After Maruti, its only listed dealer touches a new high

It was not Maruti Suzuki's stock alone that was on a roll last month, touching a new high after it announced a 56-per cent jump in first quarter profit and a high double-digit increase in July vehicle sales. Delhi-based Competent Auto, Maruti's only listed dealer, too, saw its stock touch a new high.

Being the only listed dealership of Maruti, it can be considered a good proxy for the growth witnessed by the country's largest passenger vehicle maker. Maruti's sales in the domestic market went up by 11.1 per cent to 1.17 million units in the year ended March. In the same year, Competent saw a volume increase of 14 per cent, selling 20,066 vehicles through its multiple showrooms in Delhi, national capital region (NCR) and Himachal Pradesh. Competent is not Maruti's largest dealer. The tag is enjoyed by Cochin-based Popular Vehicles.

Competent reported net sales of Rs 924 crore in the year ended March 2015, up 14 per cent from Rs 808 crore in the previous year. Net profit also went up to Rs 11.6 crore, up 26 per cent. Maruti's net sales increased 14 per cent to Rs 48,605 crore in the year ended March. However, Maruti's profitability growth was higher at 33 per cent, growing to Rs 3,711 crore.

Competent's stock price touched an all-time high of Rs 239.40 in August, the same month when Maruti's scrip touched an all-time high of Rs 4,689.20. Though Competent's market cap is only Rs 92 crore against Maruti's Rs 133,025 crore, its stock has grown 127 per cent in the past year against a 45 per cent appreciation in Maruti's stock. In a February 2015 report, Angel Broking gave a 'buy' rating on the stock, setting a target of Rs 124. Competent was then selling at Rs 92. It closed at Rs 143.10 on the BSE on Friday. One-third of the firm's shares are owned by the promoters.

"The top-line performance of the company is closely linked to the performance of Maruti Suzuki. We expect Maruti Suzuki to post robust domestic volume growth of 18.1 per cent in FY16, which will be replicated by Competent. Also, we expect Competent's market share to remain stable or improve, as the entry of a new dealer seems to be commercially unviable due to high property prices in the Delhi region," said Angel Broking.

However, Competent's operating margin of 2.79 per cent compares poorly with Maruti's 17.59 per cent. Raj Chopra, promoter chairman and managing director of Competent, said, "With the opening of several showrooms of Maruti as well as other companies in the Delhi-NCR market, there is high competition. The cost of running a showroom is going up and margins are under pressure."

Competent employs 1,900 people through its 16 showrooms and 10 workshops. Chopra, 68, said his company has survived because the company owns land on which most of its showrooms are set up. Competent Auto operates nine Maruti dealerships in Delhi-NCR (including one Nexa outlet) and seven outlets in Himachal Pradesh. The story of Competent is as old as Maruti. Competent happens to be Maruti's first dealer, set up in 1983 at Delhi's Connaught Place.

An India Today report in 1986 claimed that one-third of Maruti's 38 dealers appointed during 1983-84, including Competent, enjoyed proximity to then ruling party the Congress (I). The same report quoted R C Bhargava, then managing director of Maruti Udyog, and now chairman of Maruti Suzuki as saying that the company selected dealers purely on their merit. "It so happened that some of them had political connections," he said.

Sitting in his CP' office building (which also houses the oldest showroom) from where the first Maruti 800 car was delivered, Chopra says Competent will continue to grow with Maruti.