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Maruti Suzuki board approves reduced royalties for Japanese parent

India's largest carmaker sees Q3 net profit up just 3% after tax headwind

Royalties to Suzuki Motor paid by its Indian subsidiary are to be reduced in the wake of local tax increases.

NEW DELHI -- Maruti Suzuki India has board approval to reduce the royalty payable to majority shareholder Suzuki Motor on new models starting with the Ignis hatchback, subject to the agreement of its Japanese parent.

India's largest passenger carmaker has been paying about 5% royalty on net sales to Suzuki Motor, and a reduced formula has been under discussion for some time. Suzuki Motor owns 56% of the Indian automaker

Maruti Suzuki said in a statement on Thursday that its net profit for the quarter ending in December increased 3% year on year to 17.9 billion rupees ($283 million), despite a nearly 14% rise in net sales to 189.4 billion rupees.

The weak profit growth was attributed to higher taxes and lower non-operating income. 

Net profit was lower than expected after many analysts forecasted over 20 billion rupees. Operating profit grew 26.7% to 23.5 billion rupees on higher sales, cost reductions, reduced promotions and forex benefits "partially offset by adverse commodity prices," Maruti Suzuki said in the statement.

The company said it sold a total of 431,112 vehicles in the quarter, up 11.3%, of which 30,526 were exported.

Maruti Suzuki shares closed at 9,277.2 rupees, down 1.6%, on the BSE (formerly Bombay Stock Exchange) on Thursday.

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