Maruti Profit Misses Estimates as Promotion Expenses Rise

Maruti Suzuki India Ltd. (MSIL), the nation’s biggest carmaker by market share, reported net income that missed analyst estimates as it sold fewer vehicles and spent more on sales promotion. The shares fell.

Fourth quarter net income at Suzuki Motor Corp. (7269)’s Indian unit fell 35 percent to 8 billion rupees ($132 million), the New Delhi-based company said today. That trailed the 9.1 billion-rupee median of 25 analysts’ estimates compiled by Bloomberg.

Maruti’s introduction of its new Celerio hatchback in February could not help offset a slowdown in local sales. The automaker said that lower volumes, higher spending on sales promotion and a compensation to dealers for a reduction in excise tax impacted its profit.

“The earnings were below estimates due to margins being under pressure,” said Kapil Singh, a Mumbai-based analyst at Nomura Holdings Inc. “If the volumes pick up, we will see an improvement in margins going forward.”

Operating profit margin shrank to 5.8 percent in the three months ended March, from 9.1 percent a year earlier, according to data compiled by Bloomberg.

Maruti fell 1.3 percent, the most since April 1, to 1,956.20 rupees at the close in Mumbai trading. The benchmark S&P BSE India Sensex index dropped 0.8 percent.

Sales declined to 118 billion rupees, lagging behind the 123.3 billion-rupee median of 32 analysts’ estimates compiled by Bloomberg. The carmaker’s local deliveries fell 3.3 percent in the quarter, while exports dropped 25 percent.

Finance Minister P. Chidambaram on Feb. 17 cut excise duty on small cars to 8 percent from 12 percent in the interim budget.

Car Demand

Carmakers in India expect “moderate growth” in the year that began April 1, the first increase in three years as Asia’s third-largest economy rebounds from the weakest pace in a decade, Vikram Kirloskar, president of the Society of Indian Automobile Manufacturers, said April 11.

Maruti hasn’t yet seen customer interest translating into purchases, Mayank Pareek, the company’s sales chief, said at a press conference in New Delhi today. The carmaker may introduce three new models in the current financial year, he said without giving details.

The automaker expects demand to pick up after a new government is in place. India’s general elections began April 7 and the nine rounds of voting will be completed May 12. Votes will be counted on May 16.

“We are also hoping that post election results, post new government, there will be an improvement in conditions Sentiments will improve and there will again be a revival of the car market,” Chairman R.C. Bhargava said.

To contact the reporters on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Anurag Kotoky in New Delhi at akotoky@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Subramaniam Sharma, Suresh Seshadri

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