Maruti adjusted Q3 net rises 27 per cent

For the quarter ended 31 December 2006, net profit has increased 11.03 per cent to Rs376.41 crore from Rs339.01 crore for the previous year quarter. Total operating revenues have increased 18.24 per cent to Rs3,679.47 crore from Rs3,112 crore a year ago.

Maruti had acquired Suzuki's stake in a JV and had merged it with itself during the quarter. The company booked a loss of Rs54.61 crore, for the period April 2006 to December 2006, of this merged entity during the quarter. Adjusted for this amount, net profit has increased 27.14 per cent to Rs431.02 crore.

Operating profits, including service income but excluding the losses on account of merger of subsidiary and other income, increased 20.59 per cent over the previous year quarter.

Operating margins as a percentage of net operating revenues improved to 15.27 per cent for the quarter from 14.97 per cent for the previous year quarter.

Maruti managed the modest improvement in operating margins by limiting the rise in input costs to 16.77 per cent. Input and other manufacturing costs form 88.73 per cent of total operating expenses. Staff costs went up by 26.44 per cent while other operating expenses, adjusted for the losses of merged subsidiary, were higher by 26.95 per cent.

Interest costs for the quarter were substantially higher at Rs15.74 crore as compared to Rs1.73 crore for the previous year quarter. Depreciation costs went up by 11.46 per cent over the previous year quarter. An increase of 20.45 per cent in other income to Rs128.43 crore from Rs106.62 crore also helped the bottom line.

Volume growth for the quarter was 18.74 per cent over the previous year quarter to 172,181 units. The entry level and premium hatchback segments (also called the A2 segment) continue to drive volume growth. The company had launched a new model — the Zen Estillo — in this segment during the quarter. It is commendable that Maruti managed an improved operating margin despite the higher costs associated with a product launch.

Maruti is expected to launch the diesel version of its premium hatchback Swift within a month or so. The base version of the diesel model is expected to be priced at around Rs4.5 lakh while the high-end version may cost close to Rs5 lakh. At this price, the diesel Swift would be costlier than the only other diesel hatchback in the market — the Indica from Tata Motors.

However, the model can be expected to do well as the petrol version of the Swift has already received market acceptance. The 1.3 litre diesel engine for the new Swift — developed by Fiat and manufactured by Maruti under license — would be the first diesel engine with common rail technology in the hatchback segment.

The engine is reported to be highly fuel efficient which should make it attractive for buyers despite the higher cost.

Maruti may also launch the replacement for the ageing Baleno sedan later this calendar year, probably at a higher price point. The company is also considering an upgraded version of its off-road vehicle Gypsy besides a replacement for entry level sedan Esteem in future.