New Delhi: India’s largest car manufacturer, Maruti Udyog Ltd (MUL), reported record profits in the first quarter that exceeded analysts’ estimates as it introduced new models and a stronger currency cut import costs.
Net income in the three months ended 30 June rose 35% to Rs499 crore, or Rs17.29 a share, from Rs370 crore, or Rs12.79 per share, a year earlier, officials from the New Delhi-based unit of Suzuki Motor Corp. said. That beat the Rs370 crore median estimate in a Bloomberg survey. Sales at Maruti went up by 26% to Rs3,914 crore.
Maruti introduced five new models in the past year to attract buyers and counter higher loan rates in India, where 80% of vehicles are bought on credit. General Motors Corp. (GM) and other car makers are spending more than $3 billion (Rs12,090 crore) to expand in India as economic growth may help car sales triple to three million units a year by 2012.
Technicians at the aasembly line, Gurgaon, New Delhi
“High interest rates are a temporary setback for automobile companies,” said A.K. Sridhar, CEO of UTI Asset Management Co. Pvt. Ltd. “Sales should pick up from the third quarter,” said Sridhar, who owns shares of Maruti.
The central bank, scheduled to release its next monetary policy statement on 31 July, has raised benchmark interest rates to control inflation in the world’s second fastest growing major economy.
Shares of Maruti rose 3.9% to Rs841 on the Bombay Stock Exchange on Thursday. The stock rose as much as 6% after the earnings were detailed.
Assembly line at the Maruti Udyog
State Bank of India Ltd and ICICI Bank Ltd, India’s two largest lenders, have tied up with Maruti to offer loans to customers in towns and villages, where credit wasn’t available, to boost vehicle sales.
Maruti introduced the SX4 in May, its first new sedan in eight years, targeting buyers who want more features such as air bags and leather seats.
In January, Maruti started selling the diesel variant of its Swift model, and a month before that, it unveiled the Zen Estilo. That helped Maruti increase sales by 17% to 169,669 vehicles in the first quarter.
“Car sales will continue to grow and Maruti will be one of its major beneficiaries,” said Amar Ambani, analyst at brokerage firm Indiainfoline Ltd. The car maker, 54% owned by Suzuki, will invest about $2 billion by 2012 to make new cars and expand capacity. That may help it take on competition from GM minicars and hatchbacks from Volkswagen AG and Nissan Motor Co.
The Indian government in May sold its residual 10.27% stake in Maruti to banks, insurance firms and mutual funds.
Shares in Maruti rose as much as 5.7% on the earnings and were up 5.4% at Rs853 in a weak Mumbai market.
The stock had fallen 9.4% in the April-June quarter, trailing a 2.7% decline on the sector index and a 12% gain for the main index.
Shares in Maruti, which has a market value of about $6 billion, trade at 14.3 times forecast earnings, same as rival Tata Motors.