Maruti Udyog Ltd faces the prospect of up to 40 per cent decline in its profits during the current financial year as a result of a slew of new models and thinning margins in spite of a projected increase in its turnover to Rs 9,000 crore from Rs 8,474 crore last year.
"Due to the company's policy not to pass on increased cost, our net and gross profits are likely to fall by 35 to 40 per cent in 1999-2000 despite an expected increase in turnover," MUL director (finance) A R Halasyam told newspersons in New Delhi yesterday. The projected fall in profits would be despite a spate of increase in prices of various models by MUL in the last two months.
Another top official of the company admitted that Maruti enjoyed a profit margin of over 10 per cent till the last financial year, but the scene was changing. "The company's margins would now come in line with the international automobile industry," said the official. The average automobile industry profit margins are 3-4 per cent in the Europe, about 5 per cent in Japan and 6-7 per cent in the US.