RAHUL SAWANT

XII - f
ROLL NO - 48
MARUTI SUZUKI

INTRODUCTION

Maruti Suzuki India Limited (MSIL) is engaged in the manufacturing and
distribution of passenger cars and spare parts. It is a subsidiary of Suzuki
Motor Corporation (SMC) of Japan. The company offers a range of spare parts and
accessories of all the vehicles. The company has two manufacturing facilities;
one is at Gurgaon and the other at Manesar in India. Maruti Suzuki's facility in
Gurgaon houses three fully integrated plants with a total installed capacity of
350,000 cars per year. The Gurgaon facility also houses `K' Engine plant, which
has an installed annual capacity of 240,000 engines. The Manesar facility
manufactures models such as Swift, A-star, SX4 and DZire [Exhibit 4].

Suzuki Powertrain India Limited, the diesel engine plant at Manesar is SMC's &
Maruti's plant designed to produce diesel engine and transmissions for cars. The
plant is under a joint venture company, called Suzuki Powertrain India Limited
(SPIL) in which SMC holds 70% equity the rest is held by MSIL. The company offers
luxury cars, sports utility vehicles and multi-purpose vehicles. The company
offers entry-level cars such as Maruti 800 and Alto; family cars such as Ritz, A
star, Swift, Wagon R, Estillo and Eeco; luxury cars such as DZire and SX4; and
sports utility vehicle such as Grand Vitara.

The company's service businesses include TrueValue, which is involved in the sale
and purchase of pre-owned cars. The company offers insurance and finance services
such as Maruti Insurance and Maruti Finance. MSIL's N2N fleet management system
offers a range of services including, leasing, maintenance, convenience services
and remarketing. The company has a sales network of 600 outlets spread over 393
towns and cities in India. MSIL also provides maintenance support to customers
through 2628 workshops spread over 1200 towns and cities of India [Exhibit 8 &
9].

OWNERSHIP

Maruti Udyog Limited (MUL) was established in Feb 1981 [Exhibit 1] through an Act
of Parliament. Its main purpose of establishment was to meet the growing demand
of a personal mode of transport, caused by the lack of an efficient public
transport system. It was established with the objectives of - modernizing the
Indian automobile industry, producing fuel efficient vehicles to conserve scarce
resources and producing indigenous utility cars for the growing needs of the
Indian population. A license and a Joint Venture agreement were signed with the
Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the
equity and agreed to provide the latest technology as well as Japanese management
practices. Suzuki was preferred for the joint venture because of its track record
in manufacturing and selling small cars all over the world. There was an option
in the agreement to raise Suzukis equity to 40%, which it exercised in 1987.
Five years later, in 1992, Suzuki further increased its equity to 50%.

In 2002, the government decided to hand over management control in Maruti Udyog
Ltd (MUL) to Suzuki Motor Corporation (SMC) for a consideration of Rs 1,000
crore. At that time the government held 49.76 per cent equity in Maruti, with SMC
holding 50 per cent [Exhibit 2] and the remaining 0.24 per cent being held by an
employees trust. SMC acquired controlling stake in the country's leading car
manufacturer by way of the government renouncing its subscription to a Rs 400-
crore rights issue of MUL. After the rights issue, SMC ended up having a 54.20
per cent stake in the company, with the Centre's share falling to 45.54 per cent.
In June 2003, the government sold a 27.5 per cent stake in Maruti to the public
at a price of Rs 125 per share to garner Rs 993 crore (Rs 9.93 billion). As of
May 10, 2007, Govt. of India sold its complete share to Indian financial
institutions. With this, Govt. of India no longer has stake in Maruti Udyog. In
2012-13, there was an increase in the holding of SMC from 54.21% to 56.21% due
to the merger of SPIL.


CAPITAL

Shareholders funds
a) Share capital
b) Reserves and surplus

1,510
184,279


185,789
Non current liabilities
a) Long term borrowings
b) Long term provisions

5,429
2,259


7,688
Current Liabilities
a) Short term borrowing
b) Trade payables
c) Other current liabilities
d) Short term provisions

8,463
41,674
11,661
6,482




6,8280
TOTAL CAPITAL
261,757

From the table it can be seen that the company is able to generate a huge capital
from shareholders funds by issuing large number of equity shares. The company's
capital structure is high gearing as it has managed to balance more of borrowing
to less of equity.

Capital structure for last 5 years
Period Instrument Authorized
Capital
Issued
Capital
- P A I D U P -
From To (Rs. cr) (Rs. cr) Shares (nos) Face Value Capital
2012 2013 Equity
Share
1872 151.04 302080060 5 151.04
2011 2012 Equity
Share
372 144.46 288910060 5 144.46
2010 2011 Equity
Share
372 144.46 288910060 5 144.46
2009 2010 Equity
Share
372 144.46 288910060 5 144.46
2008 2009 Equity
Share
372 144.46 288910060 5 144.46

Maruti Suzuki follows prudent financial policies with judicious deployment of
resources. The Company has healthy financials. It has adequate cash reserves to
invest in initiatives and projects that foster the organisations long term
growth and development. Despite the sharp fluctuations in economic and industry
growth in recent years, growing competition and adverse exchange rate, the
Company has been able to grow profitably and maintain leadership. The Company has
reserves and surplus to the tune of ` 184,279 Million as on 31st March, 2013.

The year 2012-13 was a year of ups and downs. The slowdown in the Indian economy
continued for the second successive year. The GDP growth was estimated at 5% in
2012-13, the lowest in a decade. This was accompanied by high interest rates,
inflation and weak consumer sentiment. Rising fuel prices, caused partly by
depreciation of the rupee to the dollar, increased the cost of vehicle ownership.
The fuel price differential between petrol and diesel
continued through most of 2012-13. As a result, the share of diesel vehicles in
the total passenger vehicle sales increased from 48% in 2011-12 to 58% in 2012-
13. Petrol prices were largely market driven, while diesel prices remained under
Government control for most part of the year. Later in the year, the Government
gradually withdrew diesel subsidies and the demand for diesel vehicles also
dropped. The Company was able to contain the decline in sales of its petrol
vehicles to 14%, and enhance its market share in this segment to 58.4% from 56%
in 2012-13. Sales of diesel vehicles grew by 62%, enhancing the Companys share
in this segment from 19.2% to 25.2% in 2012-13. The Company saw the frequent
changes in petrol and diesel prices as an opportunity to sell its alternative
fuel vehicles. During the year, more than 51,000 CNG vehicles were sold.

PROFITABILITY

Ratio Current Year Previous Year
Gross Profit Ratio 5.43% 3.86%

Interpretation- Gross profit ratio is a reliable guide for fixing selling
prices and efficiency of trading activities. As we see here the gross profit
ratio has increased like about 2%. This shows that the company has increased
the selling prices of its products by appox 2%.

Ratio Current Year Previous Year
Net Profit Ratio 5.38% 4.49%

Interpretation- Net profit ratio indicates overall efficiency of the business.
As we see the ratio of the current year is 5.38%, whereas in the previous year
it was 4.49%. So we observe that the ratio has increased. This shows that
there is an improvement in the operational efficiency of the company.

Ratio Current Year Previous Year
Operating Ratio 5.33% 3.77%

Interpretation- Operating ratio is the test of the operational efficiency of
the business. It shows the percentage of sales that is absorbed by the costs
of sales and operating expenses. As we see here the ratio has increased from
3.77% (2012) to 5.33% (2013). This means that the company has left a lower
profit margin to meet interest, dividend, etc.


Ratio Current Year Previous Year
Operating Profit Ratio 9.70% 7.06%

Interpretation- The objective of computing this ratio is to determine the
operational efficiency of the management. As we see here the ratio has
increased from 7.06%(2012) to 9.70% (2013). This means that there is an
improvement in the operational efficiency of the business and there is a
increase in the profitability.

Ratio Current Year Previous Year
Earning Per Share Rs.79.19 Rs.56.60

Interpretation- This ratio helps in evaluating the prevailing market price of
the share in the light of profit sharing capacity. We see here that the per
share cost has increased by Rs.22.59. this is a good sign for the company. The
more the earning per share, better is the performance and prospects of the
company.

SWOT ANALYSIS
STRENGHTS

1. Robust brand image : The company has built up a strong brand image over the
years. During the year, the company received reputed awards and accolades
for its products and services from independent expert groups, media houses
and research agencies. For instance, in FY2012, for the 12th consecutive
time, MSIL was ranked the highest in JD Power Asia Pacific 2012 India
Customer Service Index (CSI) study. In addition, according to a survey
conducted by JD Power Sales Service Index (SSI) study, MSIL was ranked the
highest in customer satisfaction with dealer service for a 13th consecutive
year, with a score of 879 points. Therefore, strong brand image makes the
company's entry into new markets easier and increases the customer base
which further helps in boosting the overall sales.

2. Extensive distribution network : MSIL has an extensive distribution network
in India. It has a strong sales and service network in the country. In
FY2012, the company had a sales network of 1,100 dealerships across 801
towns and cities in India. In addition, it provides service support to
customers at 2,958 workshops spread over 1,408 towns and cities of India.
The company has the highest presence in terms of district coverage at 82%.
MSIL is the only passenger vehicle manufacturer to achieve more than one
thousand sales outlets in India. Furthermore, the company is planning to
expand the number of dealerships to 1,500 by 2015.

3. Strong parent backing : MSIL is a majority owned subsidiary of Suzuki Motor
(SMC), a Japan-based company, engaged in the manufacturing and marketing of
motorcycles, automobiles, marine and power products, motorized wheelchairs,
electro senior vehicles, and houses. SMC is a pioneer and market leader in
small car manufacturing segment in Japan. Its mini car section rolled out
innovative yet economical passenger
car for the masses.The company has high brand recognition and operates in
more than 190 countries across the world. Brand recognition allows SMC to
charge premium prices than its competitors and thus register relatively
higher margins. Hence, SMC's strong brand image gives MSIL a significant
competitive advantage and helps it to register higher sales growth in
domestic, as well as in international markets.


4. COST LEADERSHIP: Maruti Suzuki limited has the best value chain with
localized sourcing, economies of scale and huge production volume which in
has in fact always materialized in salesvolume completely. With a fully
depreciated plant its investment per car manufacturedis around Rs.
40,000 where as it is Rs. 2-3 lakh for its competitors due to new plantsand
developing value chains. It has perfected the supplier and vendor base who
in pasthave always had assured sales. This materializes in huge advantage of
price renderingwith still higher margin of profit than competitors.

5. PRESENCE IN ALL THE SEGMENTS OF MARKET: Maruti Suzuki ltd. was the first
motor company to be manufacturing cars in India. Thishas proven to be
beneficiary of the company. Foreign players didnt enter the Indianmarket
till early 1990s. This interval of more than a decade helped Maruti Suzuki
tosecure a customer base in every sector of the economy particularly the
middle classes.

6. GOVERNMENT SUPPORT: Maruti Suzuki has always relished government support
because of it being agovernment initiative. And this support still continues
because of the company beingone of the largest public sector company in
India. Also the support provides withfinancial stability in case of dire
situations which till now have not materialized


WEAKNESS

1. Still depends upon SUZUKI COPORATION, Japan For tech. support, 10%
components are manufactured outside India. Though MUL has launched luxury
cars as well its still considered as poor mans brand. Diversification is
not supported with all India presence of Manufacturing Units. Bureaucracy,
Technological disadvantages, Decades of isolation, inertia and subservience
to the whims of government bureaucrats have made MUL unaccustomed to
international standards or keen competition.
2. Lack of in house R & D : Maruti Suzuki do not have a comprehensive R
& Ddepartment.

3. New model introduction to only cosmetic changes : There is no major
designchanges incorporated in Maruti Suzuki products. Only some
cosmetic changeshave been made

4. Dominance mainly at lower level : Maruti Suzuki dominance in Indian
market isonly at its lower level segments like Swift in B -
Segment and Accent n C-Segment. It has to focus on its upper segment
models to strengthen its position inIndian car industry

5. In the Indian automotive sector, the Indian component suppliers lack know-
how in certain specific areas. Additionally, component suppliers are small
in size and they are a fragmented lot.
6. Low interior quality inside the cars when compared to quality players like
Hyundai and other new foreign players like Volkswagen, Nissan etc.

7. Government intervention due to having share in MUL.

8. Younger generations started getting a great affinity towards new foreign
brands

9. The management and the companys labor unions are not in good terms. The
recent strikes of the employees have slowed down production and in turn
affecting sales.


OPPORTUNITIES

1. It is the first company to roll out suitably designed cars before 2008 as
per Govt.s Proposal of new ethanol (renewable)
mixed fuel. Other companies lacks economy of scale, so market is still open.
Importing new technology is
controlled by Govt. so there is plenty of untapped market and with increase
in Income scale, Demand is rising.
2. Rise of Indian middle class and small cities: As a phenomenonal growth is
seen inrecent times in Indian middle class and the purchasing power
of working classindividuals. Also a rise in small cities across
the country has given a greatopportunity to Maruti Suzuki for
achieving a higher growth rate in coming times.2.
3. A Booming Economy : Indian economy is growing at a rate of on an average of
7%every year thereby giving an opportunity of larger sales
in each and everysegment.3.
4. Rising exports : With a export of Rs. 1,325 crores in last six
months, MarutiSuzuki has a great opportunity of achieving a export target
of Rs. 2,700 crores inthis fiscal year


5. After the success of the financials, procurement, and human reso
urces deployment,Maruti is considering expanding its Oracle footprint.
The company is evaluating OracleAdvanced Supply Chain Management and
Oracle Enterprise Asset Management. Wewould like to automate supply
chain management and integrate this process with theOracle ERP
system, said Uppal. We are also looking at linking more systems
withOracle, so we can access real-time information across all our
businesses. I expect OracleConsulting to play a role in future projects.

6. In evaluating the market segments Maruti Suzuki has looked
at two factors - The segments overall attractiveness and the
companies resources. As is very clearly seen Maruti Suzuki has opted
for a selective specialization kind of targeting. Maruti Suzuki can
selected a number of segments each objectively attractive and
appropriate. There is minimal synergy among the segments but each is a
cash cow. This multi segment strategy has had the effect of diversifying the
firms risk

7. Maruti Suzuki has identified its target market based on its pricing
strategy. Swift aims to be the price leader in B-Segment cars. It
has always priced its base model lower than Zenor Indica giving
all the features which they give in their higher models. With
a constantchange in its positioning strategy, Maruti Suzuki
Swift has succeeded in identifying itstarget market every time and
emerging as the fastest selling car in its own segment. Withthe
invent of Swift, Maruti Suzuki is looking towards entire
new segment of consumersand all set to target it to emerge as the
market leader in B- Segment cars.


THREATS

1. The biggest and the latest threat to the small car sector of Maruti Suzuki ltd. is
the Tata motors Nano. With a price tag of Rs. 1 lakh it aims at capturing the
Indian middle income groups.

2. Maruti Suzuki ltd. has been planning to increase its production and also planning to
increase its customer base. This requires a huge amount of capital. But with
economic recession spread worldwide such an investment can prove to be dangerous to
company, hence the company will have to be very careful in such large investment.

3. After the globalization of Indian economy many foreign players have entered the
market. And with them they have brought the highest technological standards. This
have raised the level of competition in the market hence it is highly important that
the company maintains its high standards and keep providing the best value for
money.
4. Many players fighting for the same cake : There a many major players in
the B-Segment and since the size of market is not expanding rapidly, Maruti
Suzuki hasa major threat in form of tough competition

5. Entry of new players : with coming of Tata Indica and other players
planning tocome out with much more models in B-Segment, the
competition is just gettinghotter.

6. Cannibalism : to some extent the Zen is affecting Swift because of its
price. ThusMaruti Suzuki has to focus more on its positioning strategy of
Zen and Swift.


7. The increasing prices of fuel in the international market have lead to the
requirements of fuel efficient cars.

8. MUL recently faced a decline in market share from its 50.09% to 48.09 % in
the previous year(2011)

9. Major players like Maruti Suzuki, Hyundai, Tata has lost its market share
due to many small players like Volkswagen- polo. Ford has shown a
considerable increase in market share due to its Figo.