Maruti Suzuki India Ltd Q2 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gunjan Prithyani - JPMorgan Chase & Co, Research Division - Analyst : Sir, could you share what was -- you mentioned that retail growth for rural was 10%. Would it be possible for you to share what was it overall for quarter 2, retail growth?

Question: Gunjan Prithyani - JPMorgan Chase & Co, Research Division - Analyst : Okay. Got it. And sir, the second question is on the royalty. If you can share what was the royalty percentage in this quarter? Ajay Seth - Maruti Suzuki India Limited - CFO & Member of Exec. Board (Finance, Corp. Planning, Co. Secretarial, Legal and Internal Audit) Royalty was at 5% this quarter compared to 5.3% last year.

Question: Gunjan Prithyani - JPMorgan Chase & Co, Research Division - Analyst : No, no, for Maruti, the channel inventory?

Question: Gunjan Prithyani - JPMorgan Chase & Co, Research Division - Analyst : Yes.

Question: Kumar Rakesh - BNP Paribas, Research Division - Analyst : My first question is for Mr. Seth. You have earlier talked about volume being a key margin driver for us. And we used to do 11% to 12% EBIT margin when the quarterly volume used to be around 480,000 to 500,000. Now for the last year or so, our quarterly volume has been around 400,000 units. So to get back to that 11% to 12% EBIT margin, will we need the volume to go back to 480,000 and 500,000, in between those levels? Or we are working on lowering our cost structure to reduce our operating leverage and get that earlier than reaching 480,000? Ajay Seth - Maruti Suzuki India Limited - CFO & Member of Exec. Board (Finance, Corp. Planning, Co. Secretarial, Legal and Internal Audit) So operating leverage is one of big factors for margin improvement because your fixed cost, if, let's say, is constant, it's only going -- getting absorbed in the numbers, even if you are able to sell those extra units, it all go on the marginal cost because your fixed cost is constant. So I think that's one big driver. And I've said in the past -- last year, when I commented, I said we are losing about 4% margin on sort of operating leverage. So once that volume comes back, there can be significant play in the market. But there are many other factors that needs to be considered. There are some positive factors and some negative factors. Positive being last year discounts were very high. This year, discounts are much lower than last year. So that's a positive. On the contrary, there is some pressure on the mix. So mix is a bit negative because of change in mix that we have seen, diesel going away, et cetera. The third important factor also is the commodity prices. That hit us very badly this year, especially the precious metals. And just to give you a number, almost 1.2% or 1.3% margin impacted between last year and this year just on account of the commodity prices. And foreign exchange is an additional impact of about 0.5%. So these are some of the factors that will have the adverse impact and there are factors which will have a favorable impact. So when we look at our margins, we work on all these factors. Some are controllable. Some are not controllable. And then accordingly, try and build our margins. Unfortunately, we have not been able to do any price correction for a very long period of time, given the market conditions, et cetera. So at some point in time, when we believe markets have stabilized and there is a scope, that will also help us correct our margins at that point in time. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2020 / 10:30AM, MRTI.NS - Q2 2021 Maruti Suzuki India Ltd Earnings Call