UPDATE 2-India's Maruti, Mahindra Q3 profits jump


(Releads, adds Mahindra, closing share prices, adds byline, changes dateline from NEW DELHI)

By Arif Sharif

BOMBAY, Jan 24 (Reuters) - India's top car and utility vehicle makers reported sharp increases in quarterly profit on Monday, as strong sales in Asia's fourth-largest economy and tighter control over costs offset rising raw materials prices.

Car maker Maruti Udyog Ltd. , which is 54.2-percent owned by Japan's Suzuki Motor Corp. , beat forecasts with a 70.3 percent jump in third-quarter profit, helped by aggressive cost cuts.

The New Delhi-based company makes top-selling models such as the mini Maruti 800 and Alto hatchback. Its cheap, fuel-efficient vehicles are often the first car families buy.

Indians have rushed to buy new cars in the past 18 months as the economy, growing at 6-8 percent, buoyed middle-class incomes in Asia's fourth-largest economy. Sales have also been helped by loans at their cheapest in 30 years.

Poor public transport and ownership levels of just eight cars per 1,000 people in India, compared with 35 in Thailand and 450 in the developed world, support rising car demand.

Analysts expect Maruti's full-year sales to rise 15-19 percent from last year's 472,122 units.

Mahindra & Mahindra Ltd. , India's biggest tractor and utility vehicles maker, met expectations with a 52.4 percent jump in quarterly profit, as its 27 percent share in tractors allowed it to pass on higher raw material costs to buyers without sacrificing its competitive edge.

Maruti, which has revolutionised India's nearly $6 billion car market since its entry in 1983, said net profit rose to 2.4 billion rupees ($54.9 million) from 1.41 billion rupees a year earlier. Net sales, including from services, rose 27.3 percent to 28.9 billion rupees.

Analysts had expected net profit of 2.08 billion rupees on net sales of 28.65 billion rupees.

"This is a very satisfactory result," said Dipen Sanghavi, analyst at brokerage Pranav Securities who has a "buy" rating on the stock. "They have done quite well at the operating level, despite the discounts."

Vehicle sales at Maruti, which has a 46 percent share of the passenger vehicles market -- including vans and utility vehicles -- rose 17.8 percent in October-December to 136,069 units.

Maruti is one of 13 makers of cars, vans and utility vehicles in India, most of them units of global auto makers such as General Motors Corp. and Ford Motor Co. , but its large volumes and small cars give it a price advantage.

Its shares rose 4 percent to 410.5 rupees on the results, while the main Bombay index fell more than 1 percent.


Mahindra, which has a 45 percent share in utility vehicles, said net profit rose to 1.33 billion rupees in the third-quarter to Dec. 31, in line with market expectations, from 874.2 million a year ago. Net sales grew 33.5 percent to 17.72 billion rupees.

"The macro-economic indicators continue to be positive and the general mood in the economy is upbeat. This augurs well for demand-led growth," Mahindra said.

Mahindra has been boosted over the past 20 months by a recovery in India's tractor industry, the world's biggest, as steady crop output for two straight years lifted rural incomes.

Strong sales of utility vehicles, such as the popular Bolero and Scorpio models, and a price increase in December helped offset some of the increase in raw material prices.

Indian vehicle makers have been hurt by the rising cost of raw materials such as steel, plastics, aluminium and rubber.

Those higher costs dented quarterly profits from India's big motor cycle makers, with market leader Hero Honda Motors Ltd. posting a weaker-than-expected 8 percent profit rise, and Bajaj Auto Ltd. , the second-largest, showing a profit rise of less than 1 percent, despite stronger bike sales.

"There was pressure on material costs but we worked to reduce our labour cost and other expenses," Bharat Doshi, Mahindra's executive director for finance, told a news conference.

"Input costs are still volatile," he added.

Mahindra reported a 19.7 percent rise in sales in October-December from its auto division, which makes utility vehicles, light commercial vehicles and three-wheeled vehicles.

Tractor sales jumped 28.3 percent to 19,037 units.

Mahindra is also looking to acquire tractor companies in other countries as part of its plan to become the world's No. 1 player by 2008-10, from No. 4 now.

Its shares rose 0.38 percent to 481.8 rupees in a weak Bombay market. ($1=43.7 Indian rupees)



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