The Advantage of Selective Amnesia or The Sign of the Times we live in:

Today (Sunday, 24 January 2010) headlines in some newspapers prominently displayed the smashing performance of Maruti Suzuki, the largest car company in India. The papers in their enthusiasm declared that Maruti's Q3 net profits had doubled, while its sales were up 62.5 percent.  That sounded to me like the overnight sprouting of the equivalent of the Amazon forest in the Sahara region. So like our name suggests we took a slightly Different View and decided to peek into history of the company (after slogging digging out various things from the net we found that we took the round route to a relatively easy task. Maruti actually makes it easy for history guys by placing their quarterly results on their website).

The reason why we believe that the story deserves a blog spot is that Maruti is a good barometer of the India consumption story. We took up a very simply task that was more based on one simple question: What was the actual sequential quarterly growth of the company? Forget what our media says. We believe that is important that we keep an eye on that perspective because it provides more clues about the nature of this recovery and where we are heading?

A word about the company's sales growth:  The third quarter is generally speaking the best time for the company with festival sales. I dug out some of these details and it clearly shows psychologically how good it is to experience selective amnesia (as our media and investors would love to). Minus the festival sales & exports Maruti is likely to have either had tepid sales (at best) or even a loss at worst. Considering the fact that the commodity costs are likely to move up in Q4, the results at the end of March should show us that the emperor actually has no clothes. But what does it matter, anyway by March we are likely to have an outlier event in the form of a 'black swan' in the form of either Greece or Spain or innumerable countries, apart from the usual deeply troubled Uncle Sam (who is increasingly looking like a Great Gandpa). Then all our analysts and policy makers would be back to claiming that they cannot help being off the track on their forecasts simply because of the fact that this is 'once in a hundred year event'. That is the advantage of selective amnesia. We are not facing 'once in a generation crisis' but have had these crisis with amazing frequency: 1997 (South East Asia Crisis), 1998 (LTCM collapse), 2000 (tech bubble), Argentina default, 2006 crash in Emerging markets, and the freshly minted, recent financial crisis.

Maruti Announced headlines (as in the papers) - All figures Over the corresponding previous year

Q3: Net profits Doubles
Net sales Up 62.5%
Operating Margin:16.33 vs 10.26 in the corresponding previous year.
Gross sales 804.645 cr
Total income from operations:750.285 (after excluding excise, etc)
Total Expenditure: 657.172 crores
Sales of Domestic Vehicles: 218,910
Exports 39,116
Total vehicles sold: 258,026

My peek into history (considering the fact that i am a history guy):

Q2 - September Quarter: Sales:720.261 crores
Total income (including other income: 731.262
Total Expenditure: 628.647
Total Domestic sales: 209,083
Exports of cars: 37,105
Total cars sold: 246,188

Wow Great Results: Sequential Quarter on Quarter basis: number of extra cars sold: 11,838 cars (Minus the 2000 cars, which was largely due the government subsidy for fuel efficient cars, which has since ended)

What an age we live in? An era when 9827 more car sales is considered great news that deserves bold headlines.

I leave the conclusion about the nature of economic recovery and its shape ('V', 'U' or 'L') to the better judgement of readers.