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Journalism of Courage
NEW DELHI, MARCH 31: Despite a drop in production, sales, exports and profitability during 1998-99, Maruti Udyog Limited (MUL) has set an optimistic sales target of 3,75,000 cars — or a 12.5 per cent rate of growth — for the financial year 1999-2000. The company produced 3,32,931 cars (as against 3,54,336 in 1997-98) and sold 3,09,094 (3,27,264) cars in the domestic market during 1998-99.
The estimated profit before tax of MUL for 1998-99 dropped by -19.85 per cent and stood at Rs 783 crore, as against Rs 977 crore during 1997-98. The profit after tax for the FY stood at Rs 522 crore, a drop of Rs 130 crore (or -19.94 per cent) from 1997-98, when the PAT stood at Rs 652 crore. Even exports dropped to 24,410 units as against 25,994 units in the previous year.
Only the net worth of the company displayed a growth and increased by 23 per cent — from Rs 2,123 crore in 1997-98 to Rs 2,606 crore in 1998-99. Total income also took a dive to Rs 8,118 crore from Rs 8,474 crore. Internal resources generated wereRs 668 crore, as against Rs 793 crore in 1997-98.
This is the first time in the 16-year history of MUL that profits have dropped by such large numbers. Even though sales have dipped by around -5.55 per cent, the drop in profitability is much larger owing to the drop in prices undertaken on December 30, 1998 and the additional features added to almost all the models without passing the cost on to the consumer. The last time production and sales dropped for MUL was in 1991-92 when production stood at 1,21,000 as against 1,23,000 in 1990-91.
Expressing delight at the annual results, the MUL Managing Director, R S S L N Bhaskarudu, said the company’s results were highly satisfactory keeping the entry of new players and the recessionary conditions in mind. “The market had shrunk considerably during October and December 1998. When we repositioned our products in December-end, sales increased by 43 per cent during January to March 1999, as compared to October-December 1998,” Bhaskarudu said.
Barring Zen,(83,000 units of Zen were sold during 1998-99 as against 79,500 units in 1997-98) all the other models out of the MUL stables saw a fairly substantial drop in sales. The sales figure for Maruti 800 dropped by 23,000 units at 1,67,000 (190,000). The company sold around 60,000 units (56,000) of Omni, 16,700 (17,800) Esteems and 7,200 (7,700) units of Gypsy. However, Bhaskarudu said that the company found the sales figures for the third quarter highly encouraging when the company sold 30 per cent more cars as compared to the last quarter of 1997-98. Since the car market had shrunk over the last 12 months, MUL managed to retain its market share of 80 per cent. MUL achieved savings of Rs 93 crore, as against Rs 78 crore during the last FY. It added 10 dealers to its existing network.
Maruti’s performance during the coming FY will depend largely on its own marketing strategies, its competitors and on the new models that it launches. The company is said to be working towards launching at least three new models inthe coming financial year — probably one each in the small, mid and the luxury segment of car market. The third plant at the Gurgaon factory has already become operational, increasing the installed capacity of the company from 2,50,000 to 4,50,000.
