corresponding period last fiscal.

The automaker's revenue from operations surged 29% to ₹3,721 crore in the third quarter compared with ₹2,880.65 crore in the year-ago period.

EBITDA or earnings before interest, tax, depreciation and amortisation came in at ₹857.2 crore during the December quarter.

The earnings were also aided by higher commercial vehicle sales witnessed by VE Commercial Vehicles Limited (VECV), a joint venture between the Volvo Group and Eicher Motors.

This comes at a time when domestic commercial vehicle sales volume is set to rise 9-11% next fiscal, the third straight year of growth, driven by medium and heavy commercial vehicles, according to CRISIL Ratings.

Increased allocation to infrastructure spending in the Union Budget for next fiscal will also support demand, the ratings agency says in a report. This follows strong volume growth of 31% and 27% in FY22 and FY23, respectively, as demand bounced back on increased activity in the roads, mining, real estate and construction sectors, as well as focus on last-mile connectivity.

"Besides higher volume, increase of 2-5% in realisations as original equipment manufacturers (OEMs) comply with BS VI-Stage II norms, and benefit of lower commodity prices, especially steel, will help improve operating profitability to a four-year high of 7-7.5% next fiscal from an estimated 5-6% this fiscal," the ratings agency says.

Light commercial vehicles (LCV) and MHCVs are expected to register volume growth of 27% and 40% respectively in fiscal 2023, albeit on a lower base of fiscal 2022, according to CRISIL. While the strong infrastructure impetus in the country will continue to drive MHCV sales, LCV sales will be spurred by increased focus on last-mile connectivity and stricter restrictions on movement of MHCVs within city limits to curb traffic congestion. Demand for buses will continue to see good traction from educational institutions.

"With strong demand prospects, we expect LCV sale volumes to grow 8-10% next fiscal, and cross pre-pandemic (fiscal 2019) sale volumes. MHCV sale volumes will continue to grow faster than LCVs at 13-15% next fiscal, but are expected to exceed pre-pandemic sale volumes in fiscal 2025," says Anuj Sethi, senior director, CRISIL Ratings.

Implementation of the mandatory scrappage policy from April 2023 onwards for government-owned vehicles older than 15 years is also expected to aid CV volume growth.

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