Net sales revenue during the quarter is also expected to decline to Rs 1.2 trillion over Rs 1.3 trillion over a year ago.
Passenger vehicles sales in India declined 18 per cent in the June quarter over a year ago, a second quarterly drop. A slowing economy coupled with liquidity issues facing the non-banking financial companies
(NBFCs) sapped demand as buyers postponed purchases. An increase in insurance costs and a slowing rural economy also impacted sales.
The overall sales (including all categories) skidded 12.35 per cent to 6,085,406 units over the past year, according to the Society of Indian Automobile
“All auto segments continued to face demand headwinds in Q1FY20 — a trend which has worsened from the previous quarter. High base, liquidity issues as well as elections led to further weakness in volumes,” said to a 5 July report of Motilal Oswal. The brokerage expects Ebitda (earnings before interest, tax, depreciation and ammortisation), a measure of profitability, to contract YoY for the fourth consecutive quarter by 310 basis points to 10.7 per cent because of higher variable marketing expenses and negative operating leverage.
One basis point is one-hundredth of a percentage point.
“We have lowered our FY20/21 EPS (earnings per share) estimates for all companies under coverage, it said. While an 18 per cent cut is highest for Ashok Leyland, at 3 per cent it’s the lowest for Bajaj Auto. Other brokerages are also pessimistic in their previews. “We expect, impact of negative operating leverage and product mix to partially offset by ease in commodity inflation and cost control initiatives,” according to a Prabhudas Lilladher report on the earnings preview.
The brokerage expects Eicher and Maruti Suzuki to see sharpest year-on-year decline of 480 bps to 27 per cent and 450bp to 10.5 per cent, respectively. It estimates margin to contract year-on-year for most two wheeler makers.
The Auto Index fell 9 per cent in the June quarter even as the benchmark Sensex remained flat in the same period.
Mitul Shah, associate vice president at Reliance Securities expects the September quarter to be equally challenging for auto companies even as the decline may see some moderation from September as companies start building up inventory ahead of the festive season. Auto companies in India count dispatches to dealers as sales. Our channel check with dealers show the current month is equally worrisome,” said Shah adding that whole sales and retail will continue to decline as companies curtail dispatches and demand remains weak.