Maruti is looking at spending Rs 4,400 crore in 2016-17 compared with a spend of Rs 2,500 crore in 2015-16.
The country’s largest car manufacturer Maruti Suzuki on Tuesday missed expectations with a 12% year-on-year decline in its net profit to Rs 1,133.6 crore during the January-March quarter as it was hit by a loss of over 10,000 units due to the reservation agitation in Haryana, apart from higher advertising expenses and lower other income, reports fe Bureau in New Delhi. This was the company’s first fall in quarterly net profit in the last two years.
Total revenues during the period at Rs 15,305.7 crore was up 12.3% year-on-year and above estimates.
Gross margins for the quarter expanded 250 basis points to 34%, which led to an Ebitda margin of 15.4%, higher than analysts’ estimates of 14.8%. Net realisations per unit went up 8.1% on year to Rs 4.24 lakh, taking Ebitda per unit to Rs 65,205, which was 4.5% higher on year.
The company said the higher net realisation per unit was also due to the average discount per unit coming down during the fourth quarter by around Rs 4,000 per car from the preceding quarter.
In the October-December period, discounts had reached an all-time high of `21,997 per car.
The company said that the level of expenditure on sales promotion activities would continue at existing levels. The success of models like the premium hatchback Baleno as well as compact sports utility vehicle Vitara Brezza also contributed to high realisations and low level of discounts.
A better product mix that comprises larger cars contributed 34% of volume in Q4 against 33% in the preceding quarter.
Maruti is aiming at double-digit growth in sales volume during the current fiscal.
“Despite overall subdued economic climate, we have had best results than the past. We are setting ourselves a challenge of achieving double digit growth in 2016-17. It is not going to be an easy year,” Maruti Suzuki India chairman RC Bhargava told reporters. For 2015-16, Maruti saw its total sales, including exports, grow 10.6% to 14.3 lakh units. Bhargava maintained that remained several challenges, including unfavourable foreign exchange rates as well as challenges from the “environment lobby which has been against diesel cars”.
To fuel its growth ambitions, Maruti is looking at spending Rs 4,400 crore in 2016-17 compared with a spend of `2,500 crore in 2015-16. Using the capex funds, Maruti is looking at higher spending in research and development and sales and marketing. The company has spent `800 crore in improving sales infrastructure in 2015-16, the management said.
On the company’s existing capacity and required capacity for double-digit growth, the management said that while efforts are being made to optimise the existing capacities in Gurgaon and Manesar, the Gujarat plant will begin operations from January 2017 and would contribute at least 10,000 units in the year 2016-17. “Our current capacity is around 1.43 million units from the two plants. Our engineers are working to enhance it. We can stretch it up to 1.57 million units,” Bhargava said.
For the full fiscal ended March 31, Maruti posted its highest ever annual net profit at `4,571.4 crore, up 23.2% from `3,711.2 crore in the previous fiscal. Discounts for the fiscal were at an average of `19,000 for each model, which was the same as the previous year. Royalty payments for the year stood at 6% of net sales versus 5.7% in 2014-15.