Financial Daily from THE HINDU group of publications
Thursday, Apr 04, 2002
Corporate - Performance
Maruti back in black, makes Rs 55-cr profit
NEW DELHI, April 3
MARUTI Udyog Ltd, the country's largest car maker, turned around in a sluggish market to make a net profit of Rs 55 crore in 2001-02, aided by strong cost-cutting measures and financial and labour restructuring.
The equal joint venture between the Indian Government and Japan's Suzuki Motor Corp, which accounts for about 60 per cent of all car sales in the country, had made a net loss of Rs 269 crore in 2000-01.
The turnaround in the last financial year was achieved despite revenues staying flat and a meagre 1.35 per cent year-on-year rise in domestic vehicle sales. Maruti said in a statement that its total revenue turnover in 2001-02 was Rs 9,295.3 crore, up 0.82 per cent from Rs 9,219.6 crore turnover of 2000-01.
Domestic car sales in 2001-02 was 3,39,974 units as against 3,35,461 units a year earlier. India's passenger car industry is, however, estimated to have remained more or less flat during the year, according to the latest industry figures.
The turnaround was signalled in the first half of 2001-02 itself, with the company posting Rs 30 crore profit and saying the cost-cutting measures would help it make profits in the second half of the financial year too.
"The company has returned to profit despite a higher depreciation provision compared with the previous year," Maruti said. Depreciation in 2001-02 was Rs 347 crore as against Rs 322 crore in 2000-01.
"During the year, the company adopted several innovative production practices and systems which improved quality substantially," Maruti said, adding this enabled it to bring down manufacturing cost, reduce warranty levels and raise productivity.
Recently, Maruti had reorganised production practices to improve productivity and reduce operational and maintenance costs. As part of the fiscal restructuring, Maruti said it was able to obtain funds at below the prime lending rates of banks to meet its short-term borrowing requirements. "Improved forex management also aided the turnaround," Maruti said.The company had earlier said that it was rescheduling debt and "would do everything permissible under the financial system" to cut costs.
Precisely citing these very reasons for the turnaround, the credit rating agency ICRA Ltd had recently reaffirmed its "highest safety" ratings on Maruti's debt instruments.
It may be noted that during 2001-02, Maruti had cut its workforce by nearly 19 per cent through a voluntary retirement scheme, at an estimated cost of about Rs 65 crore.
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