Maruti Oct-Dec profit up 18 percent, misses estimates

By Aditi Shah

NEW DELHI (Reuters) - India's largest carmaker Maruti Suzuki India Ltd posted a smaller-than-expected rise in profit for the third quarter, hit by one-off items including a jump in advertising costs, a higher tax rate and lower income from investments.

Maruti, which sells nearly one in two cars in India, reported a quarterly net profit of 8.02 billion rupees ($130.53 million), up 18 percent. Analysts on average expected the company to make a profit of 9.06 billion rupees, according to Thomson Reuters I/B/E/S.

Analysts attributed the miss largely to higher taxes and advertising spending that increased in the quarter due to the number of new launches. The drop was also due to lower income from a cash pile, net of debt, that ranks among the largest in the Asian auto sector, they said.

"There is a lot of surplus cash and we had expected around 2 billion rupees (of other income) for the quarter but... it came at 1.28 billion, so that is a major gap," said Jigar Shah, head of research at brokerage Kim Eng.

Maruti's $1.3 billion cash pile, net of debt, is invested mainly in debt mutual funds and is expected to grow an annual 27 percent by March 31, Reuters data showed. But investors have demanded a more transparent use of the capital or higher dividends.

"The other income is largely a timing issue where the redemption of these investments happen, so it will always vary year to year...this time it (redemptions) would happen in Q4," said Maruti.

Net sales rose 15.5 percent to 122.63 billion rupees, outpacing growth in the number of cars sold by Maruti, majority owned by Japan's Suzuki Motor Corp .

Sales of Maruti's cars during the October to December quarter rose 12.4 percent to 323,911 vehicles. It had warned of comparatively slower growth in the second half of the 2014-15 year, dampening expectations of a rapid recovery in an auto market that is hobbling back after two weak years.

"Compared to what we estimated, the sales are slightly lower, and also the kind of advantage that one should see because of the benign raw material costs and a favourable exchange rate is not seen in the profits," said Shah of Kim Eng.

Sales of passenger vehicles in India will grow just 1 percent in the year to March 2015, officials have said, blaming a government decision to scrap tax breaks.

($1 = 61.4400 rupees)

(Additional reporting by Patturaja Murugaboopathy in BENGALURU; Editing by Miral Fahmy and Muralikumar Anantharaman)