COMPANY BACKGROUND

Maruti Suzuki India limited one of the leading automobile manufacturers in India was established during 1980s and Suzuki partnership was started in Feb 1981. The Government of India sold its major stake, periodically in the past 10 years,  to the technical collaborator and presently the majority stake of the company is held by Japan’s Suzuki motor company. In September 2007 the company’s name Maruti Udyog was changed as Maruti Suzuki. Indian Government recently sold its 18.2% stake in the company to Indian financial Institutions, and 54.2% is owned by Suzuki of Japan. The Company’s car stable has 11 brands including Maruti 800, Omni, Zen, Alto, WagonR, Gypsy, Sumo, Esteem, Baleno, Swift, the MPV and Spots vehicle Grand Vitara. The company’s manufacturing plant is located in Gurgaon, which is capable of manufacturing 3, 50,000 units per annum. More than half the numbers of cars sold in India are from the Maruti stable. The company has 562 outlets spread over 372 towns and provides maintenance support to customers at 2538 workshops in over 1200 towns. Since inception it has sold over 6.75 million vehicles including almost 500, 000 vehicles exported to Europe and other places.

Suzuki and Maruti have planned to invest Rs. 90 Billion till 2010 to increase capacities and introduce new models. Maruti had three distinct phases so far in its growth in India. When it was born it had an unassailable dominance in the car market with over 80% share. When the market was flooded with other car makers in mid 90s the share fell to 50% but the market niches still saw Maruti being trusted and the dominance to continue especially in the sub compact models. This is the third phase in Maruti’s existence. It has capitalized on its export markets to expand presence targeting specific markets. Maruti is rolling out more models, expanding sales overseas through appropriately designed vehicles and dominating local market with complete control over certain market niches seem to be Maruti’s answer to the competition.

FINANCIALS

The company announced its final quarter results recently. The Net Profit for the quarter ended march 2008 fell 34% and stood at Rs.3,065.9 Million when compared to the lat quarter profit of Rs.4670.4 Million. Sales increased to Rs.55,649 Million from 51,838.2 million in the same period last year. The profits for this quarter drowned due to rise in the input prices, Inflation hike, and rise in the interest rate. The rise in the petrol and Diesel prices adversely reduced the consumers demand in the market. The Change in the Accounting policy of the company increasing the depreciation charge also led to the loss in this quarter.

The company sold 7, 64,842 vehicles during the year 2007-2008.The company’s export at 53,024 units grew at the fastest pace of 34.9 percent during the year. The sales for the company in the month of January grew by 4.2% and 1.3% in the month of February. The sales for the month of March plunged by 2.15% when compared to the same period last year.

The company’s performance with its major peers is summarized below.

The company stood top in the list despite the decrease in the net profit. The company focuses in the small car segment as its major rival TATA is planning to roll out NANO in the month of September. The Company is designing plans to levitate the sales in the rural market.

Company reported 2.22% increase in the sales volume during Jun 08 selling 61, 247 units. Biggest decline in sales occurred in Maruti 800, small car, where it lost 13.73% in volume declining to 5, 261 (6,214) units. Crude oil, food and commodity price increases have led double digit inflation in India. At present the interest rates have firmed up posing a serious challenge to post growth in auto sector sales. It is unlikely till decline in crude prices are seem the fortunes of auto companies will be hit. The stock prices are on the decline in the past six months. As reversal of this is unlikely investors may need to wait till signs of reversal are seen. On a short term basis the stock offers a good buy opportunity at Rs. 450-500 range going by the decline from its peak. The near term investors needs to be quick enough to realize the gains as the general trend of declining market will take away the gains if stock is help for a longer tenure.