Maruti Profit Misses Estimates on New Models Promotion Costs

  • Sales of Baleno hatchback started at NEXA outlets in October
  • Domestic deliveries increased 16% in October-December quarter

Maruti Suzuki India Ltd. posted profit that missed analyst estimates as costs for promoting new models eroded gains from an increase in local deliveries.

Net income in the quarter through December climbed 27 percent to 10.2 billion rupees ($149.5 million), the New Delhi-based unit of Suzuki Motor Corp. said Thursday. That compares with the 13.3 billion rupee average of 29 analysts’ estimates compiled by Bloomberg. Net sales rose 20 percent to 147.7 billion rupees.

India’s biggest carmaker by volume is expanding its portfolio by adding more expensive compact models such as the Baleno hatchback and S-Cross crossover, and building a separate network of premium showrooms called NEXA. Maruti said Thursday it had higher sales promotion expenses, employee costs increased 35 percent and earnings before interest, depreciation, tax, and amortization margins narrowed from the previous quarter through September.

“The stock should see a bit of negative reaction,” said Basudeb Banerjee, an analyst at Antique Stock Broking in Mumbai. “It’s all about margin and the stock price. Demand everybody is convinced will remain good.”

The automaker sees benign fuel prices and interest rates, and is uncertain on currency exchange rates and commodity prices, according to a company statement.

Shares of Maruti fell 0.2 percent to 4,103.30 rupees at close in Mumbai, before the earnings announcement. The benchmark S&P BSE Sensex declined 0.1 percent.

Maruti will unveil a new compact SUV Vitara Brezza at the Delhi auto show next month to widen its lineup of models. The company’s domestic deliveries in the quarter rose 16 percent, compared with the 15 percent growth in industrywide sales. It introduced the S-Cross in August and Baleno in October.

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