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September quarter: Maruti net falls 39%; to take steps to limit expenditures

Maruti declared a net profit of Rs 1,358 crore for the quarter ended September 2019, down 39.4 per cent from Rs 2,240 crore in the corresponding quarter last year

By: ENS Economic Bureau | New Delhi | Published: October 25, 2019 5:15:20 am
maruti sales, maruti suzuki quarter sales, automobile sector sales, economic slowdown, india economy car sales, latest news Amid fall in revenues and profits, automaker creates groups across departments to focus on steps on cost reduction

In line with the sharp decline in auto sales during the quarter, Maruti Suzuki India on Thursday announced a 39 per cent dip in profit in the quarter ended September 30, 2019, as the firm’s sales fell 24 per cent to Rs 16,985 crore from Rs 22,433 crore in the same quarter last year. As the revenues and profits fell, the automaker has taken steps to cut down on both discretionary and fixed expenditures and has created several groups across departments to focus on steps on cost reduction.

On Thursday, Maruti declared a net profit of Rs 1,358 crore for the quarter ended September 2019, down 39.4 per cent from Rs 2,240 crore in the corresponding quarter last year, despite lower tax outgo, as the government reduced the corporate tax rate from 30 per cent to 22 per cent (exclusive of cess and surcharge).

The company said that its effective tax rate has come down from around 28 per cent to 23 per cent, on account of the cut in corporate tax rates.
“We have been working on cutting down on expenditures — discretionary, fixed and variable cost. We have created groups across departments that are focussing on cost reduction,” said Ajay Seth, chief financial officer, Maruti Suzuki India Ltd.

In September, the company had reported a 27 per cent drop in domestic sales of passenger vehicles (PV). The company’s domestic PV sales have been declining for the last eight months.

Maruti said Thursday that in the previous quarter ended September 2019, its sales dropped 30.2 per cent to 338,317 vehicles from the corresponding quarter last year. It, however, forecast that the sales would be flat this month year-on-year. “October should be okay for us in retail sales and wholesale … but that does not mean we are out of the woods,” said RC Bhargava, chairman, Maruti Suzuki India.

While the company maintained its Navratri sales this year has been at par with that seen last year, October will be crucial for the industry as it remains to be seen if the festive season leads to some revival in year-on-year sales growth. With the country’s car manufacturers facing slowdown in sales, Maruti had cut production in August and September to cope with the slowdown, and in August cut the number of its temporary workers.

Shares of the New Delhi-based company settled down over half a per cent on Thursday, compared with the broader Mumbai market, which closed 0.19 per cent down.

What started as a problem of funding and liquidity squeeze for the industry and its consumers in July-August last year has become more of a sentiment issue over the last few months, as individuals have been looking to postpone their purchases and cut down on consumption expenditure.
With the GDP growth rate hitting levels of 5 per cent for the first quarter ended June this year and wage growth not keeping pace with expectations, economists and market experts say that people are looking to defer their large expenses.

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