Maruti board takes stock of sales downswing

The board of directors of Maruti Udyog Limited on Monday met under a cloud of secrecy to take stock of the current demand crunch and the eroding market share staring the country's largest carmaker in the face.

The board, among other routine matters, discussed the sales pattern in the current fiscal, company sources said.

The company's management, however, refused to comment stating it to be a routine board meeting.

The board, which met for over six hours, also assessed the current market situation and the company's performance in the first four months of 2000-01.

The company had recently announced a major slash in prices of three of its models -- Maruti 800, Omni and Wagon-R. However, this had failed to boost demand for its models and the company ended July with a 26 per cent drop in sales year-on-year and 58 per cent market share, down from 68.4 per cent a year ago.

Mul sold 27,665 passenger car units in July, down from 37,404 units in the same month a year ago. The company also cut down production from 38,090 units to 28,953 units in July, 2000, representing a 23.9 per cent decline.

Maruti has also announced that it will fall short of meeting its 470,000 sales target for the 2000-01 fiscal in view of the major drop in demand for its passenger cars.

''The first four months of the year have not been very encouraging and going by the sales pattern, we do not see major growth this year. We have to find ways of overcoming the situation,'' the sources added.

The company's bottomline will also be under pressure this year due to its decision to absorb the production cost hike resulting from the softening of the Indian rupee. Some of the company's recently introduced models have high import content and the cost of producing these models have gone up following rupee devaluation.

''In the present market conditions, we have decided not to pass on the cost hike to consumers and absorb the entire hike. The rupee devaluation has increased landed cost of the vehicles by 2.5-3 per cent. We have not sold too many vehicles in the first five months and so there is no reason to further burden sales with a price hike.''

The recent market borrowings and heavy depreciation on its investment would also take a toll on Maruti's profits. The company had last month raised Rs 2 billion from the market by issuing non-convertible debentures of seven-year duration.

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