Maruti Suzuki’s June-quarter net profit fell 31.67 per cent to Rs 1,376.8 crore on account of lower sales and higher depreciation expenses.
The country’s largest car maker had posted a consolidated net profit of Rs 2,015.1 crore a year ago, the company said in a statement.
Revenue from sales was down 14 per cent down at Rs 18,738.8 crore compared with Rs 21,813.8 crore a year ago.
Depreciation and amortisation expenses during the first quarter stood at Rs 919 crore against Rs 720.3 crore in the year-ago period.
Sales slump
The company sold 4,02,594 vehicles during the quarter, down 17.9 per cent over the year-ago period. Sales in the domestic market stood at 3,74,481 units, down 19.3 per cent. Exports were at 28,113 units.
Ajay Seth, Maruti Suzuki India’s chief financial officer, told analysts: “It was the fourth consecutive quarter of decline in volumes (for the industry). During the quarter, passenger vehicles sales in the industry declined 18 per cent... The company was also impacted by demand weakness and domestic sales declined 19.3 per cent.”
He, however, said the current situation was a cyclical phenomenon and the company continued to believe in the long-term potential of the market.
R.S. Kalsi, Maruti Suzuki’s senior executive director (marketing and sales), said the rural market, which was earlier witnessing good traction, was also under a lot of pressure and saw a decline of around 17 per cent. The decline in the rural market was almost similar to what happened in the urban market, he said. Footfalls at showrooms continued to decline, he said.
Royalty route
On royalty payment to parent Suzuki, Seth said royalty on almost 45 per cent of the models were being paid in rupee s and the remaining 55 per cent would also shift from yen to rupee in the next three years.
“So, by 2021-22, we would have all the models moving to the rupee formula,” he said, adding for the first quarter of the fiscal the royalty payment was at 5.2 per cent of net sales.
In 2015, Maruti Suzuki had announced that it would start paying royalty to its parent Suzuki in rupees instead of yen for all new models, starting with the Vitara Brezza, which was launched in 2016.
Earlier, company chairman R.C. Bhargava had said the royalty of all the models of Maruti was expected to be in rupee terms by 2025.
On BS-VI preparedness, Kalsi said the company has the April 2020 deadline on its mind.
“Majority of our models will be ready by the end of 2019,” he said.
Centre worried
The Centre may soon call a meeting with stakeholders in the auto industry to discuss measures to arrest the continuous decline in sales.
The industry has been demanding the lowering of GST rate from 28 per cent and measures to boost liquidity to revive sales.
Automobiles have been hit the most among the major manufacturing sectors because of a consumption slowdown and the trend may get worse with a weak monsoon.