Maruti Suzuki net rises as sales move in fast lane

Maruti Suzuki India, the country’s largest car maker, reported a 20.7 per cent increase in net profit at Rs 762 crore for the financial year’s first quarter ended June.

This was on the back of strong sales, cost reduction initiatives and favourable foreign exchange (forex) movement.

Net profit had been Rs 631.6 crore in the corresponding period of 2013-14.

Addressing analysts in a conference call, Ajay Sheth, the chief financial officer, said there was an impact of Rs 150 crore in the quarter due to forex gains. Additionally, the company made significant progress in its localisation programme. “Our total import content as on March 31 as a percentage of net sales was at 16 per cent, significantly come down from 25-26 per cent in 2010-11 onwards,” he said.

Net sales in the period under review rose 10.8 per cent to Rs 11,074 crore as against Rs 9,995 reported in the same quarter last year. Total expenses grew a bit faster, by 11.2 per cent to Rs 10,625 crore.

The company sold 299,894 vehicles during the quarter, a 12.6 per cent increase over the 266,434 units sold in the year-ago period. While sales in the domestic market went up 10.3 per cent to 270,643 units, exports grew 38.7 per cent to 29,251 units.

“We started the quarter with low consumer sentiments, high inflation and other economic factors that affected the economy last year,” said Sheth. “After the elections, consumer sentiment changed and turned positive.”

With the return of the first-time buyer after the elections, sales of the company’s best selling model, the Alto, crossed the 30,000 mark in June. Those of the WagonR were over 17,000 units for the first time.

However, Sheth said the current traction in sales was mostly driven by sentiment; real growth would only come when there was all-round economic growth, with investments coming into the country and jobs being created. “Discounts during the quarter were the highest at around Rs 21,000 a car. Discounts will go once we see genuine demand coming in,” he added.

In the quarter, there was a growth of 26 per cent in sales from rural areas, while growth in urban markets was 13 per cent. Given the improved market conditions, the company is expecting to clock “early double digit” growth in the domestic market this financial year. Export growth is expected to remain flat. Maruti Suzuki paid royalty of Rs 689 crore to parent Suzuki Motor Corporation of Japan in the quarter. The earnings before interest, tax, depreciation and amortisation margin was 11.5 per cent.