New Delhi/ Ahmedabad: Maruti Suzuki India on Saturday posted 59.81 percent fall in its net profit at Rs 240.44 crore for the quarter ended September 30, mainly due to production loss at Manesar because of labour unrest and foreign exchange loss.

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The company's board, meanwhile, has approved purchase of land in Gujarat, measuring up to up 1,500 acres to set up manufacturing plants in the state. Gujarat Chief Minister Narendra Modi has welcomed Maruti Suzuki's decision to set up a plant in the state.

It had posted a net profit of Rs 598.24 crore in the same period last year, Maruti Suzuki India (MSI) said in a statement. The rate of decline in profit is the biggest since the third quarter of 2008-09 when the company had reported a similar drop.

The total income from operations during the quarter under review also declined by 14.38 percent to Rs 7,831.62 crore, from Rs 9,147.27 crore in the year-ago period.

Vehicle sales dipped by 19.56 percent to 2,52,307 units from 3,13,654 units in the same period last year, MSI said. 

"The company lost 28,539 units during the quarter due to instances of industrial unrest at its Manesar facilities," MSI said, adding in value terms it is over Rs 850 crore.

The bottom line was also impacted due to sluggish market conditions and adverse foreign exchange rates.

"This has not been a good quarter for Maruti. Market has been declining largely because of high interest rates and fuel prices. The result of all these is the increase in cost of ownership in cars, which has mainly hurt marginal customers, who buy mainly M800 or Alto," MSI Chairman R C Bhargava told reporters here.

The company has seen the biggest drop in sales in its best selling model Alto. During the quarter, Alto sales dipped by about 20 per cent to an average of around 22,000 units a month from about 27,000 units in the year-ago period.

MSI Managing Director and CEO S Nakanishi said the fall in the Q2 net profit is the steepest since the third quarter in 2008-09 financial year.

He said during the quarter, yen appreciated by about 20 per cent that has impacted the bottom line of the company.

MSI Chief Financial Officer Ajay Seth said the company suffered an impact of about Rs 100 crore due to forex loss. Besides, the company's royalty payment to parent Suzuki Motor Corp has also increased to Rs 449 crore, which is about 6 per cent of net sales due to yen appreciation, Seth said.

Meanwhile, the board of directors approved MSI's third manufacturing facility, to come up in Mehsana district of Gujarat. It will be the company's first major establishment outside its base in Haryana.

"The board has approved that we should go ahead and purchase the land. We are looking at an area of maximum of up to 1,500 acres, out of which 400 acres will be for the vendor to develop their plants," Bhargava said.

The land will be given partly by the Gujarat government and it will be partly acquired from private owners, he added.

"The idea is not to set up the plant immediately, but do it as and when the market situation demands... The board wants the purchase of the land to be completed as soon as possible, may be within the next four weeks," Bhargava said, adding the new plant in Gujarat will not come up before 2013.

He, however, did not disclose the size of investment that the company is likely to put in for the new location.

In June, the company had said it along with vendors could invest up to Rs 18,000 crore in Gujarat as it looks to produce about 20 lakh units in the long run in the state.

When asked about the reasons for going to Gujarat, Bhargava said, "It is for the kind of positive place to do work as we already have the Mundra port, which we are using
for almost all of our exports.”

"We do expect that once the global market, particularly Europe recovers, demand of cars will shift towards smaller cars. Therefore, we want to be ready for meeting the requirements for the global market."

Besides, the company will be able to serve the Western and Southern market from Gujarat at a lesser logistical expenses than selling cars from its current base in the North.

MSI, which is 54.2 percent owned by Japan's Suzuki Motor Corp, had announced it was looking at starting operations in Gujarat with the first phase of production having capacity of
one million cars, which would take five years to install.

Asked if the company could leave its facility in Manesar due to repeated adverse labour situations, Bhargava said, "At any stage, we are not moving out from Manesar. It does not
make any sense."

Modi welcomes Maruti decision

Gujarat Chief Minister Narendra Modi on Saturday welcomed Maruti Suzuki's decision to set up a plant in the state, saying that it would accelerate the growth of the state's automobile sector.

"I welcome Maruti Suzuki's decision to come to Gujarat. Gujarat is moving ahead fast as Asia's auto hub. With Maruti, the pace will accelerate," Modi said on twitter.

"It's Gujarat's New Year and this is Maruti's gift to Gujarat on this occasion," he said.

Maruti Suzuki India (MSI) board on Saturday gave approval for purchase of land in Mehsana district of the state for its third manufacturing facility.

Suzuki Motor Corporation Chairman Osamu Suzuki had met the Gujarat Chief Minister in September. MSI had stated that it could invest, along with vendors, up to Rs 18,000 crore in Gujarat.

The company is seeking about 500 acres of land from the Gujarat government for the plant, and another 500 acres for its vendors. "MSI has not yet finalised the land in Mehsana. In all
probability, the company would be setting up the plant near Becharaji taluka of the distirict," government sources said.

The site is well connected through a highway to Mundra port, from where the company plans to export the cars.

JPN/Agencies