Maruti beats estimates with 21% rise in profit, car sales revive

Maruti Suzuki India, India’s biggest carmaker, reported a 21 percent rise in first-quarter net profit, beating estimates, as early signs of an economic revival boosted sales.

Prospects of a pick-up in the economy, spearheaded by the newly elected government of Prime Minister Narendra Modi, could spur a marginal rise in car sales in the fiscal year that started April 1, according to an industry body.

The expected increase follows two consecutive years of decline as buyers were put off by high inflation and interest rates in Asia’s third-largest economy.

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Maruti’s wide dealership network, especially in rural areas where disposable incomes are rising, and a strong pipeline of new vehicles has prepared the carmaker for a recovery in car demand, analysts say.

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Maruti, controlled by Japan’s Suzuki Motor Corp said profit for the April-June quarter was Rs 762 crore ($126.14 million), up from Rs 632 crore in the same year-ago period. Net sales rose about 11 percent to Rs 11074 crore.

The sale of Maruti cars and utility vehicles rose 10.3 percent in the April-June quarter, lead by strong performance of its small, entry-level cars targeted mainly at first time buyers that are seen returning to the market.

The company sold 2,70,643 units of vehicles during this period, up 10 percent against 2,45,346 units during the same period last year but weak monsoon rains pose a threat and could especially affect sales of two-wheelers and small cars, which depend largely on demand from rural areas.

“The company’s cost reduction and localisation initiatives, growth in volumes and favourable foreign exchange helped improve the bottomline during the quarter,” it said.

With inputs from Reuters