Gift shares, not a bike

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June 30th, 2012 Ram Prasad Sahu

So the country’s largest bike maker pulled off another month of record sales even while Bajaj Auto and TVS Motors struggle. The reason for the superlative performance ostensibly is the wedding season in North India, a stronghold of the Delhi-based company. But why is the bike doing so well during the wedding season? The answer could lie in the Indian tradition of showering gifts on the newly weds most of which is borne by the family of the bride. And talking of gifts, what better than to give the beloved Jamai a spanking new Splendor? A bike that will help him expand his business, ferry their daughter back and forth from her sasural and occupy the pride of place among other items of dowry. The bike maker that is searching for a Hero in each one of us has but the current month to sell its bikes to prospective buyers following which starts the Chaturmas  period till October considered inauspicious for weddings.

Given the sales pick up in the season, Hero MotoCorp (HMC) could do well to organize mass marriage ceremonies. This will help it increase its social networth and push it higher on the CSR stakes but also act as an excellent branding platform. Outside the mass pandal, rubbing shoulders with engines of the rural economy—bulls, cows, horses and bullock carts—will be parked the entire range in the HMC armoury right from the entry level CD Dawn to the Karizma ZMR.

Prospective targets (fathers-in-law) don’t have to head to the nearest HMC showroom but instead choose the bike of their liking right from the mandap. Having the bikes at the wedding location means that the son-in-law can pick the model and the colour avoiding the confusion over choice. If this advice is followed, HMC can at least in the marriage season outsmart its rivals and report higher volumes.

While consumer goods are a preferred option, there is a better idea. Why can’t well wishers and, especially in-laws, gift shares of the company? While a bike will have a lifespan of a decade (a stretch), shares of the company could last for generations. While one gift expends money, given the cost of petrol, the other keeps growing and over a period of time turns into a more than sizeable corpus. Consider HMC, the new avatar of Hero Honda Motors. While an investment of Rs 20,000 in  bike would become worthless after a few years to be sold per kilo to the village raddiwala, shares of the company purchased let us say 10 years ago in 2002 would have grown 7.5 times or to a hefty Rs 1,50,000. Extend the period by another 10 years and including dividends it would grow to a whopping Rs 47 lakh, about 234 times over that period. That’s a lot of money. This kind of returns not only take care of inflation and expenditure but also retirement needs, especially in rural India.

The only other asset given to newly weds which has held its own in recent years is gold. Over the last ten years, the yellow metal has returned 465 per cent.

Chuck the durables, gift shares or gold. In-laws will have a kind word to say about your foresight for a long, long time.

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