On Tuesday, Maruti Suzuki India (MSIL) revealed that its consolidated net profit for the second quarter (Q2) of FY25 was Rs 3,102.5 crore, an 18.1 percent year-over-year (Y-o-Y) decrease.
The profit figure was below the Street estimates of Rs 3,525 crore.
The decline in profit was caused by a combination of factors, including decreased sales in urban areas, a continued decline in the demand for small cars, and deferred tax after indexation benefits on long-term capital gains of debt mutual funds were removed.
“This year has been a little challenging for the auto industry. The industry’s growth has been slower than it has historically been, even though there are no shortages of semiconductors or COVID-19 effects. The demand for automobiles has simply decreased,” MSIL Chairman RC Bhargava stated during a press conference.
MSIL’s deferred tax in the second quarter of FY25 stood at Rs 1,017.7 crore. Just Rs 83 crore was its deferred tax for the same period of the prior fiscal year.
In the meantime, MSIL’s stock fell more than 4% on Tuesday, closing at Rs 11,010 per share on the BSE. It fell 6.42 percent intraday to Rs 10,744.10. It fell 4.16 percent to Rs 11,005 at the NSE.
The company’s market capitalisation (mcap) eroded Rs 14,846.09 crore to Rs 3,46,157.23 crore.
“We did a good job. We are very profitable. We have the highest turnover in history. Due to changes made in this year’s Union Budget regarding indexation benefits available to long-term debt mutual funds, the final PAT (profit after tax) is slightly lower than it was the previous year. That is been removed,” Bhargava clarified.
As a result, we have made a provision of approximately Rs 800 crore, which is not an actual expense. Consequently, PAT has decreased while PBT (profit before tax) has been increasing,” he explained.
MSIL’s PBT (profit before tax) stood at Rs 5,140.6 crore, which is 5.1 per cent.
The demand in rural areas has remained strong, according to Partho Banerjee, senior executive officer of marketing & sales at MSIL.
“The market in the country is doing well. The rural market grew by roughly 8% year over year in H1. However, because of the elections and monsoons, sales in urban areas fell by 3% annually. “There is pressure on urban areas,” Banerjee said.
Bhargava mentioned that the demand for cars priced under Rs 10 lakh has been declining and is a cause of concern. “There will be no feeder to the upper markets unless that lower end of the market grows,” he stated.
He stated that in 2018-19, about 80 per cent of cars sold in India were priced under Rs 10 lakh. “That segment is not growing. That is a cause of worry,” he elaborated.
He stated that the cost of purchasing entry-level cars is prohibitive for many. According to him, “I do not know what is required. We need people to have more disposable income.” He was asked if a tax cut on such entry-level cars would be helpful.
The Indian auto industry is not expecting a “great upsurge” in sales after the festival season. The industry is anticipated to report volume sales growth of roughly 3–4 percent year over year for the entire 2024–2025 period.
“Maruti’s growth in 2024-25 would be in line with the industry,” he mentioned.
The company’s wholesales in the first half of 2024-25 stood at 1.063 million units, which was 1.3 percent more year over year. According to Bhargava, MSIL has recently lowered its output in an effort to lower the substantial amounts of inventory that are held by the dealers.
The sales head, Banerjee, stated that the dealers now have the stock for roughly 30 days, which is a much shorter period than previously. The inventory level is still between 40 and 45 days in a few models. In the third quarter, this will be controlled (cut),” Banerjee said.
Volume sales rose 14% year over year during the festival season, which begins at the end of the Shradh period and ends with Diwali.
“At the moment, the order book is doing pretty well. “What happens after the festival season is over is still up in the air,” Bhargava said.
The discount levels are currently quite high.
Discounts are determined by the state of the market and the company’s production scheduling practices. Discounts must be offered if inventory levels are high. However, Bhargava clarified that there is no pressure to offer discounts if inventory is low.
“I do not think our discount levels will be higher than what we have been giving so far in the coming months,” he continued.
MSIL has remained resilient, Bhargava said in reference to the general slowdown in the auto industry.
“A slowdown is disliked by all. Since we also understand that slowdowns are a natural part of the auto sales industry, we do not worry. No one in the world sells a certain number of cars. It varies constantly. We are resilient, but I do not think the market will stay stable. Good times are something we can handle. “We can handle difficult times,” he continued.