Maruti Survives on its Results

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Mumbai, Apr 26: Indian's largest car maker announced its quarterly and annual result. Though this was better than analysts' expectation, it showed threats to the company. According to its annual result, sales went up 25 percent but the company's net profit was less by 8 percent to Rs 228,864 in 2011.

This was on account of higher commodity prices and adverse currency movements. The company's profit before interest and taxes (PBIT) fell by 13.59 percent (BSE).

The company saw growth in revenues on account of higher sales but the spending on new model launches to thwart the competition also impacted on profits.

Exchange fluctuations also had its impact on Maruti's profits. While Maruti and some of its vendors import from Japan, the company is also engaged in exporting its cars to Europe.

Toyota, Honda, Ford and other car makers are set to launch newer models in the market, thereby increasing competition in the industry. Reserve Bank of India's (RBI) hawkish stance on interest rates to tackle inflation also seem to affect Maruti's sale in the coming quarter.

The operating margin of the company was hit on two accounts; increase in raw material costs, that affected everyone associated with the sector; rise in other expenses, which the management has attributed to cost incurred in the process of research and development.

Volumes increased due to 27.3% up-trend in domestic sales. This was driven by high rural penetration which formed one-fifth of the domestic sales. Exports fell 26% y-o-y, during the fourth quarter.

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