Ahead of its maiden public offer to hit the market early in June, car major Maruti has warned that company sales and profits could come under pressure due to increasing competition.
Maruti which notched up a hefty 40 per cent jump in net profit to Rs 146 crore (Rs 1.46 billion) during 2002-03, attributed a host of factors including competition based on prices, product performance, brand image and new models for the pressure saying, "We operate in a highly competitive environment and competitive pressure on our business is likely to continue."
In its draft prospectus filed with the capital market regulator -- the Securities and Exchange Board of India -- the car market leader said, "Our net profits have fluctuated during last three years, including a net loss in fiscal 2001. While we achieved profits in 2002, we may face a decline in profits or a reduction in sales volumes in future due to intense competition."
The government, which holds 45 per cent stake in the joint venture along with Japanese car giant Suzuki Motor Corporation, will offload 25 per cent stake through a public offering.
This would be followed a second tranche of 20 per cent, paving the way for the exit of government from the company.
Last year SMC acquired management control over the company after hiking its stake through a Rs 400 crore (Rs 4 billion) rights issue which sold for a premium of Rs 1,000 crore (Rs 10 billion).
Maruti was the only manufacturer in the entry level 'A' segment, while in 'B' segment it faced competition from at least three other carmakers, it said.
Maruti expects to face continued competition in export markets which may reduce demand for products in these markets.
"We exported passenger cars comprising 3.9 per cent, 3.1 per cent, 2.6 per cent and 6.9 per cent of our total sales in fiscal 2000, 2001, 2002 and the nine months ended December 31, 2002, respectively, to many countries including in Western Europe."
The carmaker which manufactures mostly petrol-driven vehicles, also listed future competition from improved public transport systems as well as diesel-fuelled cars for the competitive pressures.
Maruti said its ability to cut production costs and increase operational efficiency was an essential part of the business strategy, but expressed scepticism that cost reduction measures would continue to achieve the kind of operational efficiency they yielded in the past.
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