Maruti to take pole position amid crisis
THE CARMAKER’S CASH RESERVES OF OVER ₹34,000 CRORE WILL HOLD IT IN GOOD STEAD
MUMBAI:Maruti Suzuki India Ltd (MSIL), the country’s largest passenger vehicle manufacturer, may be in a relatively better position to deal with the covid-19-induced economic downturn than most of its peers due to its exposure in the hatchback segment and wide network in the semi-urban and rural markets, according to analysts with brokerage firms.
With passenger vehicle sales expected to decline in double digits this fiscal, Maruti’s cash reserves of more than ₹34,000 crore will also hold the firm in good stead during these trying times, the analysts said.
The New Delhi-based company was expected to lose market share starting this fiscal due to the lack of products in the fast-growing and profitable sport utility vehicle (SUV) segment and its decision to pull out of the diesel vehicle market.
Due to the pandemic, most brokerages believe that customers’ affordability has taken a hit and most would prefer cars such as hatchbacks, entry-level sedans and compact SUVs, and a recovery in demand may start from semi-urban towns and rural areas. Maruti is believed to be in a better position than others that depend on one or two key products to drive sales.
“With an uncertain outlook, Maruti Suzuki would be the fastest to recover on account of its strong brand equity and strength in entry- and mid-segment passenger vehicles. The company’s 4QFY20 result is a mere reflection of the 10 days of lockdown in March, with the worst yet to come in the first half of FY21. While the pain of the covid-19 crisis would result in a very weak FY21, we expect MSIL to come back stronger and recover faster than peers,” Jinesh Gandhi and Vipul Agrawal, analysts at Motilal Oswal Securities, said in a note on Thursday.
Maruti on Wednesday reported a 28% year-on-year (y-o-y) drop in profit and 17% y-o-y decline in sales for the March quarter due to tepid demand, exacerbated by a nationwide lockdown to curb the spread of covid-19.