Maruti Suzuki suffered its first loss since 2003 due to Nationwide Lockdown

The Industry Outlook Team | Thursday, 30 July 2020

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For the April-June period, Maruti Suzuki which is the largest carmaker reported a standalone net loss of INR 249.4 crore. This is its first quarterly loss since 2003. The loss has been directly caused due to the nationwide lockdown caused by COVID-19.

During the same period last year (2019), the company had reported net profit of INR 1,435.5 crore and INR 1,291.7 crore in January-March 2020. The company has also said in its statement that the loss was a partial offset by lowering operating expenses and higher fair-value gain one the invested surplus.

Maruti Suzuki said, “It was an unprecedented quarter in the company’s history; a large part of the quarter had zero production and zero sales in compliance with a lockdown stipulated by the government. Production and sales started in a very small way in May.”

The car maker company further added, “With carefully designed safety protocols, which went far beyond compliance levels, the production in the whole quarter was equivalent to just about two weeks of regular working. The results have to be viewed in this context.”

Compared to April-June 2019 where the company sold more than 4 lakh vehicles, this year’s quarter saw only a total of 76,599 vehicles sold due to the pandemic. Because of this, Maruti Suzuki share fell to INR 6,185.6 on the BSE at 1.62 percent.

Due to negative operating leverage in the first quarter of FY21 amid a nationwide lockdown initially and a slow pick up later on, the company’s results were considerably subdued, said Arjun Yash Mahajan, head, institutional business, Reliance Securities.

He added, “Adverse product mix and higher other expenses took a toll on operating margins. However, the strong balance sheet with huge cash and cash equivalents would help support the entire value chain system associated with Maruti Suzuki.”