Maruti Udyog has reported a stronger-than-expected 42% rise in quarterly profit as cost cuts and sales of higher-priced vehicles helped offset firmer raw materials prices.

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However, according to Reuters, its operating margin eased to 11.5% during the quarter, tripping up its shares on fears pressure on margins will continue in the coming quarters.


The New Delhi-based firm, 54.2% owned by Japan’s Suzuki Motor, makes top-selling models such as the mini Maruti 800 and the Alto hatchback. Its cheap, fuel-efficient cars are often the first Indian families buy, the news agency noted.


Reuters said the redesigned Swift hatchback, launched in May, has helped boost Maruti’s share of the fast-growing compact segment. Maruti is also preparing to launch diesel cars in 2007, an area where Tata Motors Ltd. has a head start.


Net profit for the fiscal second quarter to 30 September rose to INR2.62bn rupees ($58m) from 1.84bn rupees a year earlier. Net sales rose 16% to 30.26bn rupees from 26.14bn rupees a year earlier. The report noted that beat a median profit forecast of 2.43bn rupees and was in line with a sales forecast of 30.36bn rupees from 13 brokerages polled by Reuters.

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Full-year net profit for Maruti, which has more than half India’s passenger vehicle market, is expected to rise 23% to 10.5bn rupees, according to Reuters Estimates.


Reuters said Maruti’s vehicle sales rose 8% in July-September to 140,540 units from a year ago. Vehicle sales in July were hit by heavy rains in the western region, a major market.