Maruti Suzuki to sharpen rural focus after Q4 earnings top forecasts

By Aditi Shah

NEW DELHI (Reuters) - Maruti Suzuki India Ltd, the country's top-selling car maker, plans to push deeper into smaller towns and villages to increase sales, its chairman said on Monday, after the company reported a forecast-beating rise in quarterly net profit.

Maruti expects its push into rural areas will help expand its market share at a time when competition in bigger cities is intensifying, with several global car makers launching affordable, entry-level cars, the company's mainstay.

The group plans to increase its presence to 150,000 villages by end-March 2016 from 125,000 despite a weak rural economy, R.C. Bhargava told reporters.

Maruti reported a 61 percent increase in net profit for the quarter ended March 31 to 12.84 billion rupees, helped by higher sales, lower material costs and royalty payments, and a weaker yen.

Analysts on average expected Maruti to post a net 10.9 billion rupees, according to Thomson Reuters data.

Maruti's rural sales, which made up a third of the company's total sales of 1.17 million, grew 23 percent during the year to end-March, outpacing the 11 percent growth in urban sales.

"The strategy of extending the reach of sales and service to a larger number of villages each year has helped. This is an area where we can continue to grow. Rural sales are a long-term proposition for us," Bhargava said.

Maruti, which sells about one in every two cars in India, expects passenger vehicle sales to grow 11 percent in this fiscal year, said Bhargava, same as last year. He did not commit to a growth forecast for rural sales.

"It makes sense for Maruti to work harder on rural areas because competition in cities is really intense and global automakers are eating into urban demand," said Puneet Gupta, senior associate at consultancy IHS Automotive.

However, sales of automakers including Mahindra & Mahindra and two-wheeler makers like Bajaj Auto were dented last fiscal year after unseasonal rains damaged crops, hurting India's rural economy.

This is likely to worsen following a below-average forecast for monsoon rains this year.

(Reporting by Aditi Shah; Editing by Sumeet Chatterjee)