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Maruti March quarter profit rises 16%

The company has earmarked Rs 4,500 crore as capex for the current financial year, which is way above the Rs 3,200 crore spent as capex during FY 17.

Maruti Suzuki on Thursday reported a net profit of Rs 1,709 crore for the three months to March, posting a 15.8% year-on-year increase. The rise in profit, although a shade below the consensus estimates of Rs 1,771.4 crore, was driven both by an increase in volumes of its premium models as also better net realisations. The country’s biggest carmaker ended 2016-17 with a record profit of Rs 7,511 crore, a jump of 36.6%. Total revenues from operations rose 18.25% to Rs 68,035 crore, with the carmaker selling 1,568,603 million units in all.

The Maruti stock ended Thursday’s trading session at Rs 6,371.15 on the BSE, down 0.5% over Wednesday’s close. The stock has gained nearly 75% in the last two years compared with a gain of just 10.5% for the Sensex. Net sales in Q4FY17 rose a smart 20.3% y-o-y to Rs 18,005 crore but higher raw material prices hurt operating profit margins, which came in at 16.7%, a contraction of around 300 basis points y-o-y.

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The ratio of raw materials to sales in the quarter was higher. As such, the auto major’s earnings before interest, taxes, depreciation and amortisation or Ebitda rose just 4.78% y-o-y to `3,005.6 crore, with the company having spent more on advertising and marketing costs. Despite demonetisation, Maruti clocked volumes of 4,14,439 units, up 15% in the March quarter. Longer waiting periods for the Baleno and Vitara Brezza helped support demand.

Chairman RC Bhargava said at a media conference that demonetisation had not impacted business as badly as had been feared. “There were other challenges in the form of environmental issues which created difficulties for automobile companies,” Bhargava said. Maruti plans to use its large reserves of cash to expand its sales network substantially.

The company has earmarked Rs 4,500 crore as capex for the current financial year, which is way above the Rs 3,200 crore spent as capex during FY 17. Chief financial officer Ajay Seth said funds were needed to expand the dealer network, to meet higher marketing and advertisement
expenses, R&D and to maintain and upgrade the manufacturing capacities in Manesar and Gurgaon.

The contribution of Maruti’s premium products to total volumes last year increased to 25%. As a result, the amount spent on discounts reduced to Rs 16,748 per car from Rs 18,695 in FY16 and boosted realisations.

“We are hopeful of meeting demand this year. Though there will be production constraints, we can stretch up to 10-12 % growth in current year,” said Rahul Bharti, vice-president (corporate planning & government affairs). The company announced a dividend per share of Rs 75, up from to Rs 35 for FY16.