Latest Car News in India

Wednesday, December 25, 2013

By Kamal Swami

Suzuki not in a mood to increase the share of Maruti

Maruti Suzuki the country's biggest carmaker by volume, said Japanese parent Suzuki Motor has no immediate plans to raise its holding in the company, but that such a possibility could not be ruled out in future. "There is nothing in that direction we have heard so far," RC Bhargava, executive chairman at Maruti, said on Tuesday. "We are not aware of SMC's (Suzuki Motor Company) plans to increase stake in Maruti, but it could possibly happen in the future depending on the circumstances and the Indian market." 
Bhargava's comment follows reports last week that Suzuki is considering raising its stake by up to 5% through purchase of shares from the open market. Suzuki owns 56.2% stake in Maruti. According to the reports, Suzuki's move was aimed at streamlining control and integrating operations of its largest global unit. 
 
Maruti, which commands 40% share of the Indian car market, contributes about 40% of the parent's profits. It also makes up nearly 45% of Suzuki's total sales and generates around 25% of its sales revenues. The company has a cash reserve of 39,600 crore. Going by the importance of the Indian subsidiary in its global operations, Suzuki had asked Maruti to produce and market vehicles to major emerging markets of Africa, West Asia and Southeast Asia, while it focuses on critical markets of Europe and China to increase its global presence.  The company has also not ruled out promoting Indian executives as directors on the board of Maruti. Kenichi Ayukawa, managing director and chief executive at Maruti, has said the company would promote "good" candidates to the board. "We always try to find out good candidates and would consider them as company directors. We are enhancing people's values and try to assign the right role to them," he said. Maruti does not have any Indian on its board except for the independent directors as mandated by the law.
Bhargava also said Maruti will set up manufacturing facilities in Gujarat only when the Indian automobile market comes out of the red and starts posting positive growth in sales. 
 
The company would, however, concentrate on its integrated research & development (R&D) centre at Rohtak in Haryana. The testing facility, along with the R&D centre, which is expected to go on stream over the next 2-3 years, will allow Maruti to develop expertise in conceptualizing, designing and testing Suzuki vehicles for African, West Asian and some South Asian markets. 
 
"It would complement Suzuki's global facilities. The R&D centre is in line with SMC's overall global strategy for a multi-location and unified global R&D team. We expect the test tracks to get over by next year and other facilities to also start operating after that," Bhargava said. 
 
Built at an initial investment of Rs 1,000 crore, the 600-acre R&D facility will be commissioned in two phases by 2016. As of now, around 1,300 engineers are working at Maruti's R&D division. 
 

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