Covid-19 impact: Maruti Suzuki posts first-ever quarterly loss in 17 years

Revenues in the quarter plummeted 80% year-on-year to Rs 3,677 crore, missing estimates as volumes sold were only 76,599 vehicles compared with despatches of around 1.3-1.5 lakh units a month in normal times. The management said that the production in the quarter had been equivalent to just about two weeks’ of regular working.

By:Published: July 30, 2020 9:45 AM
Maruti Suzuki India launched vehicle lease subscription service for individual customers under 'Maruti Suzuki Subscribe' brandImage of the Maruti Suzuki Vitara Brezza used for reference.

Maruti Suzuki India (MSIL) on Wednesday reported a net loss for the three months to June as the lockdown imposed in the wake of the pandemic disrupted business. This is the carmaker’s first quarterly loss since its listing 17 years ago in 2003. The net loss of Rs 249 crore, versus a net profit of Rs 1,435.5 crore a year ago, is however, below Bloomberg consensus estimates of Rs 340.63 crore. Revenues in the quarter plummeted 80% year-on-year to Rs 3,677 crore, missing estimates as volumes sold were only 76,599 vehicles compared with despatches of around 1.3-1.5 lakh units a month in normal times. The lower sales severely impacted the Ebitda (earnings before interest, tax, depreciation and amortisation) margins which came in at a negative 23.47% and a negative ebitda of Rs 863.04 crore. The Maruti management said production in the quarter had been equivalent to just about two weeks’ of regular working. “It was an unprecedented quarter in the company’s history wherein a large part of the quarter had zero production and zero sales in compliance with a lockdown stipulated by the government.

Production and sales started in a very small way in May,” the company said. Even though June saw some uptick in auto sales, April was a complete washout and business in May remained sluggish when factories resumed production and showrooms opened. Maruti Suzuki chairman RC Bhargava had said in March that with too many uncertainties, it would be difficult to predict the recovery timeline. It would take 6-8 months, Bhargava said, to understand when business could recover to pre-2019-2020 volume levels. He had declined to give an outlook for 2020-21, citing too many uncertainties.

Meanwhile, analysts expect volume growth for the passenger vehicle segment to remain muted in FY21. This is primarily due to weak economic growth due to the coronavirus pandemic leading to negative impact on businesses and a decline in diesel segment volumes due to 6-8% price increase owing to the BS-VI transition. “We expect MSIL volumes to remain flattish y-o-y in FY21 led by low single-digit growth in the entry-level segment offset by double-digit decline in export and CV segments,” analysts at Kotak Institutional Equities said in a recent report.

According to Crisil, Covid-19 has put 50% of passenger vehicle sales at risk. An analysis of district-wise sales pattern revealed that the passenger vehicle segment has higher inherent risk compared with two-wheelers, because of a relatively higher concentration of sales in the top 100 districts. These districts account for 62% of passenger vehicle sales, in terms of volumes.

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