Maruti net up 4% on tax cut, lower costs

Lower commodity prices also help; vehicle sales rise 2% during the quarter

India’s largest carmaker Maruti Suzuki’s consolidated net profit rose 4.12% to ₹1,587.4 crore for the third quarter ended December 2019, on account of a reduction in corporate tax rate, cost reduction efforts and lower commodity prices.

The company had reported a net profit of ₹1,524.5 crore in the September-December 2018 quarter. Consolidated revenue from operations grew 5.29% to ₹20,721.8 crore from the ₹19,680.7 crore in the year-earlier period.

In a statement, the company said it had sold more than 4.37 lakh vehicles during the quarter, higher by 2% compared with the same period of the previous year.

While sales in the domestic market rose 2% to 4,13,698 units, exports stood at 23,663 units.

The company attributed the increase in net profit to “cost reduction efforts, lower operating expenses, lower commodity prices and reduction in corporate tax rate.” However, this was partially offset by higher sales promotion expenses, higher depreciation and lower fair value gains on invested surplus.

For the nine-month period from April-December 2019, consolidated net profit dipped 25.16% to ₹4,355.3 crore while total revenue from operations fell 11% to ₹57,452.3 crore. The firm sold more than 11.78 lakh vehicles, lower by 16% from the year-earlier period.

Discounts climb

During an investor and analyst call, Maruti Suzuki’s CFO Ajay Seth said that during the quarter, average discounts stood at ₹33,000 compared with the ₹24,000 in the same period last year.

To a query on the impact of company’s decision to stop producing diesel vehicles amid transitioning to BS-VI norms, Shashank Srivastava, executive director, marketing and sales, said that overall, the share of diesel vehicles has been on a decline and the trend is likely to continue. Maruti Suzuki expects to increase its share in the petrol car market with upcoming launches, including petrol variants of the Vitara Brezza and the S-Cross.

Mr. Srivastava said the share of diesel vehicles in the passenger vehicle (PV) segment had fallen from 58% in 2012-13 to 30% in December 2019, mainly due to the declining price gap between the fuels and the perception in customers’ minds about diesel being a ‘dirty fuel.’

Currently, the company’s market share was about 50%, of which a little over 40% came from petrol vehicles and the balance from diesel. Mr. Srivastava said it was estimated that the share of petrol vehicles in PVs will go up to 80-85% from the 70% now, “in which case we should be able to maintain our market share.”

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Printable version | Apr 8, 2020 3:28:53 PM |

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