The Hindu Business Line : Maruti net down 36%; to hike prices

An increase in raw material prices, losses on external commercial borrowings and a new depreciation policy on its tools triggered a 36 per cent drop in Maruti Suzuki’s net profit at Rs 296 crore for the second quarter ended September 30, 2008.

During the quarter the company incurred a Rs 20-crore on external commercial borrowings, taking its overall loss to Rs 30 crore in the first half of the fiscal. Maruti’s net profit was eroded by Rs 58 crore in the quarter due to its new depreciation policy introduced last fiscal to reduce the life cycle of its tools.

The company’s Chief Financial Officer, Mr Ajay Seth said, “On exchange rate, we will feel the pain for the next two quarters as our imports are high this year. But as our exports will increase from next year, we will become net exporter.”

The company’s net sales marginally increased by 6 per cent, during the quarter to Rs 4,806.3 crore.

Commenting on the second quarter results, Mr Shinzo Nakanishi, Managing Director, Maruti Suzuki India Ltd, said, “Depressed market sentiments have impacted our results. We are aware of the global macro economic situation. But we believe India will recover soon because of the potential of the domestic market.”

Pricing strategies

Commenting on whether the company offered a loyalty bonus of Rs 30,000 on SX4 to improve its margins, Mr Mayank Pareek, Executive Officer (Marketing and Sales) said: “We were a late entrant in the A3 segment. Almost 80 per cent of the customers in the segment are adding a new car or upgrading. So we felt we should give some incentive to our customers.”

The company increased its share in the premium segment by 28.5 per cent. It also announced an increase in its price in the range of Rs 2,000-6,000 (0.7-1.1 per cent) on all models, except on the Swift and Dzire variants.

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