The country's largest carmaker Maruti Suzuki India (MSI) on Thursday reported its first decline in quarterly profit in over four years as a dip in rupee value, rise in commodity prices and higher sales promotion expenses hit its margins.
The auto major, which has over 50 per cent market share in the domestic passenger vehicle segment, reported a 9.8 per cent decline in net profit at Rs 2,240.4 crore for the second quarter ended September 30.
The company had reported a net profit of Rs 2,484.3 crore for the same period of previous fiscal.
Net sales, however, rose marginally to Rs 21,551.9 crore for the quarter under review, as against Rs 21,438.1 crore a year earlier.
Sales dipped 1.5 per cent during the July-September period at 4,84,848 units as rising fuel prices and changes in insurance impacted overall buyer sentiment during the period.
"... There has been a significant impact of rising oil prices. Plus the fact that it was decided that this year three years insurance premium has to be paid at the time of the buying ... close to Rs 9,000 a customer has to pay extra at the time of buying has also impacted the sentiment," MSI Chairman R C Bhargava told reporters.
Similarly, sentiments and laws relating to diesel have become more adverse and the uncertainty relating to the vehicles run on the fuel particularly in Delhi/NCR has also impacted the buyer sentiment, he added.
"We have committed for 10 per cent sales growth this fiscal and we will continue to make best efforts to achieve this figure. However, going by the current circumstances it is not going to be an easy task," Bhargava noted.
The company's quarterly net profit has dipped after 17 quarters with the last decline taking place in the fourth quarter of 2013-14.
Bhargava said that the current festival season has failed to bring in numbers and sales remain same as before.
"So far the festival season has not shown any buoyancy in sales. We used to witness a sales growth of around 10-15 per cent during the festive season but this year there is no indication for such a growth," Bhargava said.
He added that the company is ramping up production of CNG cars as the government is trying to promote the fuel with plans to add another 10,000 CNG outlets in the country.
"Currently we have eight models which offer CNG option. Our sales of such vehicles this year have grown over 50 per cent last year which clearly demonstrates the customer preference for CNG vehicles," Bhargava said.
When asked to comment on the Supreme Court banning sales of BS-IV vehicles post-April 1, 2020, he added that MSI will "phase out" all such vehicles much before the deadline.
When asked about the impact of a dip in rupee value in recent times, MSI Chief Financial Officer Ajay Seth said there was an impact of 120 basis points on the company's margins in the first half of the fiscal.
"The real pain would be visible during the second half of the year," he added.
MSI Senior Director (Marketing and Sales) RS Kalsi said that sales were in "lower gear" in urban areas while the rural markets were still doing well.
Tough market conditions have made the company shell out more discounts to attract buyers. MSI is offering Rs 3,000 more discount on its models as compared with the same period of last fiscal.
For the first half of the current fiscal, the company reported a net profit of Rs 4,215.7 crore, up 4.3 per cent from Rs 4,040.7 crore in the April-September period of 2017-18.
Net sales rose by 12.4 per cent to Rs 43,362.6 crore. The company sold 9,75,327 vehicles during the period, up 10 per cent from the same period of last fiscal.
Shares of MSI Thursday ended 0.65 per cent down at Rs 6,724.70 on BSE.