Auto sector slowdown: Maruti Suzuki Q2 net profit drops 39% to Rs 1,391 cr, revenue declines 25% to Rs 16,123 cr

New Delhi: The country’s largest carmaker Maruti Suzuki India (MSI) on Thursday reported biggest drop in quarterly profit in over eight years with consolidated net profit declining by 38.99 percent in September ended quarter hit by a sales slowdown in the auto industry. The company posted a consolidated net profit of Rs 1,391.1 crore in the second quarter as compared to Rs 2,280.2 crore in the year-ago period.

#2QwithCNBCTV18 | @Maruti_Corp's Q2 numbers come in on a high base, margin lags by almost 6% on a like-to-like basis, EBITDA down 53% pic.twitter.com/psjYdJRIEn

— CNBC-TV18 (@CNBCTV18Live) October 24, 2019

The last time the company saw a bigger decline in net profit was in the second quarter of 2011-12 when it posted a net profit of Rs 241 crore, down 56 percent from Rs 549 crore in the year-ago period. Revenue from operations in the second quarter stood at Rs 16,123.2 crore as against Rs 21,553.7 crore in the year-ago period, down 25.19 percent. Sales volume during the quarter under review stood at 3,38,317 as compared with the same period last fiscal, down 30.2 percent. Commenting on the financial performance, MSI Chairman RC Bhargava said: “The results of the second quarter and the first half of the fiscal are substantially lower than the last year. The sales have dropped 22 percent (in Q2) as a result of that everything has dropped.” The auto industry has been badly affected by affordability issue as a result of cost escalation of vehicles on account of new safety and emission regulations besides hike in insurance and registration charges, he said. [caption id=“attachment_5037561” align=“alignleft” width=“385”] Representational image. Reuters.[/caption] “This got compounded by lower availability of finance for inventory and buying cars, along with increased down-payment requirement,” he said adding banks were yet to fully transfer the benefit of repo rate cut by RBI to end consumers. Bhargava said the weak demand has hurt the cars segment more with its share in total passenger vehicles sales coming down to 60 percent as compared to 65 percent in the year-ago period. During the quarter under review, MSI said, it had offered an average discount of Rs 25,000 per car across models in comparison with Rs 18,000 in the corresponding period of the last fiscal. He, however, said in October sales have picked up with the company offering “record discount”, more than what was offered in the second quarter. “Thanks to the biggest promotions we ever had, sales in October will be comparable to sales in October last year,” he said. Bhargava, however, added, “That does not meant that we are out of the woods”. Recovery will depend on what happens in the next two months, he added. When asked if the company was putting investments on hold, Bhargava replied in negative saying normal annual capex of Rs 4,000-5,000 crore is continuing. “We are quite confident of the future and we don’t want to jeopardize our future by not preparing due to the current slowdown,” he said. Net profit for the first half of the fiscal ended September was at Rs 2,767.9 crore as against Rs 4,295.3 crore, down 35.55 percent. Revenue from operations in the first half stood at Rs 34,862 crore as compared to Rs 43,367.5 crore in the corresponding period last fiscal. Sales volume in the April-September period stood at 7,40,911 units, down 24 percent as against the same period of 2018-19.