Buoyed by Ertiga bookings, Maruti expects revenue rise

Top Indian automaker Maruti Suzuki India is expected to post its first rise in revenue in three quarters after a torrid financial year for the carmaker as Tata Motors continues to see revenue and profit surge on the back of strong sales at its Jaguar Land Rover unit.

Maruti has posted two consecutive quarters of falling profits as the car maker struggled with an industry-wide sales slowdown and the impact of widespread labour unrest at its factories in 2011.

Maruti Suzuki has plastered India with its “Live life with LUV (Life Utility Vehicle)” adverts as it promotes its new Ertiga model, and stock investors appear to have responded in kind.

As of Thursday’s close, Maruti stocks had surged 9.3 percent since the launch of the model on April 12, versus a 2 percent gain in the broader Nifty index, after analysts cited the competitive pricing for the model.

Shares in India’s biggest car maker Maruti Suzuki added 1.1 percent on Friday, extending the rally after executives have been making media appearances citing the auto maker has received over 10,000 bookings in the first five days of sales.

“Even as the product has lower engine power, Ertiga initial response is better than expectations as it carries a competitive pricing and higher mileage tag with it,” said Deepak Jain, a sector analyst at brokerage Sharekhan.

“Large proportion of Ertiga sales is expected to be for the diesel variants,” Jain said.

Car sales in India grew an annual 13.4 percent in the January-March quarter and revenues are seen rising across the industry, but profits are expected to fall as increased input costs and a weakened rupee curb operating margins.

“Year-on-year volumes are up and that will reflect in higher revenues, but profits will be lower as margins are hit by around 200 basis points, mainly due to unfavourable currency moves,” said Joseph George, an auto analyst at IIFL Securities in Mumbai.

Indian automakers import a substantial number of parts and machinery. The rupee fell 13.5 percent in the year to 31 March.

Maruti, 54.2 percent owned by Japan’s Suzuki Motor Corp, saw sales rise in January for the first month since May 2011 and is seen posting a 14.5 percent rise in revenue, but a 14.4 percent slide in profit.

Tata, whose sales jumped more than 20 percent in the quarter due to continued demand for its Jaguar and Land Rover vehicles, is seen posting a 20 percent rise in profit even as the performance of its domestic business lags.

The British luxury brands accounted for more than 90 percent of profit in the previous quarter.

Overall car sales in India rose just 2.2 percent in the year to end-March, the slowest growth in three years, as costly credit and the rising price of fuel in Asia’s third-largest economy smothered demand.

Reuters