Maruti Suzuki India Ltd on Thursday said its net profit in the January-March quarter dropped 34 per cent from a year ago, largely because the company switched to more stringent depreciation rules.
Net profit in the fiscal fourth quarter dipped to Rs 297.70 crore from Rs 448.60 crore in the same period a year ago, even as total income rose 9.4 per cent to Rs 5069.90 crore during the quarter.
“For a tighter and more prudent financial reporting, the company has voluntarily adopted shorter depreciation cycles for its equipment and tooling assets," Maruti said in a statement. "The full depreciation for equipment and tooling will now be eight years instead of 13 years previously. The full depreciation for dies will be four years instead of five years earlier.” In line with this accounting revision, Maruti has made an additional provision of Rs 212.30 crore for depreciation for 2007-08.
Maruti shares fell 3.25 per cent to close at Rs. 745.95 in Thursday trading on the Bombay Stock Exchange.
An analyst at Religare Securities said the decision to opt for a new depreciation policy was due to shorter life cycle of assets in view of introduction of new products at shorter duration.. He said most of the automobile companies have followed a straight line method of depreciationand it remains to be seen whether other companies will now follow suit.
Operating profit — earnings before depreciation interest tax amortisation — for the year stood at Rs 3130.8 crore, a growth of about 21 per cent over the previous year, it said. The company announced a dividend of 100 per cent for 2007-08.