The country’s largest car maker, Maruti Suzuki India Ltd, said net profit for the third quarter (Q3) ended December rose by a better-than-expected 24% from a year ago, as it sold more premium cars such as the SX4 sedan and the Swift compact car.
Analysts expect growth next quarter to slow because the Reserve Bank of India left key interest rates unchanged, keeping car loans expensive. As a result, Maruti may have to spend more on rebates to ensure sales growth.
Maruti’s Q3 net profit increased to Rs467.04 crore from Rs376.41crore a year ago. The increase was better than the Rs461.2 crore average estimated by five analysts polled before the results.
Sales rose 27% to Rs4,654 crore in the quarter, as customers bought more of recently introduced models such as the SX4 sedan and the Zen Estilo. In the same period in the previous year, the revenue was Rs3,664.19 crore.
Maruti has introduced two new models and the Swift-diesel in the past three quarters and offered rebates of up to 10% to push growth. Despite lending rates being at a five-year high—resulting in slower vehicle sales growth in the country—the firm sold 17% more units in Q3 compared with a year ago.
“There’s been lots of discount(ing) this quarter which has impacted margins,” said Piyush Parag, analyst with Religare Securities Ltd.?“The com-petition is increasing and will continue?to lead to higher marketing and promotion spend.”
Maruti’s operating margins fell about 46 basis points to 11.26% in Q3 from a year ago, as it spent more on raw materials and discounts. Operating margins measure how much profit is left after deducting the basic expenses of running a business. Maruti shares closed 0.6% down at Rs857.2 each in a weak Mumbai market that closed 60.84 points down at 18,091.94.