Maruti Suzuki’s net profit plunged by two-thirds in the third quarter, squeezed by a slump in demand for cars, production losses, a fall in the rupee and royalty to Japanese parent Suzuki.
The good news is, the bad news may be ending for India’s largest car maker, said analysts.
The company doesn’t foresee sales improving this quarter (January to March), but remains upbeat on the next fiscal because of a strong set of launches and higher output of diesel engines.
“The results are in line with estimates,” said Surjit Singh Arora, analyst with broking house Prabhudas Lilladher. “We maintain a positive outlook for the company for the next fiscal, with margins rising 100 basis points led by a 15% growth in volume.”
Ajay Seth, CFO, Maruti Suzuki, said in an earnings call on Monday that the third quarter was quite challenging.
“The magnitude of slowdown in the passenger vehicle segment has been more severe than in 2008-09,” he said.
Net profit plunged to `Rs06 crore from Rs565 crore a year earlier.
Seth believes the worst is over for the automaker. “A lot will depend on economies of scale. Also, our efforts towards cost control and price hikes will help improve margins. The only thing we cannot control is the exchange rate. We will have to take risk mitigation measures and strategise our hedging policies,” he said.
During the quarter, Maruti sold 211,803 units in India, 29% less than the 299,527 units sold in the same period last fiscal.
The company has also started hedging for its vendors for which it has received the Reserve Bank of India’s approval — for indirect imports.
Maruti is also looking at localising indirect imports going ahead to improve margins for the next fiscal.
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