New Delhi: Maruti Suzuki India Ltd, the country’s largest carmaker by volume, reported a 10% year-on-year jump in net profit to Rs1,882.1 crore for the quarter ending 31 March, on the back of increased demand from rural and semi-urban markets, improved product mix and realizations due to reduction in discounts.
However, net profit fell short of Bloomberg estimates of Rs2,085.50 crore due to a substantial increase in commodity prices, advertisement and Auto Expo-related expenses and overall taxes paid during the quarter.
The Delhi-based firm reported an 11.4% increase in the number of vehicles sold during the quarter from last year, courtesy the increase in demand for its offerings such as the Baleno (premium hatchback), the Vitara Brezza (compact sports utility vehicle), the new Dzire (compact sedan) and the new Swift (hatchback). Its entry-level vehicles also reported a growth of 5.6% on a huge base, indicating a turnaround in the rural economy.
Consequently, in the quarter, the company reported a 14.4% year-on-year increase in net sales to Rs20,594.3 crore. Operating profit (earnings before interest and taxes) rose by 24.4% to Rs2,312.5 crore due to higher sales volumes and cost-reduction efforts.
Due to the introduction of new models, discounts offered by the company also reduced to Rs1,39,000 per unit, compared with Rs1,51,000 a year ago. As a result, the average realization per unit also increased to Rs4.06 lakh compared with Rs3.93 lakh a year ago.
Royalty payments are also expected to decrease in the next few years as the board of parent company Suzuki Motor Corp. has approved a new royalty structure whereby Maruti Suzuki will be given exemptions for research and development work done in India, and payments will be capped at 5% of the company’s net sales. This insulates the company from any future fluctuations in the exchange rate.
“Maruti Suzuki reported in-line results for Q4FY2018. Strong volume growth coupled with higher realizations due to a better product mix boosted the top line. Regardless of higher employee costs and other expenses, MSIL managed to improve margins on a year-on-year basis due to price hikes and operating leverage," said Bharat Gianani, research analyst at Sharekhan.
“We expect that by 2021, all the existing cars in our portfolio will be covered by the new royalty formula. As of now, Ignis, the new Dzire and Swift are the vehicles to be covered by the new formula. I hope in the coming years the royalty payments by the company will be reduced, though we can’t say by how much they will come down," said R.C. Bhargava, chairman of Maruti Suzuki.
For the full year, the company reported a 16.7% year-on-year increase in net sales to Rs78,104.8 crore while operating profit rose by 20.1% to Rs9,303.6 crore. Net profit for the fiscal year increased by 5.1% to Rs7,721.8 crore.