Indian carmaker Maruti sees quarterly profit jump 93 pct
NEW DELHI: India's largest carmaker Maruti Suzuki reported Saturday that its quarterly net profit had soared 93 percent year-on-year, amid signs pointing to a reviving domestic economy.
Maruti, majority owned by Japan's Suzuki Motor Corp, reported net profit of 5.7 billion rupees (123 million dollars) in the second financial quarter to September 30, broadly in line with market expectations.
Net sales jumped 47 percent to 70.5 billion rupees.
The car manufacturer attributed the profit increase partly to government stimulus measures aimed at boosting a slowing economy that have put more money into the hands of India's increasingly affluent middle class.
"Demand has been driven by government stimulus," Maruti Suzuki India Ltd said in a statement issued in New Delhi.
It also attributed the rise in sales to aggressive monetary easing by India's central bank to help shield the economy from the impact of the global financial crisis that has made consumer loan costs cheaper.
Nearly four-fifths of cars in India are purchased using loans.
In recent months India's carmakers have seen demand for vehicles pick up on lower interest rates and stimulus packages from the government targeted at boosting an industry which was hit hard by the global downturn.
The company, which holds 55 percent of the passenger car market, said it "remains cautiously optimistic" on sales volumes in the near future.
It added operating margins may come under pressure due to rising input costs from firming commodity prices but that it would continue to focus on cost-cutting.
Domestic car sales grew by 22 percent to 209,083 units in the three-month period from a year ago.
Exports also contributed to the strong growth, riding on stimulus packages by European governments, the company said.
India's car exports have been buoyed by incentives in major European markets to scrap old vehicles in exchange for new ones, a scheme aimed primarily at shoring up European automakers.
However, these incentives are expected to wind up soon, making the export market more challenging for Indian carmakers.
The strongest domestic growth in India is in the small car segment.
Domestic demand was propelled by Maruti's new A-star and Ritz models along with its other Alto, Swift and WagonR small cars.
Analysts say India holds huge promise for global automakers as the country of nearly 1.2 billion people has one of the world's least penetrated car markets.
The sharp growth in Maruti's profit, amid signs of India's economy gaining steam, came as India's central bank was due on Tuesday to consider whether to start withdrawing monetary stimulus to tame mounting inflationary pressures.
The bank will weigh up economic data pointing to a resurgence of industrial activity and recent comments by the government that India's nascent economic recovery should take root before interest rates are hiked.
The pickup in car manufacturing production helped drive India's industrial output up 10.4 percent in August year-on-year, its fastest clip in 22 months.