Apple's profit shrinks 33% in India, sales up 51%

KOLKATA/MUMBAI: Apple's India unit saw FY2013 profit shrink to about a third of what it was the year before as it went on an aggressive campaign to carve out a bigger share of one of the world's largest mobile phone markets, where it's trying to play catch up with Samsung and Micromax.

Profit dropped to Rs 112.66 crore from Rs 311.5 crore, according to the company's Registrar of Companies filing. Sales at the Indian arm rose 51% to Rs 3,030.11 crore. This was in sharp contrast to its FY2012 performance, when revenues rose 223% to Rs 2,003.9 crore and net profit shot up 431% to Rs 311.5 crore. 

Analysts had estimated that Apple's India revenues would hit $1 billion in FY2014, but now they say it's unlikely, although the new iPhone 5S has seen demand outstripping supply. 

The FY2013 performance was attributed to marketing push from the fourth quarter (January-March) of FY13, which involved a substantial increase in marketing expenditure, price cuts on iPhone 4, its cheapest model, along with buyback schemes as rupee depreciation saw its import bill ballooning. Its efforts have made Apple India's second-largest mobile phone vendor by value after Samsung. 

Apple profit shrinks to a third, sales rise 51% to Rs 3,030 crore in FY13 According to market tracker CyberMedia Research, Apple's volume market share rose to 2% in the July-Aug period from 0.8% in the same period last year. 

That's still marginal compared with market leader Samsung (32.1%) and Micromax (20.4%). Also ahead of it are Karbonn (9.9%), Nokia (5.4%) and Sony (4.2%). 

Apple's promotional schemes in the January-March quarter took a toll on profit margins, said Manasi Yadav, senior market analyst at researcher IDC India. She said such schemes increased shipments and sales of the lower-priced iPhone 4 over the premium iPhone 5. 

"It's actually a long-term strategy for Apple to increase its consumer base in India by making the device affordable and get them hooked into the Apple experience, since very few Apple users migrate to competitors. In the long run, Apple will reap rich benefits out of this strategy," said Yadav. 

A senior executive at a top multi-brand mobile retail chain said Apple had been subsidizing the retail price of iPhone 4 by Rs 5,000 in the buyback offer and another Rs 900-1,200 was going to banks as the interest cost for its 0% EMI scheme. "The Apple scheme actually changed smartphone marketing in India, leading to a flurry of similar offers from Samsung and Nokia," he said, requesting anonymity. 

An email to Apple's spokesperson at regional headquarters in London on Monday afternoon did not elicit any response as of press time. Apple plans to discontinue iPhone 4. However, Apple CEO Tim Cook indicated to analysts the company may reduce the price of iPhone 4S and position it as an entry-level model to gain share in emerging markets like India. 

"As you know from comments that I've made previously, we're selling iPhone 4 in very good volumes and as we begin to experiment in different regions, at somewhat lower price points, we saw a fair amount of price elasticity and so we're hoping and thinking that, that will continue with the 4S," Cook said last week.