India’s largest car maker Maruti Suzuki India Ltd on Tuesday reported a robust 18% year-on-year rise in net profit for the quarter ended June at Rs 549.2 crore against Rs 465.4 crore last year. The auto major’s other income comprising mostly of capital gains due to long-term investments helped tide over a period of sluggish consumer demand.
Sales during the quarter declined marginally by 0.6% to 281,526 units as high interest rates and rising fuel costs kept consumers away from its showrooms. The 13-day strike at the company’s Manesar plant, its first in 10 years, during the quarter complicated matters further.
The strike alone cost Maruti 12,600 units in sales and Rs 420 crore in revenue. As a result, Maruti’s overall revenues grew by only 2.7% to Rs 8,529.3 crore.
“Higher commodity prices and foreign exchange volatility put pressure on margins compared to the same period last year,” the company said in a statement. “The market was sluggish mainly due to a sharp increase in fuel prices and high interest rates. The company’s unit sales in the domestic market grew by 3.2% during the quarter.”
The domestic demand for cars is, however, expected to remain weak in the second quarter as well and is likely to pick up only during the festive season in October, the company said.
“Market condition continues to be sluggish and the rate hike (of 50 basis points by the RBI) would effect consumer sentiment,” said Ajay Seth, chief financial officer, MSIL.