Project on

MARUTI SUZUKI

Acknowledgement

With my deep sense of gratitude, I wish to thank my instructor G.B.Sandeep, for his guidance and helping me to complete the project on Maruti SuZuki .

CFA Anurag Kumar

Enr No. 6010010832293

Company Analysis

Table of Contents1. Preamble.............................................................................................................................................3

2. Background..........................................................................................................................................4

3. a . Product and Services.......................................................................................................................4

4. Business Model....................................................................................................................................4

4.1 Target Customer & Value Proposition............................................................................................4

4.2 Distribution Channel.......................................................................................................................5

4.3 Promotion.......................................................................................................................................5

4.4 Revenue Stream.............................................................................................................................5

4.5 Core Capabilities.............................................................................................................................5

4.6 Value Configuration........................................................................................................................5

4.7 Partner Network.............................................................................................................................5

5. Business Analysis.................................................................................................................................6

6.1. Segmental Analysis...............................................................................................................................6

6.2. Competition....................................................................................................................................7

6.3. Issue & Challenges..........................................................................................................................7

7. Operational Performance....................................................................................................................7

7.1. Sales & Sales Growth......................................................................................................................7

7.2. Segmental Sales Analysis................................................................................................................7

7.3. PBDIT & OPM..................................................................................................................................8

7.5. Cost Structure.................................................................................................................................8

1. PreambleMaruti Suzuki launches Maruti SX4,Maruti Eeco, Maruti Grand Vitara, Maruti Kizashi, alto-k10 with a K-series, 998 cc engines I.e. engines having high fuel efficiency. It also introduces next generation CNG technology i.e. I-GPI to ensure more power & for better ride experience. It will give safety and reliability. This will attract customer base as k-series engines have all those feature for which customer are waiting. The company registered net sale of Rs. 80507 mn during in 1st quarter of 2010-11 so having growth of 27% with compared to last year quarter.

2. BackgroundIncorporated in 1981 by Government of India, Maruti Suzuki is India’s largest 4 wheeler manufacturer in Indian soil. Its headquarters is in New Delhi with installed capacity of 700,000 car/ annum in Gurgaon & in Manesar with capacity of 300,000 car/annum. The major lines of business are purchase and sale of 4 wheelers, driving school, sales of components, and true value market.

3. a . Product and Services

Segment ProductA1 Maruti-800A2 Alto , Zen, Wagon-R, A-star, Swift ,Ritz , Zen EstiloA3 D-Zire , SX4MUV Grand Vitara , GypsyC Omni , Versa , EecoServices True value cars, Driving cars, Safety programs for customers

Source: Maruti Suzuki

4. Business Model

4.1 Target Customer & Value PropositionSegment Target customer Value Proposition

A1 Consumer wants to purchase a car, have a conservative mindset. Low income group.

Have low cost but durable. i.e. ever lasting

A2 Middle class wants to buy to show its image.

Better engine quality, Design, Space with little extra cost.

A3 Customer looking for more enjoyable car.

Comfortable car with better design & style

MUV Consumer looking for luxurious cars , comfortable ride high quality interior and safety features

High performance engine car

C Commercial purpose Lot of Space with reasonable price

4.2 Distribution ChannelMaruti Suzuki sales network is in 790 outlets covering 549 towns and cities. The company provides service support to customers through 2700maruti service station.

4.3 PromotionTo attract company is advertising through lucrative ads &to reach in semi-urban & in rural areas it is reaching through local &national newspaper, Radio. Company hoarding can be seen in busy roads & in metropolitan region also during game company try to reach through its logo. Company is spending a bulk of money to promote its brands

In terms of CSR company has adopted 3village in Manesar (Haryana). Promoting motor sport in the country. Family Day Function once in year for employee. Planted over 1000 tree nearby region.

4.4 Revenue StreamThe company receives bulk of revenue from dealers and other value added services like driving schools, true value cars.

4.5 Core CapabilitiesGurgaon has an installed capacity of 700,000 car/annum & facilitate ‘K' engine plant. K-series engines are available in 1 litre and 1.2 litre capacities. & Manesar plant having capacity of 300,000 cars/annum. The high degree of automation and robotic control in the press shop, weld shop and paint shop to help manufacture with acute precision, high quality and speed.

4.6 Value ConfigurationCompany has set up a new gasoline engine plant in Gurgaon which will provide engine to A-Star. In MUV segment company has launched new Grand Vitara .Maruti Suzuki introduces K-series, 998 cc engines, having high fuel efficiencies. CNG technology engine with I-GPI to ensure safe, reliable, clean, responsive and environment friendly situation. Maruti Suzuki inaugurated its state-of-the-art new engine plant at Gurgaon

4.7 Partner NetworkCompanies received input material from steel companies, Tyre Company and supply its product to different dealer by third party

logistics.

4.8. Cost structure Raw materials constitute major part of expenditure i.e. 81%. As the price of raw material fluctuate more due to rise/fall in the input material which directly affect on manufactured goods. Company also affected by increase in other expenses.

Source:BSE India

5. Business Analysis

5.1. Segmental AnalysisCompany gets major revenue from A2 type’s product. As income of middle class has increased & as this segment give social images & have better quality, design. This type of car is comfortable and easy to drive.

5.2. Issue & Challenges

New product has been launched by other player. Increase in interest rate. Rise in crude oil price. A lot differentiated product is in the market. Increase in raw material price. To innovate new & competitive car. To increase fuel efficiency. Fluctuation in the exchange rate. European crisis. Consumer sentiment as their attitude is wait & watch. To achieve economies of scale by reducing the cost f the production.

6. Operational Performance

6.1. Sales & Sales Growth

During the quarter ended June 2010, company’s sales witnessed rise of 17.28% to Rs 82,315.30 million compared to previous quarter. The strong growth due to decrease in interest rate, easy financing, Increase in income level, Change in lifestyle of

Source: BSE India

people. customer loyalty, also it has got good responds from A-star car, Maruti SX4,Maruti Eeco, Maruti Grand Vitara, Maruti Kizashim Maruti Carvo . Increase in sales growth is due to the low base effect.

6.1. Segmental Sales AnalysisDuring the quarter ended June2010, overall company’ssales growth came from C segment. As this segment car are spacious, have design give social symbol in competitive rate. It has high fuel efficiency. The other segment also performed well which added company’s top line growth. Of the all divisions one segment A1 witnessed dip as this segment car not come in the market.

Source: Maruti Suzuki

Source : BSE India

6.2. PBDIT & OPM

The company for the quarter ended June 2010 has witnessed dip in the margins compared to JFM 10. This is due to the fact that cost of production increased, increase in the royalty payment. It also reveal that cost of expenditure is more than revenue earned..

6.2. Cost Structure

The company for the quarter ended June 2010 has witnessed rise in the cost components due to rise in cost of raw material , increase in interest rate than compare to JFM 2010 . Percentage change in raw material cost 1.47, in other 1.14, in staff cost (.11) , In interest 0 , in depreciation (.09) , in tax (1.32).

Cost structure as % of sale

Source : Maruti Suzuki

Source: BSE India/Maruti Suzuki

OPM as % of Sale

0

2000

4000

6000

8000

10000

12000

14000

AMJ 09 JAS 09 OND 09 JFM10 AMJ 10

RS

mn

0.002.004.006.008.0010.0012.0014.0016.0018.00

%

PBDIT (LHS) OPM (RHS)

7. Operating metrices7.1. Revenue per Vehicle

During the quarter June 2010 revenue per vehicle rose due to increase in the price of car & increases the output capacity in Manesar plant from 1700 to 2500. Company also launched new product which helped it in improving its sale compare to JFM 2010.

7.2. PBDIT per Vehicle

During the quarter ended June2010 PBDIT per vehicle decreased due to increase in price of raw material , increase in royalty payment & increase in competition.

Source: BSE India/Maruti Suzuki

Revenue per sale

284000

285000

286000

287000

288000

289000

290000

291000

AMJ09 AMJ10

Rs L

akh

Revenue per sale

Source: BSE India/Maruti Suzuki

PBDIT per Sales

05000

100001500020000250003000035000400004500050000

AMJ09 AMJ10

Rs

Lak

h

PBDIT per Sales

8. Financial Performance

8.1. Net Profit growthCompany profit after tax has declined in JFM 10. This is because increase in raw material cost. The growth rate has also decline as increase in royalty payment due to the low upfront payments. Company other income also saw heavy decline i.e. 53.7%. Increase in competition led to decrease in sale which affected its profit.

8.2. Debt to equity ratioD/E ratio has declined from 0.98 to 0.07 in 2006-07 to 2008-09. It is good for company health. As large D/E means company is paying large money as interest. It reflect that the company able to reduce the cost on capital. Company had paid its debt. It shows that company is good for investment as it has low degree of leverage.

Source: BSE India

Source: BSE India

8.3. Return on Capital EmployedTrends of ROCE show that it will fall in coming years. I.e. profitability of company will decline due to increase in competition & hike in raw material cost. Investment is not good in the short rub but in the long run it is will give better return as company has

large penetration & new product will increase its sale & give competitive edge over other players.

Source: Maruti Suzuki/BSE India

Trends of ROCE

27282930313233343536

2006-07 2007-08 2008-09

%

Trends of ROCE

8.3. Return of equityDecline in ROE means shareholder return is decreasing as the profitability of company is decreasing. It means that profitability of company decline due to increase in competition. Trends show that it will decline in coming years due to fluctuation in exchange rate, rise in oil prices, effect of new

players.

9. Capital market performance The price of Maruti Suzuki fluctuates with respect of Sensex. As loyalty payments rise due to low upfront payments. Rise in oil price & raw material affected share price. Increase in interest rate, customer sentiment:

wait & watch. New and diversified product is coming at competitive cost.Volume of company is good and this would help the price to regain its position. Royalty payment has affected the share prices adversely. Share price crosses 200 point in sep 2009 after that it decline and not able to cross 200 points but strong volume support the price to remain in between 150-200 price level

Source: BSE India

Source: BSE India/Maruti Suzuki

.

10. Recent strategies

10.1. Value DriversInbound Logistics i.e. the receiving and warehousing of raw materials, and their distribution to manufacturing. MUL’s inputs primarily comprise raw materials and purchased components. , It is increasing its supply chain efficiencies. It is expanding its production capacity in Manesar Plant from (1700-2500) Crores to meet increasing demand. In order to improve quality and generate economies of scale, MUL has reduced the number of vendors of components in India. By lowering the time and cost involved in dealing with more vendors, they have increased their supply chain efficiencies.

10.2. Growth DriverMaruti Suzuki is going to launch a variety of product like Maruti Carvo, Maruti SX4, Maruti Grand Vitara, Maruti Kizashi to attract different customer base. They have introduced K-series & CNG engine which would increase fuel efficiency and is also environment friendly. Company has invested 1700 crore for enhancing production. Prudent business approach and foresightedness helped company to handle the tough situation calmly and maintain its production, sales and market share. Despite the market slow down it won performance awards for customer satisfaction and product quality. sales and service network has increased. Maruti Suzuki plan to increase its sale in rural area to improve its performance.

Sale trend of automobile

Source : SIAM India

11. Outlook Indian economies are growing at faster pace and many players entering in this market because demand is increasing also income level and style of living. India is one of the most important emerging car economies in the world today. Government liberalized policy drawn attention of foreigner. 100% FDI has boosted industry and help in expansion. Government has collaborate with private player to build highway has improved infrastructure condition & is also beneficial for auto industry. A large venture capital are investing in Indian economy as it has huge untapped market & showing a good sign to improve its situation. Skill and efficiency of labour has increased which help in increasing production. The Indian auto industry is still in nascent stage so major investment can be seen now a days also product quality with design. As large player are entering market is pushed towards production.

In case of Maruti Suzuki , it is facing challenges from Tata Nano , Ford fiego in small & cheap car because it has drawn attention to customer having low income level . Maruti has implemented JIT for its suppliers. To improve demand company is launching new model, expanding supplier & dealer base & also expanding its footprint over the other countries. The control over cost & superior quality provides Maruti Suzuki rooms to be flexible, As it has economies of scale , vast network & close relation with customer & advantage over cost will help company to capture and to grow at faster rate. Company volume is growing at a good rate so this will provide edge to the company over its competitor. New product will give it chance to regain its market position.Company planned project executed smoothly in current scenario and this is helping company to improve its customer base. The company partnership with stakeholder help in ensuring & sustaining growth . From the chart it is clear that growth prospect of automobile industry is bright as income level is increasing, availability of easy financing. JNNURM for commercial vehicles. 100% FDI allowed to boost this sector This would help in expansion & improving demand.

Potential Vehicle sale in India 2015-2016

Source : SIAM India

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