Though Maruti Suzuki recorded 11.7 per cent fall in net profit to ₹1133.6 crore in the quarter ended March 2016 (compared with the March 2015 quarter), the stock gained about 3.6 per cent on Tuesday.

A drop in profits was anyway expected, given the production loss, the yen appreciation and the higher discounts offered. But what pleasantly surprised the market perhaps was the double-digit growth in revenues and higher-than-expected operating margins.

Despite a muted 3.9 per cent volume growth, net sales for the quarter grew 12.5 per cent to ₹14929.5 crore.

This was aided by a richer product mix, consisting of vehicles at higher price points such as the Ciaz, SX4 S Cross and the Baleno. The sale of Vitara Brezza also took off towards the fag end of the quarter.

Secondly, apart from passing on the infrastructure cess announced in the budget, the company also took price increase of ₹1,000-₹4,000 during the quarter across its models. Even the price of the recently launched Baleno was pushed up in the range of ₹5,000-₹12,000.

Thanks to these two factors, average realisations moved up to ₹4.14 lakh per vehicle compared with ₹3.82 lakh a year ago.

Higher realisations and lower raw material costs (68.9 per cent of sales now, vis-à-vis 70.2 per cent in March 2015 quarter) helped operating margins reach 15.3 per cent against market expectations of about 15 per cent.

In the quarters to come, raw material benefits may begin to be impacted by base effect.

At the same time, a continuation of unfavourable currency movements may shave off some of the margins too.

But higher volume growth expected due to lower inflation, interest rates and pay commission dole outs and a richer product mix from the addition of the Vitara Brezza will help mitigate impact to an extent.

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