Maruti Suzuki Q2 net profit jumps over 80%

Maruti Suzuki India's net profit surged 80.3 per cent to Rs 3,716.5 crore in the September quarter, driven by better sales, softening commodity prices, cost reduction efforts and higher non-operating income.

The company had delivered a net profit of Rs 2,061.5 crore in the year-ago period, Maruti Suzuki India said in a statement on Friday.

Maruti said it is expecting the affordability of small cars in the domestic market to come back in the next 2-3 years in the face of rising income levels of people and a growing economy, among others.

During the second quarter of the current fiscal, the company registered net sales of Rs 35,535.1 crore against Rs 28,543.50 crore recorded in the same quarter of the previous fiscal, owing to higher sales volume and product mix, it noted.

The company sold 5,52,055 vehicles during the quarter compared to 5,17,395 units in the second quarter last fiscal.

Of the vehicles sold in the July-September period this year, 4,82,731 units were sold in the domestic market, while the remaining 69,324 cars were exported, the company said.

The carmaker also said it recorded its highest-ever quarterly sales volume, net sales and net profit in this quarter.

"And given this kind of growth (rising income levels and growing economy), I expect that the affordability factor, which was in the past the reason for small cars (sales) going down, that factor is going to gradually get eroded and in the next, maybe 2-3 years, we will find that people once again, will be able to afford a small car and the market should gradually come back," Maruti Suzuki India chairman R C Bhargava said at the post-Q2 earnings virtual media conference.

The importance for small cars coming back, Bhargava said, is that without the growth at the entry-level and the small car market in a retail space like India, we cannot sustain good growth levels in the industry.

"I expect that given the kind of demography and consumers we have, there are 150-180 million two-wheeler users in India.

"I believe, demand for economic models should come, given that cost rises are controlled, so that those users can start adopting cars.

"The importance of small cars coming back is that without them in India, we cannot sustain good growth levels in the car industry," Bhargava said.

"I believe that a growth in this small car entry level market is an essential requirement for the sustained growth of the car industry in India," he said.

"I believe that for the long-term health of the Indian car industry, revival of the small car segment is important and I believe it will happen as we go along, it may take a couple of years or so," Bhargava added.

The Indian economy, despite what is happening globally, is in a good position, growing at 6-7 per cent this year and things are moving along as they should, he said, adding, "we feel that we are now in more normal circumstances".

"I am told that the industry is not very optimistic about next year, and the growth projections for next year are virtually at a stagnation level.

"And partly, it is because perhaps there is degrowth in the small car segment, and India needs that segment to grow," he added.

"Unlike the overall industry with things that make sure there will be a flat kind of situation, we are not that pessimistic.

"We think that next year their will be positive growth (for MSI)," Bhargava said.

Bhargava, however, said he will not hazard a guess on the growth numbers for the next year.

He said while the industry this year is expecting to grow at 5.5 per cent, Maruti Suzuki India is hoping to grow better-than-the industry at around 10 per cent.

The company has crossed the one-million production mark in the first half of this year and the possibility of achieving two million vehicle production is very high and if this happens, "MSI will be the first company in India to get to two-million production in one year," he said.

Bhargava also said the company has been able to reduce the waiting period at a time from close to 400,000 cars "and we think by the end of this month, it will be somewhere around 2.15 lakh cars."

The company is expecting to sell over 18-lakh units this year in the domestic market against around 16.4 lakh of last year, he said, adding, "partly because in fact it has been a degrowth in the small car segment".

India needs that segment to grow so that is how the industry is looking at for the future, he added.

MSI is expecting exports this year at the same level as last year as there is not much capacity for an increase.

"The rural market continues to be in reasonably good shape.

"It is growing slightly faster than the urban market.

"Both, roughly around 10 per cent  but rural market is around 11 per cent, urban market is a little below 10 per cent but not too much difference between the two," he said.