Cost control helps Apple India post 44% jump in FY17 profit

Cupertino, US-headquartered iPhone-maker Apple Inc.’s Indian subsidiary has reported profit of Rs 373.38 crore ($56.22 million) for 2016-17 – up 44% from the Rs 259.41 crore in the year-ago period, according to VCCEdge, the data research platform of News Corp VCCircle.

Apple India Pvt. Ltd’s net sales rose 17% during the period to touch Rs 11,619 crore ($1.8 billion) from Rs 9,937 crore in 2015-16. The growth rate, however, has been the slowest since 2009-10, when its net sales had risen by just 4.7%, according to VCCEdge.

In comparison, Apple India had been growing by at least 40%, annually, over the past few years, with growing smartphone usage and internet connectivity boosting demand for iPhones. Its sales had surged 53% in 2015-16 and 43.8% in 2014-15. In 2011-12, the company’s sales had more than tripled year-on-year.

Last December, it had reported the slowdown in revenue growth for 2016-17, but recently filed a detailed report on its financials for the fiscal year with the Registrar of Companies.

The jump in profit can be attributed to the company’s cost-control initiatives. While its total expenses for 2016-17 rose 15.78% to Rs 11,093.69 crore from 9,581.35 crore in the previous fiscal year, other operating expenses fell by 24% to Rs 684.41 crore from Rs 900.59 crore during the period under consideration.   

Analysts attributed the slowdown in revenue growth to the government’s banknote ban of November 2016. The move to crack down on graft and tax evasion had caused widespread slowdown in consumer spending. The timing of the announcement had also come days before the dates for Apple’s new products launch during the holiday season.

According to market research firm Counterpoint Research, the company had sold 2.9 million devices in 2016-17 compared to 2.2 million the year before. However, the 32% rise in sales volume did not result in an increase in revenue because actual selling prices of handsets had dropped.

Tarun Pathak, associate director, mobile devices and ecosystem, Counterpoint Research, said that the actual selling price of iPhones had fallen 2% in 2015-16 and further in 2016-17. “Most iPhones selling in India were older models contributing to 40% of overall sales. Hence, the rise in sales volume may not be equally felt in revenue.”

Navkender Singh, senior analyst, IDC, agreed: “The $600-plus segment represents just 1.24% of the overall smartphone market and Apple owns 65% of this segment. Therefore, sales of high-end Apple iPhones dis not have much impact on its revenue.”