By Janaki Krishnan
MUMBAI (Reuters) - India's top automaker Maruti Suzuki missed forecasts for fourth-quarter net profit and warned of margin pressure and slower sales growth this year in the fiercely-competitive compact car market.
Maruti, which sells one in two cars in India, was hit by higher raw material prices, the costs of adopting new emission norms, fresh model launches and adverse currency movements.
Shares in the company, which is worth $8.8 billion, fell nearly 2 percent to 1,335 rupees in a Mumbai market up 0.3 percent.
Maruti reported net profit of 6.56 billion rupees ($148.1 million) for its fiscal fourth quarter ended March, compared with 2.43 billion rupees a year earlier.
"The industry will continue to grow by 13-14 percent on continuing demand but I see Maruti stock underperforming in the short to medium term because there is nothing new happening and everything has been factored into its valuations," said Umesh Karne, analyst with Brics Securities.
"The market is also concerned about the increasing competition and how the company will tackle it," he said.
The company posted strong sales in rural areas but is counting on urban consumers to drive demand, said Managing Director Shinzo Nakanishi, as rivals roll out attractively priced new models.
Maruti, 54.2 percent owned by Japan's Suzuki Motor Corp, sold 287,422 cars in the March quarter, up 22 percent from a year earlier, and said it expects sales growth to slow this fiscal year to lower double-digits -- which would be in line with market growth forecasts.
The company said operating margins shrank by 200 basis points in the fourth quarter from the third, and will remain under pressure.
RISING COMPETITION
Maruti faces intense competition in the compact car segment from other global carmakers.
Data from the Society of Indian Automobile Manufacturers showed total industry car sales in India rose 28.4 percent in the March quarter from a year earlier.
General Motors, whose India sales rose 130 percent in the March quarter, recently revised its sales outlook for 2010 upward based on the success of its Chevy Beat minicar, which it launched in January.
Hyundai Motor Co is Maruti's closest competitor in the domestic segment with its popular i10 and i20 hatchbacks. Its car sales in India rose nearly 38 percent in the quarter.
For the next two years Maruti plans capital expenditure of 58 billion rupees ($1.3 billion) for expansion, research and development and new launches, Chief Financial Officer Ajay Seth said in the conference call.
A rise in prices for raw materials such as steel, copper and nickel eroded profit margins by 70 basis points in the quarter from a year earlier, Seth said.
Maruti shares fell 9.2 percent in the March quarter, compared with a 0.4 percent rise in the main index.
(Additional reporting by Devidutta Tripathy in New Delhi; Editing by Surojit Gupta and David Cowell)
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