* Apr-June qtr net profit up 21 pct on strong sales
* Planned capital expenditure of $661 mln in FY15
* Expects double-digit growth in car sales this year
(Adds company comments, details on investment, auto industry
By Aditi Shah
NEW DELHI, July 31 India's biggest carmaker,
Maruti Suzuki India Ltd, warned on Thursday that its
rising sales were largely driven by improving sentiment,
discounts and government tax breaks, rather than any underlying
It was commenting after beating estimates in quarterly net
For two consecutive years, high inflation and interest rates
have resulted in declining car sales in India, but prospects of
an economic recovery under Prime Minister Narendra Modi's new
government helped a rise in sales in the June quarter, according
to industry data.
Maruti, however, suggested the mood was not yet cemented in
"The vehicle sales increase we have seen in the first
quarter is not broad-based across the industry and is driven
more by sentiment," Chief Financial Officer Ajay Seth said.
"We are hoping the current sentiment-led recovery moves to an
investment and job creation-led recovery soon.".
The company said profit for the April-June quarter was 7.62
billion rupees ($126.14 million), up from 6.32 billion rupees in
the same period a year ago. Net sales rose about 11 percent to
110.74 billion rupees.
Analysts had expected the company to post a profit of 7.35
billion rupees, according to Thomson Reuters I/B/E/S.
Domestic carmakers including Maruti and Tata Motors Ltd
are expected to raise their capital expenditure by
15.6 percent in the next 12 months, the most among peers in the
Asia Pacific region, Thomson Reuters data showed.
India is working its way up to become the world's
third-largest car market by 2018.
Maruti, controlled by Japan's Suzuki Motor Corp,
said it plans to increase its capital expenditure by 14 percent
to 40 billion rupees ($661 million) in the fiscal year that
started April 1, compared with a year ago.
Sales of Maruti cars and utility vehicles rose 10.3 percent
in the April-June quarter, led by strong performance of its
small, entry-level cars as first time buyers were seen returning
to the market lured by an extended tax concession by the
government and high discounts offered by the carmaker.
Seth expects the upcoming festive season in India, which
starts in October and is considered an auspicious time to buy
homes and cars, to further boost sales.
Maruti expects to end this fiscal year with a double-digit
growth in car sales compared with 3 percent growth last fiscal
year, said Seth.
The company's wide dealership network, especially in rural
areas where disposable incomes are rising, and a strong pipeline
of new vehicles has prepared the carmaker for a recovery in
demand, analysts say.
($1=60.5500 Indian rupee)
(Additional reporting by Shilpa Murthy in Bangalore; Editing by
Miral Fahmy and Jeremy Gaunt)