The investments will be utilised by the country’s largest carmaker to gradually ramp up production, maintenance and R&D.

Maruti Suzuki car on displayPTI / File image
Money Financial Results Thursday, May 14, 2020 - 19:39

Maruti Suzuki India Limited (MSIL) has earmarked a capital expenditure (capex) of Rs 2700 crore for the current fiscal FY2020-21, the company said, as it released its financial results on Wednesday. 

Expressing complete confidence in the economy and looking ahead to the long term, Maruti Suzuki Chairman R C Bhargava said the company can’t afford to miss the capital expenditure this year. 

The investments will be utilised by the country’s largest carmaker to gradually ramp up production, maintenance and R&D. 

Further, the company informed that no job cuts or salary cuts are planned to achieve its cost-cutting objectives. 

Saying that the company will resume with limited production for at least two months, Bhargava added that he doesn’t see the need for huge discounts as the demand will outstrip the supply. Any discounts on Maruti Suzuki cars in the near future will depend on market conditions, he added. 

For the January-March 2020 quarter, the company reported a net profit of Rs 1,291 crore which was 28.1% lower than the corresponding figure over the same period last year. This was mainly on account of lower sales volume, higher sales promotion expenses, which was partially offset by lower operating expenses, cost reduction efforts and reduction in corporate tax rate, the company said in a statement. The lower sales volume was owing to stalled operations due to the coronavirus pandemic. 

In Q4, the company sold a total of 3,85,025 vehicles and 3,60,428 vehicles in the domestic market, both representing a 16% decline over the same period the previous year. 

As far as the full year (April 2019-March 2020) is concerned, the company’s net profit stood at Rs 5,650 crore, which was 24.7% lower over the same period in the previous year. This was owing to lower sales volume, higher depreciation expenses, which was partially offset by cost reduction efforts higher fair value gains on invested surplus and reduction in corporate tax rate, the company stated. 

The company sold a total of 15,63,297 vehicles during the year, which was 16.1% lower over the same period the previous year. In the domestic market, the company sold 14,61,126 vehicles, which was lower by 16.7% over the corresponding period the previous year. 

Further, in line with the company’s financial performance for the year and considering uncertain business environment, the Board of Directors recommended a dividend of Rs 60/- per share (face value of Rs 5 per share) for FY 2019-20, the company declared. 

The company has commenced operations at its Manesar plant while it will open the Gurugram plant by May 18. Further, one-third of Maruti Suzuki’s dealers have reopened while 1,900 workshops are functional now. 

Meanwhile, while many carmakers and auto industry bodies have welcomed the Rs 20 lakh crore financial package announced by the Centre, they are now looking forward to a specific package from the government geared towards reviving the auto industry which has been battered by the pandemic and the slowdown the previous year.  

The Society of Indian Automobile Manufacturers (SIAM) remains hopeful that Finance Minister Nirmala Sitharaman will come out with an industry-focussed package when she announces details in the coming days. 

TVS Motor Company Chairman Venu Srinivasan called for the government to prioritise support for the small, medium and micro industry employees and initiate a direct benefit transfer to employees in unorganised and small scale sectors. 

The plight of the auto industry, which has been hit hard by the pandemic, can be gauged from the fact that Maruti Suzuki, Hyundai, Mahindra & Mahindra and Toyota India all registered zero domestic sales for the month of April 2020.