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Maruti misses Street estimates, Q2 PAT slides 18% to Rs 3,102 crore

Shares of MSIL on Tuesday declined over 4 per cent to settle at Rs 11,010 apiece on the BSE. Intra-day, it slumped 6.42 per cent to Rs 10,744.10. At the NSE, it tumbled 4.16 per cent to Rs 11,005

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Deepak Patel New Delhi

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Maruti Suzuki India (MSIL) on Tuesday reported an 18.1 per cent year-on-year (Y-o-Y) decline in its consolidated net profit for the second quarter (Q2) of FY25 at Rs 3,102.5 crore.
 
The profit figure was below the Street estimates of Rs 3,525 crore.
 
The fall in profit was due to deferred tax taken into account after the removal of indexation benefits on long-term capital gains of debt mutual funds, a continued decline in demand for small cars, and reduced sales in urban areas.
 
“The automobile industry is having a somewhat of a difficult time this year. The growth of the industry has been slower than what has been in the past and this is despite the fact that there are no shortages of semiconductors or impact of Covid-19. It is just that the demand for cars has slowed down,” MSIL Chairman RC Bhargava said in a press conference.
 
 
MSIL’s deferred tax in the second quarter of FY25 stood at Rs 1,017.7 crore. It has deferred tax in the corresponding period of the previous financial year was just Rs 83 crore.  
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Meanwhile, shares of MSIL on Tuesday declined over 4 per cent to settle at Rs 11,010 apiece on the BSE. Intra-day, it slumped 6.42 per cent to Rs 10,744.10. At the NSE, it tumbled 4.16 per cent to Rs 11,005.
 
The company’s market capitalisation (mcap) eroded Rs 14,846.09 crore to Rs 3,46,157.23 crore.
 
“We have performed well. Our profitability is very good. Our turnover is the highest ever. The final PAT (profit after tax) is a little bit lower than the last year but that is because of the change that was done in this year’s Union Budget in terms of indexation benefits, which were available to long-term debt mutual funds. That has been taken away,” Bhargava explained.
 
“That has resulted in us making a provision — this is not an actual expenditure — of Rs 800-odd crore. As a result, while PBT (profit before tax) has been growing, PAT has come down,” he elaborated.
 
MSIL’s PBT (profit before tax) stood at Rs 5,140.6 crore, which is 5.1 per cent.
 
Partho Banerjee, senior executive officer of marketing & sales at MSIL, said the demand in rural areas has remained robust.
 
“The rural market is doing well. In H1, the rural market’s growth was about 8 per cent Y-o-Y. However, the sales in urban areas decreased by three per cent Y-o-Y due to elections and monsoons. Urban areas are under pressure,” Banerjee noted.
 
Bhargava mentioned that the demand for cars priced under Rs 10 lakh has been declining and is a cause of concern. “Unless that lower end of the market grows, there will be no feeder to the upper markets,” he said.
 
He stated that in 2018-19, about 80 per cent of cars sold in India were priced under Rs 10 lakh. “That segment is not growing. That is a cause of worry,” he elaborated.
 
He mentioned that the people are not finding it affordable to buy the entry-level cars. When asked if a tax cut on such entry-level cars would help, he replied: “I don’t know what is required...we need people to have more disposable income.”
 
The Indian auto industry is not expecting a “great upsurge” in sales after the festival season. For the entire 2024-25, the industry is expected to post a volume sales growth of about 3-4 per cent Y-o-Y.
 
“Maruti's growth in 2024-25 would be in line with the industry,” he mentioned.
 
The company's wholesales in the first half of 2024-25 stood at 1.063 million units, which was 1.3 per cent more Y-o-Y. Bhargava said MSIL has reduced its production lately to reduce the high levels of inventory lying with the dealers. 
 
Banerjee, the sales head, mentioned that the dealers now have the stock for about 30 days, significantly lower than before. “In a few models, the inventory level is still at about 40-45 days. This will be managed (reduced) in the third quarter,” Banerjee noted.
 
In the festival season, which starts from the end of Shradh period and runs till Diwali, the volume sales increased by 14 per cent Y-o-Y.
 
“The order book is quite healthy at the moment. We are yet to see what will happen once the festival season is over,” Bhargava noted.
 
The discount levels are currently quite high.
 
“Discounts are a function of market conditions and what the company does in terms of scheduling its production. If inventory is high, discounts have to be given. But if inventory is not high, then the pressure to give discounts is not there,” Bhargava explained.
 
“In the coming months, I don't think our discount levels will be higher than what we have been giving so far,” he added.
 
While talking about the overall slowdown being observed in the automobile industry, Bhargava stated that MSIL has stood the test of time. 
 
 “Nobody likes a slowdown. We don't get worried because we also recognise that slowdown is part of the car sales business. No one anywhere in the world gets certain car sales. It always fluctuates. I don't expect the market to remain steady...we are resilient. We can manage good times. We can manage bad times,” he added.
 

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First Published: Oct 29 2024 | 7:04 PM IST

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