Maruti Suzuki India Limited (MARUTI.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Maruti Suzuki India Limited Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pranav Ambaprasad. Thank you, and over to you, sir.

Thank you, [Rutuja]. Ladies and gentlemen, good evening once again. Welcome you all to the Q2 FY '26 earnings call. May I introduce you to the management team from Maruti Suzuki. Today, we have with us our Chief Investor Relations Officer, Mr. Rahul Bharti; and CFO, Mr. Arnab Roy. Before we begin, may I remind you of the safe harbor. We may be making some forward-looking statements that have to be understood in conjunction with the uncertainty and the risks that the company faces. I also like to inform you that the call is being recorded, and the audio recording and the transcript will be available at our website. May please note that in case of any inadvertent error during this live audio call, the transcript will be provided with the corrected information. The con call will begin with a brief statement on the performance and the outlook of our business by CIRO and Senior Executive Officer, Corporate Affairs, Mr. Rahul Bharti, after which we'll be happy to receive your questions. I would now like to invite our CIRO, Mr. Rahul Bharti. Over to you, sir.

Thanks, Pranav. Good evening, ladies and gentlemen, and thank you for joining us. Before we move on to the financial results, I believe it is only appropriate to begin by expressing our heartfelt gratitude to the honorable PM, the honorable FM and the GST Council for ushering in a landmark reform, which has brought buoyancy not just to cars, but to the overall consumption sentiment in India. And because of that, there is a high level of consumer activity in our showrooms, and we hope the momentum continues. We also have had other major milestones to report in this quarter. We are deeply honored that the Honorable Prime Minister graced the occasion of 2 historic events for the Indian automobile industry. The first was the start of production of Maruti Suzuki's first BEV, the e VITARA for sales in over 100 countries, further expanding our multi-pathway approach to carbon neutrality. And I must say at a time when most conversations about electric vehicles in India are around imports from technologically advanced countries, it is the responsibility of the market leader to bring a paradigm shift and produce a state-of-the-art BEV, the e VITARA, both for the Indian market and for export to over 100 markets of the world, including Europe and Japan. The second was Suzuki's first lithium-ion battery cell and electrode level manufacturing in India for strong hybrid electric vehicles. Both of these were significant milestones in Make in India at Nirbhar Bharat. Back home, there had been more powerful milestones, the launch of the Victoris. It further strengthened the company's product portfolio in high-growth SUV segment. The all-new Maruti Suzuki Victoris is equipped with new age features to offer a got-it-all experience with features like theater on wheels effect, a SmartPlay Pro X touchscreen infotainment system with OTA updates, smart powered tailgate with gesture control, all-round safety with Level 2 ADAS, 6 airbags, high-definition 360-degree view camera, 5-star safety rating in Bharat NCAP for both adult and child occupant protection, next-generation Suzuki Connect telematics with eCall and 60-plus features, available in multiple options like petrol with strong hybrid, ALLGRIP 4x4, eco-friendly smart CNG technology with a segment first underbody tank design. And I'm happy to share that the Victoris equipped with a host of cutting-edge technological features has generated remarkable excitement in the market, garnering over 30,000 bookings in a very short span of time. In addition to the Victoris, another model, Invicto secured a 5-star safety rating. The company also celebrated 10 years of Nexa by unveiling Grand Vitara PHANTOM BLAQ Edition with matte black exteriors and all black interiors. Grand Vitara has set a new benchmark in the mid-SUV space by achieving 300,000 sales in just 32 months. The company also inaugurated its 5,000th Arena service touch point in India. In total, Maruti Suzuki's service network has over 5,640 service touch points, covering 2,818 cities across India. These workshops include a diverse mix of formats such as Arena and Nexa workshops, Maruti Suzuki sales and service points, rural workshops, service on wheels and Maruti Suzuki Authorized service stations. The company continued to maintain a robust growth in exports. Just 1 out of 18 car companies in India, which is your company, Maruti Suzuki, it commanded nearly 45.4% share of India's total passenger vehicle exports in quarter 2 of this financial year. The Fronx became the fastest SUV from India to clock exports of 100,000 units. Another point, the Jimny 5-door has recently achieved a landmark milestone, surpassing a cumulative export figure of 100,000 units from India. The export journey for the Jimny 5-door began in 2023 year, shortly after its India debut. SUV manufactured exclusively in India has won hearts across more than 100 countries, including Japan, Mexico and Australia. Coming to the business performance in quarter 2. During the quarter, the company sold a total of 550,874 units, comprising domestic sales of 440,387 units and exports of 110,487 units. The domestic sales volume declined by 5.1% and the export volume grew by a robust 42.2%. You may be aware in the domestic market due to the anticipated price reduction on account of GST, there was very low sale from mid-August till 22nd September, and so the wholesale got temporarily impacted on account of this. Interestingly, starting 22nd September, retail sales have taken off steeply and the festive season sales have been exceptionally good for us. So the buoyancy of GST reduction will reflect in the future quarters. Another notable development in Q2 was a strong performance of the fourth generation Dzire, which contributed significantly to the growth of the sedan segment across the industry. And for the first time in a long while, the growth in sedan segment outpaced that of SUVs at the industry level. The major highlight in exports was the EBITDA exports. And so far, the company has shipped over 7,000 units majorly to European countries. In financial results, the company registered net sales of INR 401.3 billion as against INR 355.8 billion in the same period previous year. The net profit for the quarter was INR 32.9 billion compared to INR 30.6 billion in quarter 2 of the financial year. Since investors look for a sequential comparison, I'll share on a sequential basis, while the overall sales volume grew by 4.4%, the net sales grew by 9.6%, owing to a favorable mix. Sequentially, the operating profit margin EBIT has increased to 8.5% of net sales compared to 8.3% in quarter 1 of financial year '26. The favorable factors were leverage of about 110 basis points, lower operating expenses of about 50 basis points. These favorable factors were partially offset by higher sales promotion expenses by about 75 basis points, a limited time price correction in some models, which affected margin by about 20 basis points. Advertisement expenses largely on account of the new model, Victoris, higher by about 15 basis points. ForEx and commodities put together were adverse by 30 basis points. And the commodities was adversely largely on account of PGM and ForEx was adversely -- was adverse largely on account of the Japanese yen. Additionally, it is to be noted that the benefit in terms of ForEx of about 20 basis points is accrued due to hedging gain. And because of the nature of this income, this benefit is accounted in nonoperating income and is therefore not captured in the operating margin. I may also add at the PBT level, the hardening of bond yields resulted in an unfavorable mark-to-market impact on our invested surplus, leading to lower nonoperating income. Coming to the half year financial results. The company sold a total of 1,078,735 units during the period, comprising domestic sales of 871,276 units and all-time high half yearly exports of 207,459 units. The company posted its highest ever half yearly net sales of about INR 767.6 billion in H1 of financial year '25/'26 as compared to INR 694.6 billion in H1 of financial year '24-'25. Net profit in H1 of financial year '25-'26 was at about INR 70 billion as against INR 67.2 billion in H1 of the previous financial year. We are now ready to take your questions, feedback and any other observations. Thank you.

[Operator Instructions] The first question is from the line of Raghunandhan N. L. from Nuvama Research.

Two questions. Firstly, how was the festive season in terms of growth? And second, what is the strategy to take back market share to 50%?

Great. So in the festive season, if we talk about retail sales, and I'm talking about the period from 22nd September, which was the first day of Navratra, also the first day of GST increase. Till date, we've got about 5 lakh bookings -- 500,000 bookings. And in the same period the previous year, we were at about 350,000 bookings. And if we talk about retail sales, in this period, we did about 400,000 retails and the same period the previous year was 211,000 retails. And within this 400,000 retails, about 250,000 came from small cars, which had a growth of almost 100%. Having said that, we should qualify that there could be an element of deferred sales in these numbers. And what -- I missed your other question?

The strategy to take the market share back to 50%.

Okay. Sorry, I want to add one more piece of statistics. In the month of October, our retail grew by about 20% overall. And growth in the -- this is October retail versus previous October retail, 20% growth overall in which -- and the small car segment, which is -- which falls under the 18% GST bracket, that grew by 30%. So these things are favorable. And I would imagine they would be positive for our market share also. We were in the Japan Mobility Show yesterday, and Global President of Suzuki Motor Corporation, Mr. T. Suzuki, made a mention of 8 more SUVs to be launched in India by the turn of the decade by 2030-31. And analysts know it more than anybody else, the mathematical phenomena. It will help our market share. Of course, the usual strengths, for example, the Victoris has just been launched. So those numbers will be incremental. The 8 SUVs do not include Victoris. And the EBITDA numbers are also yet to come. So the usual strength of Maruti, the brand, the features, the quality, the proximity of our sales and service networks, all of them will also help us.

The next question is from the line of Binay from Morgan Stanley.

Just continuing on the earlier comments you made, like the data that you shared, large part of retail sales came from small car side. How do you see that momentum continuing into the coming months? And secondly, how to think about gross margins, ASPs and all in that context? Because you also talked about a temporary price reduction. So how to think about gross margins if small car rebound continues?

Okay. I missed your first question.

How do you see the small car trend continuing because...

Sustainability of this momentum.

Yes, because half the sales came from small car, yes.

We have to be conscious that this would have had some amount of deferred sales, some amount of festive euphoria also. So how much of it is sustainable, we are yet to make a clear assessment. But at least, I think the total industry growth across all segments, we should see about 6% year-on-year on a sustainable basis. That is a preliminary estimate. It's very difficult to predict the future. And on margins, we don't talk about segment-wise profitability. We talk about blended average, and that is the strength of our market leader who has presence in multiple segments.

And Rahul, just a 6% number. Like earlier, we had talked about, I think, 10% H2 growth in volumes. So is this 6% number?

10% is small cars. We had mentioned 10% for the small car segment and 6% overall.

In the second half for the industry, is that what you are saying? Or it's a...

Second half and beyond, yes and beyond. See, in the month of October, the cars that were in the 18% bracket grew by 30% for Maruti retail sales. The cars that were in the 40% bracket grew by between 4% to 5%. So we believe that small cars should grow faster than other countries on this -- particularly on this base. But having said that, it's always very difficult to predict the future. We'll make an assessment maybe in January or February, what could be a sustainable level of growth going forward.

And lastly, just typically, post festive, we see production volumes dropping down. Now that October is almost behind us, your retail sales have played out. What is inventory booking number? Are you again -- are you keeping that production momentum that we saw? Any comments on the near term?

Yes, our production colleagues have worked for 3 Sundays now and probably we will need to work at least one more Sunday. So -- and inventories would be at a low level in the network. So a number of models are now on a small wait list. So we are stretching to deliver on this demand.

The next question is from the line of Gunjan Prithyani from Bank of America.

Just a quick clarification. Rahul, could you talk about the pending bookings post the festive and what that number is?

Sorry, your voice is not clear, but if your question is on pending bookings, it's about 200,000.

Okay. Got it. Okay. Two questions from my side. Firstly, on the continuing on the small car recovery, of course, as how sustainable it is?

Gunjan, we are not able to hear you. Gunjan, your voice is not clear.

Sorry to interrupt you, Gunjan, but your voice is sounding muffled. Can you please...

Better now?

Yes, much better.

Okay. Just 2 questions. Firstly, on the small car recovery that we are seeing right now. Of course, it will take time to ascertain the sustainability. But if this was to come back, how do you think the launch cycle and the product action changes? Because I mean, a lot of focus incrementally is on SUVs, right? So if we were to go back on the drawing board and think about smaller car coming back, how soon or what sort of changes we expect? That will be the first question. I mean just sort of excitement we should see on that portfolio. We haven't really seen much on the non-SUV side.

No, no, we have. I think studying the market, studying the consumer trends and studying what can we do different on our products is a very, very continuous exercise between our marketing and product planning verticals. It continues all the time, particularly when the cycle of product development almost runs into 4 years. So we are quite conscious of this. We are continuously studying that customer in that segment. And as a market leader, we cannot ignore any segment. So it's on our radar, and we'll keep studying that. Whatever that segment needs, we will provide.

Okay. And second question on the margin. Just looking for a clarification on what did this depreciation increase come from in this quarter? And is this the sort of number we should work with? And maybe I'm just adding in a bit more on margin where Binay did ask on the margins. Just trying to get a sense, does a small car recovery mean it has an adverse implication on the profitability of the portfolio? If you can just share some insights and qualitative insights around that?

I'll take your question, Gunjan. This is Arnab. So on the depreciation, is primarily coming out of the new plant, which is in Kharkhoda. So that's the impact of the depreciation. See, as we have said multiple times, we don't give a forward-looking outlook. So it's not there. And in any case, see the gross margin is dependent on multiple factors. It's a function of commodity, it's a function of ForEx. It's a function of the capacity. So there are too many factors which comes into play, not a single factor which you can call out.

Kharkhoda had already reflected from March and June quarter, right? So I'm a little unsure of the step-up in this quarter. Was it to do with the launch or a commissioning of the line?

See, Kharkhoda is one of the factors. Plus we had a new model launch, which came out, the Victoris. So there will be a nice impact of that in this quarter.

We are producing the Victoris in the Kharkhoda plant.

The next question is from the line of Kapil Singh from Nomura.

Sir, just wanted to understand, we have seen a very strong improvement in ASPs. Is that -- like what are the reasons for that? If you could help us understand that? Any more color on the mix would be helpful.

I think the mix has been overall -- I mean, we are holding on to the mix. And as you can see, post 22nd, there was a good sales. So overall, if we have to talk about the ASP in quarter 2 FY '25, we were at about INR 566,000 in that range. This quarter, we are in the range of INR 587,000. Last quarter, we were at about INR 576,000. So yes, I think the ASPs are going in the right direction.

Any color you can share here, which model mix or what mix has led to a Q-o-Q improvement that we are seeing?

It's a combination of multiple things because there are multiple markets, multiple things which comes in. Overall, as we have said in the walk, the overall, I think there has been a good export, as you can see here. So export has been good. I mean this -- I mean, post 22nd, I think generally, there has been a good offtake, which has helped us. Specifically calling out the model may not be the right reason here because things play into the picture. The CNG contribution has been good. So a combination of things have contributed to that.

Okay. And can you just let us know where are the inventory levels? And I also missed the retail sales in festive season last year, did you mention 211,000?

Yes, that's right. Last year, 211,000; this year, 400,000. This is for the period 22nd September till 31st October. Projected.

And what are the inventory levels currently?

Yes. So as on September end, we were at about 38 days of inventory. And as Rahul said, the October outlook, it will be much lower in October end.

Okay, sure. And sir, just one question I had on the pricing power now. How to think about that and the discounts? Can we see a scenario as you are saying inventories come down? Can the discounts fall sharply as we go ahead because you have always mentioned that discounts are a function of the inventory? And is there a need to increase prices given the cost pressures that you are seeing? What is the outlook on costs, if you could share that?

It's not easy to say this. It depends on many, many factors. So we'll, of course, watch the market. And we want that the market momentum should continue.

The next question is from the line of Amit Hiranandani from PhillipCapital.

Congrats team for the decent set of numbers. Sir, my question pertains to the extrusion prices, which Maruti has reduced for some models. And looking at the current momentum, do you think Maruti will be able to roll back prices partially? And related to this, if you can help us with the average discounts also for the quarter 2, please?

So we just answered this question. Pricing and discounts depend on many, many factors. It's very difficult to say. What we had done on 22nd September was we had gone beyond just GST benefits and offered from more side because we wanted to build a critical mass and we wanted to build a consumer momentum, which fortunately has come. It will be difficult to make any kind of projection for the future. And your second question?

Sir, your retail sales has done very well. Basically, I wanted to understand what was the industry retail sales for the same period?

Sorry, retail sales?

Retail sales for the festive period was very well for Maruti. What was the industry number for the same period?

Industry, we would not have. Maybe by tomorrow or tomorrow evening, we might get.

Sir, lastly, any upward revision in the exports growth target of 20% for this fiscal?

So we should be exceeding our guidance of 400,000 units this year. In the first half, we've done more than 200,000. So that gives us some confidence.

The next question is from the line of Amyn Pirani from JPMorgan.

Most of my results-related questions have already been asked. So I just had a medium-term question. This 50% market share, which keeps coming back in commentary, I wanted to understand as to how important is it to get to 50%? Because while it has come down to 40%, 41%, it is on a much larger industry base. And even if you can maintain 40% in an industry which will become 6 million, 6.5 million units, it's still a very commendable achievement. So how important is getting the 50%? And is there a trade-off that you are willing to take while capturing that 50% in terms of either profitability or segmental share, if you can shed some light?

What is good for India is good for Maruti and what is good for Maruti is good for India. We believe it as a market leader, we should serve the customer, and we should give mobility to more number of people. So 50%, we should get it. It is important for us. On a lighter note, I thought our investors would be more ambitious than we would be. So probably your remark stems from some kind of a fear of a trade-off. We don't think that is true. All you have to do is there's a global philosophy of Suzuki Motor Corporation by your site. So if you really think about your customer, you observe and you strive to provide it, 50% is clearly achievable. Having said that, this question came to our Global President in the press conference, I think, day before yesterday also. And he did mention that getting to 50% would be probably more difficult than it has ever been in the past. Having said that, we have levers available. We have 8 SUV launches. And you know SUV incremental models can really get us incremental market share. The small cars, which we have been talking about for so many years have now shown healthy signs of recovery. And all our other strengths of the company, like the brand, like our service network, like our multiple channels, the Nexa and the Arena, our EV launch, our multiple pathway approach to carbon neutrality, all this should give us the strength to get that without a trade-off.

Great. If I can just -- as a follow-up, these 8 SUVs, I know it's still early in the year. Last year, you had talked about 2 new SUV launches and the Victoris got launched and the e VITARA has already been launched. Can we like get some early guidance into next year? Like will we have 2 new SUVs? And what are the white spaces? Because Maruti, with your large market share, you're already present in so many subsegments. So what are the white spaces for these SUVs to come in, if you can help us?

Thanks for that question, but I think you'll have to retain your curiosity for some more time.

The next question is from the line of Kumar Rakesh from BNP Paribas.

My first question, Rahul, was around the same question which Amyn was also asking. So you have set a target which you have spoken multiple times about 50% in terms of market share. But you haven't spoken ever anything about the range in which you want to operate from a profitability perspective. Many of your peers in India do talk about the sort of profitability that they would be operating at. So just -- I can understand earlier you did spoke about that the discounts and all of those things are a factor of a lot of things. But just on the framework, how you decide in terms of what kind of discounting you would do, the price correction that you will take, what kind of market share that you will chase. Are there any guardrails similar in terms of the profitability margin as well? I completely appreciate that Maruti would want to have higher number of volume and would want to do as you go to what's good for India is good for Maruti. But the profitability is also critical to keep on investing in future technologies, future product development and the capacities as well. And hence, the question from that angle as well, that is there any guardrail -- is there any broader picture that you have in mind from the profitability perspective while you will be incentivizing many of the segments to drive your growth?

The answer is yes. I do not know if you are aware, Suzuki Motor Corporation on its website has set out an aspiration. And of course, aspirations, I mean, it's not easy to meet them. So they always come with a rider. But they have talked about 10% margin and 50% market share. So that's a very clear goal for the whole management of Maruti Suzuki.

Got it. So is there any similar number or goal for Maruti Suzuki level that you would want to share?

So this 10% EBIT margin, we have also adopted as our guiding light. And management is working for it. It's on the website. And personally, I believe it's a bold step to give out this number in the public domain. But then it exists, and this is what management is working towards.

Okay. Got it. That's very helpful. My second question was more near term. Over the last 2 quarters, we have seen a very smart improvement in the ASP, but the gross margin during this period of time has contracted. So the traditional thought process that higher-priced products have higher margin, that doesn't necessarily work in this scheme. Can you just help understand the decoupling of ASP and the gross margin?

As I said a little earlier, gross margin and operating margin is a function of multiple factors. So you cannot just link it to the mix. Commodities play a part, ForEx play a part, capacity utilization play a part. So there are multiple factors. You have to keep decoupling the factors to come to this. One factor alone will not give you the 100% correlation here.

Got it. Just a clarification. Can you share the CNG mix in the quarter?

Healthy levels. We are higher than in the past.

The next question is from the line of Chandramouli Muthiah from Goldman Sachs.

My first question is just on the Victoris model. Are you able to share what the latest gross bookings count is since launch last month?

I thought you mentioned 30,000 bookings.

So that's as of end October?

Yes.

Got it. That's helpful. Second question is just a clarification on export revenue for the quarter. And also if you could share the quarterly retail number and the discount per unit, which I think till a couple of quarters back was close to about INR 30,000 per unit.

So the export revenue is about INR 8,300 crores plus. And your other question was?

The retail for the quarter, September quarter and discount units that you had during the quarter.

The retail sales was about 394,000 in the quarter. And sales promotion sequentially affected us by about 75 basis points.

Got it. And just lastly, on the 8 SUVs launch plan over the next 5 to 6 years. So I think as it stands after the [ CIS ] has been discontinued and the Victoris has been launched, I think our current number of models in the market is close to 19 models. And a couple of quarters back, we had mentioned that over the next 5 to 6 years, we plan to take the model count closer to 28 models. So it looks like most of the new model launches are likely to be SUVs. And at some point over the next 2 or 3 years, majority of our models in the domestic market will be SUVs. Is that the right understanding, next 2 to 3 years?

Not necessarily.

Got it. Got it. So there can be some small car launches in tandem with the SUVs to keep that healthy mix between small cars and SUVs in our domestic offerings?

There could be so many ways of looking at the portfolio.

The next question is from the line of Pramod Amthe from InCred Capital.

Rahul, I wanted to get some color in terms of consumer profile in this recovery. Do you see any significant changes either in terms of first-time buyer or rural or age profile of the buyers?

So as anecdotally, our marketing colleagues have mentioned, we see a lot of helmets coming into our showrooms, which is a good sign because people who had never considered buying a car before, they are now actively considering. And the other aspect is that -- the top 100, I think, grew by 50%, but the non-top 100 cities beyond top 100, they grew by 65% in terms of bookings. So it looks like it's a broad-based recovery.

And looking at the first-time buyers, do you see a first-time buyers increasing? Do you need to do product interventions in the small car because that segment has not seen much as compared to peers? And you being a leader, you would take that responsibility. Is that fair to understand?

So there is some increase in the first-time buyers since these have been days of high sales pressure. So we are yet to get our data on it.

And related to GST also is, do you see a decent reduction in the service charges because the parts have come down and that's shifting organized, unorganized and the parts sales business? How do you see this? Is there any significant change?

Sorry, I didn't get it.

No. There has also been a lot of auto component parts where the GST has been reduced. Does it have a meaningful impact on service?

Nothing meaningful. So just to add to your -- the share of small cars has gone up from about 16.5% to 20.5% in the smallest 4 vehicles that we have in our portfolio.

Okay. For the festival weekend, which you did?

Before and after 22nd September.

Ladies and gentlemen, this was the last question for today. With that, we conclude today's conference call. On behalf of Maruti Suzuki India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.