The Hindu Business Line : Maruti Q1 net grows 35%

Increasing sales volumes, higher realisations, gains through non-operating income, currency fluctuation and reduction in expenses has led Maruti Udyog Ltd to post a 35.20 per cent increase in its net profit at Rs 499.6 crore in the first quarter ended June 30.

This is against Rs 369.5 crore in the corresponding quarter last year. The company’s net sales rose by 25.76 per cent at Rs 3,930.8 crore in the current quarter from Rs 3,125.4 crore in the same period last year.

During the quarter, the company sold 1,60,604 units in the domestic market up 17.1 per cent over the corresponding period last year, while total sales (including exports) also grew by 17.1 per cent to 1,69,669 units, the company said in a statement.

Higher margins

Maruti increased its operating profit to Rs 798.0 crore from Rs 599.9 crore, reporting an increase of 33.02 per cent. The company spokesperson attributed it mainly to increase in its sales. “Further, the company has been adopting measures to reduce wastage and substituting certain material and parts to reduce costs wherever possible.”

However, industry analysts felt that the increase in the company’s margins was due to currency fluctuations and factors such as reduction in other expenses. According to them, the company’s net profit has risen mainly on the account of its increased non-operating income and barring this, Maruti’s margins have remained flat.

With higher base in volumes, the company has been able to reduce the ratio of expenses to its net sales, although the absolute numbers show an increase in its expenditure.

Reduction in expenses

“Maruti’s 12 per cent imports of raw material are in yen denomination against which the rupee has appreciated by 10 per cent. While the company exports 7 per cent in dollars, it has been able to offset the impact,” said Mr Amit Kasal, auto analyst, Motilal Oswal Securities. He said that despite concern over the company’s margins continuing to decline over the last four quarters, it had shown improvement in the current quarter.

Name change proposed

With a view to building a global identity, Maruti’s Board of Directors, at its meeting held on Thursday sought a proposal to change the company’s name to Maruti Suzuki India Ltd. However, this would be subject to approval by its shareholders at the company’s annual general meeting to be held in September.

While the company has produced models like Swift, SX4 and Vitara in collaboration with its Japanese partner, it is seeking to build a global name to expand its presence in new markets. This international dimension in the company’s name will help it expand its role in the global markets. Maruti has targeted Europe with new launches and is also looking to make itself Suzuki’s research and development hub for Asia, outside Japan, said the company.

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Maruti Q1 net profit zooms 63%

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