Maruti Q3 beats forecast, net up 1.6%; to expand in Gujarat

Net profit increased to Rs 681.15 crore from Rs 670.23 crore Q-o-Q and Rs 501.3 crore Y-o-Y.

Numbers were not comparable on year-on-year basis due to the Suzuki Powertrain merger. Suzuki Powertrain was merged into Maruti on October 3, 2012, the results started to reflect from Q4FY13.

The CNBC-TV18 poll of analysts had expected the car maker to report profit of Rs 636 crore on revenues of Rs 10,900 crore for the quarter.

Total income from operations or revenues climbed 4 percent (down 2.7 percent year-on-year) to Rs 10,893.8 crore on sequential basis while net sales grew 4 percent Q-o-Q (down 3 percent Y-o-Y) to Rs 10,620 crore in the quarter gone by.

Operational performance was very strong during the quarter. Earnings before interest, tax, depreciation and amortisation rose 2.6 percent sequentially to Rs 1,355 crore and operating profit margin slipped 20 basis points to 12.4 percent as against analysts' expectations of Rs 1,266 crore and margin of 11.5 percent, respectively.

Volumes

The market share of the company increased 2.5 percent to 42.8 percent in the quarter gone by.

Maruti sold a total of 2,88,151 vehicles in the quarter ended December 2013, degrowth of 4.4 percent over a year ago period. Exports dipped 38.6 percent to 19,966 units while domestic sales slipped 0.3 percent year-on-year to 2.68 lakh units.

Sales of utility vehicles like Ertiga, Gypsy, Grand Vitara dropped 10.2 percent to 18,222 units and compact cars (which are Swift, Estillo, Ritz) sales declined 13.5 percent to 59,481 units. Sales of mini cars, which are M800, A star, Alto, Wagon R, grew 3.6 percent to 1.15 lakh units. 

Expansion in Gujarat

Meanwhile, the board of directors decided to expand manufacturing facilities in Gujarat after more than two years the board approved the purchase of land in Mehsana district of Gujarat (on October 29, 2011).

The company had kept expansion on hold due to market conditions. Since the approval, the company acquired approximately 640 acres of land in Becharaji and 550 acres in Vithalpur.

"The board approved implementing the expansion through a 100 percent Suzuki subsidiary Suzuki Motors Gujarat Private Limited because it would result in substantial financial benefits to MSIL and its minority shareholders," the company said.

The Suzuki subsidiary will not sell vehicles manufactured in this plant to anybody else. This subsidiary will produce vehicles according to requirements of MSIL and will be sold to MSIL only.

"The price of the vehicles to MSIL will include only the cost of production actually incurred by the subsidiary and just adequate cash (net of all tax) to cover incremental capital expenditure requirements," the release said.

While addressing press conference, Bhargava said the Gujarat expansion will be funded by Suzuki subsidiary and overall investment is expected to be around Rs 3,000 crore.

"It will be started with Rs 100 crore. The company, which will not be listed company, having headquarters in Ahmedabad will be set up by April 2014," he elaborated.

However, in case of Manesar plant, he said there is no room for further expansion of manufacturing facilities.

Stake hike by promoter?

"We have no plan as of now to raise stake in Maruti Suzuki. We cannot say now if company will up stake in Maruti in future," Bhargava said.

There were source-based reports in December that the promoter Suzuki Motor Corporation, which holds 56.21 percent stake, may hike stake in the company.

At 14:43 hours IST, the stock was down 5.02 percent to Rs 1,616 amid large volumes on the BSE. It fell as much as 7.9 percent intraday post results.