Maruti Suzuki: Forex losses impact profits

Parvatha Vardhini CBL Research Bureau Updated - March 12, 2018 at 12:56 PM.

maruti

Despite production losses and weak demand, the 64 per cent fall in Maruti Suzuki India's profits may have been contained had it not been for the foreign exchange loss. An appreciation of the yen against the rupee during the quarter saw the company set aside Rs 75 crore as marked-to-market loss as provision for royalty.

In addition, an exchange loss of Rs 19 crore was incurred on the royalty payment for the first half of the year, made in November 2011.

Although commodity prices haven't risen materially , Maruti has been impacted by the unfavourable exchange rates (yen and dollar) on import of raw materials as well. In all, the forex impact totals to Rs 200 crore. This factor too played its part in the shrinking of its margins.

But, there have been some positive indicators. . One, discounts have narrowed in the quarter. Two, retail sales have picked up in December. Three, with the agreement to source diesel engines from Fiat, Maruti is in a position to convert enquiries to sales faster. The soon-to-be launched Ertiga and the new Dzire will also give volumes a boost. Better volumes and recent price hikes, along with favourable exchange rates, could bring stability to the company's financials in the current quarter .

>vardhini.c@thehindu.co.in

Published on January 23, 2012 16:45