Maruti's performance in 1997-98 with a profit after tax of Rs 651 crore on a turnover of Rs 8473 crore was significantly better than 1996-97 net profit of Rs 510 crore on a turnover of Rs 7956 crore. But the story in the current financial year is expected to be vastly different.

Maruti has been hit hard in 1998-99 on three fronts. The company had to absorb cost escalations both by way of upgradation of models and excise pay-out. The cost absorption in case of Zen-VX was over Rs 100 crore, sources said. The car was launched with additional features such as company-fitted stereo system and body-colour bumpers etc.

The company also launched an upgraded version of 800-cc with a marginalprice hike of Rs 6000 which did not cover the increase in the cost of the car.

The final blow to the company's profitability during the current year has come in the form of price cuts announced today. Market experts say that the company has been forced to launch a stripped down version of Zen with a lower price tag due to fresh competition from Hyundai Santro and Tata Indica. At the same time, the ex-showroom price (New Delhi) of the base model of the 800-cc car has been cut to Rs 1.85 lakh keep it attractive as compared to Indica's base model which has been priced at Rs 2.59 lakh.

"The launch of the new air-conditioned model of Zen at Rs 2.95 lakh also shows that Maruti has finally admitted that Hyundai Santro priced at Rs 2.99 lakh is a good car which could give Maruti a run for its money," an automobile industry expert said.