Maruti Suzuki’s net sales rose in the January-March quarter by 12.48 per cent year on year, but net profit for the three months fell by 11.73 per cent from a year ago. Maruti says the cause for the profits to plummet were higher tax outgo and production loss from unrest near its factory. This profit drop was their steepest in two years.
Newer models like the compact SUV Vitara Brezza and premium hatch Baleno generated a lot of positive response and sold in high numbers. The demand for these cars is still high due to which Maruti is ramping up their production in order to decrease the waiting period. Maruti expects their sales number to only rise further owing to the opening of a new manufacturing plant in Gujarat in early 2017.
Ajay Seth, chief financial officer at Maruti Suzuki, dismisses this dip in profits as a one-time occurrence: “It is a one-time phenomenon and will get reversed the next year.” Maruti Suzuki paid tax at a higher rate of 33 per cent owing to fewer benefits on research and development (R&D), smaller tax-free income and lower capital expenditure compared to the year-ago period all of which are to blame for the fall in profits.
The company however, remains positive and according to RC Bhargava, Chairman Maruti Suzuki, they should be expecting a double-digit growth in sales starting from April. With all the new cars and segments they are targeting, Maruti Suzuki will continue its dominance as the Number 1 car manufacturer in India, this year as well.