Deferred tax pulls down Honda Cars's net profit by 53% to Rs 661 crore

Honda Cars India (HCIL) net profit dropped by 52.8 per cent year-on-year (Y-o-Y) to Rs 661.4 crore in 2023-24 (FY24), primarily due to deferred tax of Rs 359.8 crore, according to the annual results submitted to the Registrar of Companies (RoC) and reviewed by Business Standard.

 

In FY24, the company's production increased by 16 per cent Y-o-Y to 134,807 units.

 

Profit before tax (PBT) in FY24 stood at Rs 1,029.6 crore, which is 24.7 per cent higher.

 

During the two Covid-affected years of FY20 and FY21, the company’s net loss stood at Rs 1,672.2 crore and Rs 1,587.5 crore, respectively, according to documents. Consequently, it had zero deferred tax in FY22.

 

“As at April 1, 2022, the company had significant unabsorbed depreciation and carry forward business losses in accordance with the Income Tax Act, 1961. In view of the absence of reasonable certainty of sufficient future taxable profits, deferred tax assets had been recognised to the extent of deferred tax liability only,” the company stated in its RoC documents.

 

Therefore, in FY23, HCIL took a deferred tax benefit of Rs 567.1 crore, which helped it post a massive six-fold Y-o-Y jump in net profit to Rs 1,401.8 crore.  

 

“However, as at March 31, 2023, the management believed that there was reasonable certainty of having sufficient future taxable profits based on the projection and hence, the company had recognised deferred tax assets from March 31, 2023,” it stated.

 

As it had previously taken deferred tax benefits, the company had to recognise a deferred tax expense of Rs 359.8 crore in FY24, which contributed to the drop in net profit despite improved business performance. Its exports — primarily of sports utility vehicle (SUV) Elevate — jumped 65.5 per cent to 37,589 units in FY24.

 

In its RoC documents, HCIL stated: “The year marked Honda’s strong entry in the booming SUV segment in India with the launch of its latest global model Honda Elevate. India became the first country to produce and sell the model in September 2023.”

 

“With growing importance of Indian operations in Honda’s global business and focus to make India a key export hub, FY24 marked another significant milestone in the company's journey. HCIL started its first ever exports from India to Japan of its ‘Made-in-India’- Honda Elevate under the brand name WR-V, showcasing India’s manufacturing prowess and global competitiveness. The company clocked its highest ever export volume with 37,660 units in the reporting year,” it added.

 

The Elevate got a very good response from the market and customers are appreciating its bold design, outstanding space and comfort, advanced safety offering and well-appointed features.

 

During FY24, total passenger vehicle sales in India stood at 4.2 million units, recording an 8.4 per cent Y-o-Y growth, surpassing the 3.9 million units clocked during FY23.