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ABOUT MARUTI UDYOG LTD.

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MUL INFO
Maruti Udyog Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been the leader
of the Indian car market for about two decades. Its manufacturing plant, located some 25 km
south of New Delhi in Gurgaon, has an installed capacity of 3,50,000 units per annum, with a
capability to produce about half a million vehicles.
The company has a portfolio of 11 brands, including Maruti 800, Omni, premium small car Zen,
international brands Alto and WagonR, off-roader Gypsy, mid size Esteem, luxury car Baleno,
the MPV, Versa, Swift and Luxury SUV Grand Vitara XL7.

In recent

years, Maruti has made major strides towards its goal of becoming Suzuki Motor Corporation's R
and D hub for Asia. It has introduced upgraded versions of WagonR Zen and Esteem, completely
designed and styled in-house.

Maruti's contribution as the

engine of growth of the Indian auto industry, indeed its impact on the lifestyle and psyche of an
entire generation of Indian middle class, is widely acknowledged. Its emotional connect with the
customer continues.

Maruti tops customer

satisfaction again for sixth year in a row according to the J.D. Power Asia Pacific 2005 India
Customer Satisfaction Index (CSI) Study. The company has also ranked highest in India Sales
Satisfaction Study. The company's quality systems and practices have been rated as a
"benchmark for the automotive industry world-wide" by A V Belgium, global auditors for
International Organisation for Standardisation.
In keeping with its leadership position, Maruti supports safe driving and traffic management
through mass media messages and a state-of-the art driving training and research institute that it
manages for the Delhi Government.
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The company's service businesses including sale and purchase of pre owned cars (TrueValue),
lease and fleet management service for corporates (N2N), Maruti Insurance and Maruti Finance
are now fully operational.. These initiatives, besides providing total mobility solutions to
customers in a convenient and transparent manner, have helped improve economic viability of
The Companys dealerships. The company is listed on Bombay Stock Exchange and National
Stock Exchange.
MARUTI -DRIVING A NATION
One might imagine that a car brand that redefines the meaning of personal transport in a country
of a billion people must be pretty powerful. And yet the unassuming people's car, the Maruti 800
(always referred to by its cubic capacity), has ruled the Indian roads for almost two decades and
keeps the cash registers ringing for its manufacturer the Suzuki Motor Corporation, acclaimed
for its small car ingenuity worldwide.
Not surprisingly, the name Maruti has become generic for "small car" in India, since it is
invariably most Indian's first car. It is probably also the world's cheapest car, priced at US$
5,000. Considering the car's accessibility, Maruti's tagline "Realize your dreams" seems
especially apt.
The car's humble beginning dates back to the year 1982 when Suzuki Motor Corporation
entered into a joint venture with the Government of India to manufacture fuel-efficient passenger
cars under the brand name Maruti (a winged Hindu deity) at its plant outside Delhi. The
company was christened Maruti Udyog Limited (MUL), and the first car rolled off the lot in
December 1983 with a 796cc 3-cylinder engine that delivered 39.5 bhp at a very affordable price
of US$ 960. Additionally the car ushered in a work culture and Japanese philosophy for super-

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efficient manufacturing. It was a formula that brought about the renaissance of the Indian
components industry, rebuilding it from scratch over 20 years.
Doubting Thomases wrote the car off as a "matchbox" for its diminutive
proportions and pronounced it likely to cave in at the slightest bump. But the seemingly
innocuous-looking car proved that looks are deceptive when it debuted on the Indian roads. For
its tiny dimensions the car was surprisingly spacious enough to carry four adults. It did its job
with great lan and proved a delight to drive in start-stop city traffic. Suzuki's precision
technology coupled with Maruti's sheer determination and will to attain high levels of
indigenousness have enabled a value-for-money pricing strategy for its vehicles.
Buoyed by the 800's success, MUL launched the car's van avatar,
the Omni, in 1984. The van was an instant hit among large families and taxi operators who took
to its sheer functionality and economy. Between 1973 and 1983, the year Maruti 800 made its
advent, the Indian car market had stagnated at a total volume of 35,000 cars. Maruti 800 was the
change agent, reaching a total production of 1 million vehicles in March 1994. It crossed the 2
million mark in 1997. Together, 2.5 million units of the two models (Omni) have been sold so
far, representing a staggering 50 percent of all cars sold in India in the last 18 years.
Over its lifetime the Maruti 800 has been put to the
test on the most severest of Indian terrain (known for its inhospitable nature) by the most
insensitive Indian drivers, but the car's excellent maneuverability assisted by a lightweight body
structure weighing all of 665kgs with an efficient small capacity engine makes it extremely
drivable, leaving its critics behind. There have been numerous instances where the Maruti 800
has registered six digit mileage measurements on the speedometer without an engine overhaul.
The car's versatility can be gauged from the fact that it has assumed every role for which it was
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not originally conceived. But the USP of this car, which makes it all the more invincible and
enviable, is its unmatched fuel efficiency of 16-18 kilometers per liter under any circumstances
coupled with ridiculously cheap spares backed by a nationwide strong sales and service support.
No other car on Indian roads is more economical to own and run, with spare parts available on
virtually every corner of the sub-continent.

The road to fame was not easy for Maruti.

For over a decade, MUL's focus had been churning out as many 800s as possible, rather than
doing anything to the car itself. The only major facelifts given to the car were in 1986 and 1997
with the body exteriors. When competition arrived in 1999 from the Korean carmakers Hyundai
and Daewoo in the form of flagship brands Santro and Matiz, Maruti 800's near ten-year
monopoly came under fire.

Maruti became further waylaid when India's

second largest automaker, Telco, challenged the automaker for non-compliance with Euro2
emission norms. Suzuki responded aggressively by transplanting the car's engine with a modern
MPFI unit and improved the car's breathing characteristics through a 4-valve-per-cylinder head;
a new 5-speed gearbox further complemented the engine. The result was a zippier Maruti 800,
which delivered 47 horses from the same 800cc displacement and achieved a top speed of
140kph. The car was widely acclaimed as a wolf in sheep's clothing.
Over the years, Maruti has quietly set the
stage for the successful launch of Suzuki's international range in the Indian car market by way of
the Zen, Alto, Wagon R, Gypsy, Esteem/Swift, Versa and the Baleno, all backed by the inherent
value proposition of high on quality, fuel efficient, and compared with the competition, low in
cost. This formula has been largely responsible for a new generation of Indian car users swearing
by the Maruti brand name.

Maruti 800 also holds the distinction of

being the first "made in India" car to be exported to select European and South American
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markets. In 2000, MUL was the lead in its home market and in the JD Power Customer
Satisfaction study.
However, today the Indian car market is in a transition phase with the Maruti 800 steadily losing
market share to bigger hatchbacks. Although the car retains its numero uno status, its market
share has declined from 49.5 percent in 1991 to a modest 21.7 percent now. Realizing that the
800 is toward the end of its product lifecycle, Suzuki has conceived the AltoLX as its
replacement. The AltoLX has Marutis 800cc engine bolted on to a contemporary chassis, which
conforms to the latest safety norms.
Despite the passing of the torch, for now Maruti 800 remains the best-selling car in India
since its launch two decades ago. Its low cost structure remains unmatched even today. No
manufacturer, not even MUL itself, would be able to make a car like the 800 today, at the same
price. The very fact that Maruti 800 still adorns the porch of millions of Indian houses is itself a
tribute to the inherent strength of the car. As foreign automakers make a beeline for the still
virgin Indian automobile market, Maruti 800 continues to gratify the basic commuter needs for
the common Indian. It will go down in automotive history as a car that put a nation on wheels.
1. BRANDING
There is so much that has been read, said and written about brands. A brand is a name, term, sign,
symbol, design or a combination of these intended to identify the goods and services of one
seller to distinguish them from those of another. A brand is like a human being and passes
through successive stages, right from its birth, growth, maturity and aging. A brand is like a baby
when it is born. In its lifecycle its grows and makes friends and bond with people and the real

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test of its friendship lies in the loyalty of its friends (customers) who stick by it through the highs
and lows of the brand. If the brand is indeed a person, then he or she will communicate with
others through a distinct style of dressing, appearance, personality, values and ideologies.
However, if the communication from various aspects does not tie up with the persons identity
then the person will be considered a split personality. In such a case friends and others will
misunderstand him or her. It should be remembered that positioning is more a reflection of a
product and that it stifles the rich meaning of the brand without taking into account all its
potentialities.
To understand the modernization of Indian Automobile Industry its very important to have fuel
efficient vehicles that can save the resources. Maruti Udyog Limited was established in
February 1981 through and Act of Parliament to meet the growing demand of a personal mode of
transport caused by the lack of an efficient public transport system. A license and joint venture
agreement was signed between govt of India and Suzuki motor company in October 1982.
Maruti Suzuki has a sales network of 307 state if the art showrooms across 189 cities with a
workforce of over 6000 trained sales personnel to guide the customers in finding the right car.
Tata Motors(Telco) established in 1945 entered into collaboration with Daimler Benz of
Germany in 1954 to manufacture commercial vehicles. The collaboration ended in 1969. Tata
Motors has since grown from strength to strength. The company has spread its manufacturing
facilities across India by setting up plants at Jameshpur, Pune and Lucknow. This is coupled with
nation wide sales, services and spare parts network. The company enjoys a significant demand in
export markets like Europe, Australia, South East Asia and Africa.
2. IMPROVING CUSTOMER SATISFACTION

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Customer satisfaction research is not an end unto itself. The purpose, of study, in measuring
customer satisfaction, with Indian cars brands, is to see which cars company stands in this regard
in the eyes of its customers, thereby enabling service and product improvements, which will lead
to higher satisfaction levels. The research is just one component in the quest to improve customer
satisfaction. There are many others, including:

a. Top Management Commitment: Top management, through its actions, must show that
customer satisfaction is important to it. This can be done in several ways. Acknowledging
areas where the company needs to improve, Allocating appropriate resources to the
improvement of customer satisfaction, Involvement of management and employees in the
development of plans for customer satisfaction improvement, Linking management bonuses
to satisfaction scores, Clear and frequent communication of what is being done to improve
customer satisfaction.

b. Linking of Customer Satisfaction Scores With Employee and Management Monetary


Incentives: This really is just a case of having management put its money where its mouth is.
Monetary incentives for improving customer satisfaction scores should reach all levels of the
organization, from top management to front-line employees and suppliers. Incentive
programs can be structured so that all employees in an organizational unit receive
compensation if the unit's customer satisfaction goals are met. Additionally, exemplary
service on the part of individual employees can be rewarded on an ad hoc basis. Management
incentives do not have to result in incremental expenditures; a reallocation of current
incentives will suffice. For example, if 100% of a manager's bonus is dependent upon

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meeting operational and sales goals, the mix could be changed to include customer
satisfaction goals.

c. Recognition of Employees Who Contribute to Customers' Satisfaction: This is an


inexpensive way to foster customer satisfaction. The keys to success are: Making sure that all
employees are aware of why a particular employee is being recognized, Making sure that
each employee being recognized is worthy of recognition.

d. Identification, Measurement, and Tracking of Operational Variables Which Drive


Satisfaction Scores: The results of a customer satisfaction survey need to be evaluated to
determine what needs to be improved. For example, a survey may find that customer-waiting
times need to be reduced. The next step should be to quantify actual customer waiting times,
and to set goals and strategies for reducing them. Goals should be as specific as possible. It is
better to say "we want to reduce wait times during peak periods from an average of twenty
minutes to fifteen minutes by the end of June," than to say "we need to reduce customer
waiting times."

e. Customer-Based Improvement Goals: This tie directly to the previous point. Once you
have identified what needs to be improved, you need to develop a plan for improving each
identified area. Such plans need to be based on what customers really need, rather than what
management believes to be a good goal. Using the previous example, if customers really
desire wait times of ten minutes or less, having management dictate that wait times must be
reduced to fifteen minutes will have limited appeal with customers. You may need to do a
separate survey with customers to actually set appropriate goals. If this is not economically
feasible, at least talk to a number of customers and gain their input before setting a goal.

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f. Plans for Improving Operational Variables: Once you have established what needs to be
improved, and how much it needs to be improved, plans need to be developed to make
improvement happen. The keys to successful planning are to: Involve front-line employees
and management in the planning process, Make sure plans are specific, and evaluate the
success of plans once they have been put into place. Measuring actual improvement in
operations and customer satisfaction does this.

g. Incorporation of Customer Satisfaction Skills into Employee Training Programs:


Employee training programs should be modified to include: A description of the
importance of customer satisfaction to the company, Descriptions of what keeps customers
satisfied, A description of customer satisfaction measurement programs, recognition
programs, and incentive programs, Specific employee-performance expectations with regard
to keeping customers satisfied.

h. Measurement of And Plans for Improvement of Employee Satisfaction: Unhappy


employees will have difficulty in keeping customers happy. You should consider measuring
the satisfaction levels of employees, and then developing action plans to improve employee
satisfaction.

i. Changes in Corporate Hiring Practices: Certain types of people will do a better job of
satisfying customers than will other types of people, regardless of the quality of training,
reward, and recognition programs. Once you have determined the types of employee
behaviors are important to customers, you should incorporate this knowledge into your hiring
practices.

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5. REAL FACT ABOUT MARUTI


Incorporated on February 24, 1981.
MOU signed on April 4, 1982.
License and JV agreement signed on Oct 2,1982.
Plants located at Gurgaon, Haryana.
Head office located at New Delhi.
Ownership - GOI 49.74%, SMC 50%,MEMBF 0.26%.
Rapid Expansion of Capacity: From 20,000 units (one plant) in 1983 to 3,50,000 units (three
plants) in 1999 Total Number of Employees : 5838 (as of March 2000)
Productivity: Vehicles per employee increased from 15 in 1984-85 to 70 in 1999-2000
Highest value added per employee in 1998-99 at Rs.23.6 lakhs 95.3% attendance 2.5 days of
Average Inventory
Suggestions Scheme & Quality circles: Cost savings of Rs. 131.69 Cr. through 52,054
Suggestions in 1999-2000
Innovative use of IT for increased efficiency, effectiveness of communication and reduction
of costs
6. SOME SUCCESS STORIES
VISION The leader in the Indian Automobile Industry, creating customer delight and
shareholders wealth; A pride of India.
VALUES

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CUSTOMER OBSESSION

FAST, FLEXIBLE & FAST MOVER

INNOVATION AND CREATIVITY

NETWORKING AND PARTNERSHIP

OPENNESS AND LEARNING

HR VISION Lead and Facilitate continuous change towards organizational excellence; create a
learning and vibrant organisation with high sense of pride amongst its members.
CULTURE BUILDING INITIATIVES SINCE INCEPTION Japanese Management
philosophy of Team Spirit

Common uniform

Open office

Common Canteen

Open Office Easy accessibility, Speedy

Communication and decision making

Morning Meetings

Morning Exercises

Management Committee Meetings every Tuesday

Single unaffiliated Union Excellent Industrial Relations scenario no loss of mandays


due to strike/lockout etc. in past 5 yrs.

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Maruti Udyog Sahyog Samiti a forum for Non-Unionised Staff Delayered


Organisation Structure Workers (Techn. / Asst.), Supervisors, Executives, Managers

FOCUS OF EFFECTIVE MANAGEMENT PROCESS SINCE INCEPTION

Top Driven HR MD is also Director HR

HRs role of a facilitator

Line managers as HR Managers

Year of the Customer HR Internal Customer Focus

Focus on Internal & External Customer

HR INITIATIVES Prepare MUL Strategic Business Plan-2000-2005; to achieve the Vision &
Goal Improve the performance Appraisal system - its process, skill & usage introduce a
Potential Appraisal System

Improvements in internal & external Training & its effective utilisation. Training need
identification Systematic career planning; Job Rotation; Empowerment; Job enrichment

Periodic communication meeting at various levels; Roll out of Vision

Raise cost consciousness for cost control and reduction

Exposure on Brand Strategy to all non-Marketing staff

Retention of Talent

INDUCTION & SUCCESSION

Transparent Recruitment & Selection process

Recruitment on an All India Basis no sectoral or region specific

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Recruitment of Best available Talent in the Country

- Engineers CAMPUS - IITs/RECs/Rorkee/HBTI


- ALL-INDIA TEST
- MBAs IIMs/XLRI
- CAs - Rank Holders
- Technicians - ITIs diploma holders after All
India Exam & Apprenticeship In MUL
Lateral Entry for Experienced Professionals
SUCCESSION PLANNING

Potential & Performance

Vacancy - based

TRAINING & DEVELOPMENT

Annual Training Plan - All Levels

Training customised to meet Organisational Objectives

Topics selected based on Vision, Values & Departmental

Feedback of Company-wide Managers

Competency Mapping to identify Individual Training Needs

Technical Training on latest Technologies abroad at SMC, Japan

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STRONG FOCUS ON TRAINING INITIATIVES


- Build a Learning Organisation
- Continuous Value Additions to Professional Skills
- Customised Training
- Training to the personnel of Business Partners
OVERSEAS TRAINING Training held in co-ordination with SMC, Japan and AOTS (Assoc.
for Overseas Tech. Scholarship) (Covered 1600 employees under the various schemes)
6 months SMC Training for Technicians - OJT in SMC, Japan (2 batches/yr of 50 each)
9 months Javada Training for Press, Tool & Die Specialists - Design & Maintenance
AOTS Managerial Training (4-10weeks) for Manager & above - Managerial Best Practices
AOTS Technical Training (3.5 to 6 months) for Supervisors & above - Technological
Knowhow
R & D Training (2 yrs.) - Research on new Technologies
APPRAISAL & REWARD
Appraisal

New Appraisal System based on KRAs & Targets

Review of Targets at regular Intervals

People Development an important KRA


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Reward

Promotions based on Performance

Productivity & Profit-linked Incentive

Schemes

Training including Long-term SMC Japan Trg.

Highest paid workforce in the Industry, if not the Country

LEADERSHIP

Vision, Value & Team Building Workshops for Top Management

CFT (Cross Functional Teams) of Managers for Major Thrust Areas

Managers sent to Joint Ventures to upgrade their practices to MUL standards

CAREER DESIGN
o

Performance & Potential based Appraisals

Fast Track Option for High-performers

Promotions after Managers Vacancy based

Interviews for promotions above Managers

Selection of Supervisors:
Performance / Attendance / Discipline record
Written Test & Interview

Job Rotation - including Inter-functional

OUTSOURCING HR

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Part of our Long-term Strategic Plan


Currently Trainers hired from outside
RETENTION & EMPLOYEE WELFARE
Employee Welfare
-

Residential Colonies for Employees Chakkarpur & Bhondsi

Hospitalisation Reimbursement on actuals without Ceiling

Vehicle Loans

Household Equipment Loans

House Building Advance

Annual Advance

MUL PF Trust for better Mgt., Service & speedy redress Proposed MUL Pension Scheme
Learning Opportunity - Benchmark in Auto Technology Professional Value addition through
Training Opportunity for foreign training at SMC, Japan Job Rotation & Job enrichment
EMPLOYEE ENGAGEMENT - Maruti Udyog Ltd. Employees Mutual
Benefit Fund Scheme

Managed by a 10-member Trust

Fixed Equity of 0.26%

Lock-in period of 3 years

Transferable Internally

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SUGGESTION SCHEME & QUALITY CIRCLES

For better quality and productivity

Through involvement of all employees and teamwork

During the year 1999-2000 :i) Suggestions Implemented - 52,054


ii) Cost Saving (in crores) - Rs. 131.69 Crores
iii) Number of QC Groups - 510
iv) QC Meetings held - 7189

Target for SS & QC

Suggestions Implemented - Prod. & VI - 1implmented/employee/month Other areas - 8.4


implemented/employee/month Cost Saving Rs. 165 crores (25%)increase for the Company QC
Meeting - 13 meetings/QC Gp./ Year Target - 34 marks / suggestion
Company-wide QC Groups (8-15 members per group)
Monthly QC Meetings on the First Wednesday each Month
Company-wide QC Competitions - Best Team sent to SMC
MDs lunch with Best QC Team & Best Suggestion Winner
SUGGESTION MERIT EVALUATION: 5 LEVELS (A to E) Criteria - Cost Saving (per
annum/one time)

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- Ingenuity of Suggestion (depth of study)


- Applicability (in work area/entire plant)
SUGGESTIONS: Monetary Reward Criteria - Idea
- Efforts
- Result : Cost reduction / Q Improvement / Productivity
Improvement
FUTURE CHALLENGES
- HR INITIATIVES Realigning Organization Culture Based On New Vision & Values
Objective Performance Management & Development System Transparent Job Rotation & Job
Enrichment Performance Linked Reward And Recognition System Career Planning & Promotion
Policy Revised Recruitment Policy Competency Mapping Strong Focus On Training Initiatives
Build A Learning Organization Continuous Value Addition To Professional Skill Customized
Training Training To The Personnel Of Business Partners Internal Communication

Union

Alignment Employee Involvement & Participation

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INDIAN AUTOMOBILES INDUSTRY & MUL

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INDIAN AUTOMOBILES INDUSTRY & MUL


Passenger car penetration in India expected to increase
The penetration level of passenger cars in India is just 7 cars per 1,000 Indians compared to 12 in
Sri Lanka / Pakistan and over 100 in Europe / US. We believe there is a good case for this to
improve going forward. Strong GDP growth of 8% in past 3 years has lead to higher disposable
incomes and new job opportunities in the high paying service segments like IT, BPO/ITES.
Increased competition in the financial sector and sharp decline in interest rates, have increased
car affordability. The demand for personal transport is very much there, with 25m two wheelers
sold in India over the last 5 years. Upgrades to entry level cars by this segment itself can unleash
a demand explosion.
Figure 1: Low car penetration in India

Excise duty cuts in compact segment


Prior to liberalization, cars were considered as a luxury item. It has taken 15 years for successive
governments to reduce the excise duty from 40% initially to the present 16%. We believe that the

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excise duty cuts announced in the last budget will provide the incremental boost to the models in
Mini and Compact segment, a stronghold of MUL.
Table 2: Excise duty cuts in compact segment

Leader in passenger car segment


MUL is the market leader in the passenger car segment in India. Inspite of extreme competition
in the passenger car segment, MULs share has always hovered between 45-50% over the last 5
years.
Table 3: Market share for MUL

It is even a stronger player in the Mini and Compact sub-segments of the passenger car segment
with its key brands- M800 (Mini) and Alto, Zen, WagonR and Swift (Compact) with a combined
market share of ~54% (as of end August 2006).
Table 4: Leader in Mini and Compact subsegment

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Every second car in the Mini and Compact segment taken together is a MUL vehicle. A strong
dealership network comprising 390 dealer outlets and 2096 service workshops have been the
chief reason for this recognition. Further MULs tie-up with several financial institutions has also
fuelled this growth. For e.g. it has a tie-up with SBI and Mahindra Finance which helps it to tap
rural markets, tie-up with Magma and Cholamandalam to tap the eastern and southern part of
India respectively.
Lowest wage ratio in the industry
MUL has successfully reduced the wage bill in the last 3 years. Its wage bill as a % of sales fell
from ~3.3% in FY04 to ~1.9% in FY06. This was achieved through VRS schemes (2001 and
2004) and linking of the compensation of workers with the productivity. Further, the productivity
has also improved in terms of hours required to produce a vehicle as can be seen below:
Figure 2: Index of hours required to produce a vehicle

A comparison of wage bill as a % of net sales reveals that it has the lowest ratio in the industry.
Table 5: Lowest wage ratio in the industry (%)

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Indigenization of parts
MUL has laid great emphasis on localization of components. It has a set up a plant which is
called Suzuki Power Train. Items like the foundry unit and the transmission unit which were
being imported from Japan earlier, are now are being made in India. New components are being
added every few months and the process of localization begins. The higher the localization, the
cost goes down because these are much cheaper than the imported components.
Most of its key models have reached nearly 100% localization levels.
Table 6: High localization level

Involvement of suppliers
The development of the auto-ancillary units in India was primarily initiated by MUL since its
inception in 1981. MUL has traditionally worked in close association with its vendors to
continuously localize imported parts. Along with its major vendors, MUL has now moved to tier2 vendors. MULs entire focus is to help them in cutting down their costs, helping them in better
layouts, productivity and improving productivity. MUL clubs the commodity purchases of its
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tier-1 and tier-2 suppliers with itself, thereby reducing their commodity cost. Streamlining its
supplier base, MUL has cut down its suppliers from 400 to ~225.
Highest margins in the auto industry
MUL has been continuously working to improve operational efficiencies since 2002-03.
Between FY02 and FY05 it successfully completed Challenge-30 and Challenge-50 programs
whereby the target was 30% cost reduction and 50% productivity improvement by focusing on
waste reduction, inventory management, and use of techniques like Kaizenetc. Also, MUL also
improved its product mix in favor of higher priced models in the last few years. It has succeeded
to a large extent in marketing the higher priced Alto as an entry point vehicle for new car buyers
rather than the lower priced M800.
Table 7: Improving product mix

Except for MUL all the other competitors have shown a margin drop in the last few years.
Further, margins of MUL are the highest in the industry
Table 8: Highest margin in the passenger car industry

MUL tops customer satisfaction surveys


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MUL models have a high level of customer satisfaction. This is borne by the 7th consecutive
years award from JD Power Survey for being the best in customer satisfaction. Even in the Total
Customer Satisfaction 2004 (TCS) study by TNS, MUL models were ranked highest; M800 for
entry compact; Zen for premium compact and Esteem for entry midsize. One important factor
contributing to this, is the large 2,100 Service centers spread across the breath of India along
with minute attention paid to quality by the company.
MUL has been constantly changing the looks of its cars to keep their appeal value intact. It has
also been very aggressive in taking price reductions and offering incentives to push sales. Such
high degree of customer satisfaction results in repeat purchases whereby an existing MUL owner
prefers to go back to MUL for his second purchase or upgrade of existing one.
The importance given to quality can also be seen in drop in warranty claims over the last 5 years.
Figure 3: Warranty claims ratio

Targeting international markets


MUL has shown a very strong growth in exports with the exports growing at a CAGR of ~30%
both in volume as well as value terms. The top 5 export markets were Algeria, Sri Lanka, UK,

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Chile and Denmark. These countries together contributed 67.3% of the total export sales during
FY06.
The company proposes to expand its export markets and is currently exploring the feasibility of a
foray into countries like Oman, Sudan and Nicaragua. In revenue terms as well, the export
revenues have increased from Rs.1,995m in FY02 to Rs.5,734m in FY06 which is a CAGR of
~30%.
Table 9: High growth in exports

Capacity expansion at just the correct time


New car manufacturing plant
The new plant Manesar commencing operations in Q3FY07 has an initial capacity of 100,000
cars, to be scaled up to 300,000 in three years, being set up with an investment of Rs.25bn. The
plant is being set up by a subsidiary company, Maruti Suzuki Automobiles India Ltd (MSAL) in
which MUL held 70% stake and the rest by Suzuki Motor Corporation (SMC). However, in a
recent development (April 2006), Maruti has approved the purchasing of the entire shareholding
of SMC and accordingly MUL now owns 100% in MSAL.
We believe that setting up a green field plant provides the opportunity for MUL to bring in stateof-the-art manufacturing facilities. Any expansion at its existing plant would have resulted in
disruption in production along with lower flexibility in setting up the new shop floor. Also, we

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believe that buying out the stake of SMC eliminates the issue of transfer pricing and intercompany transactions.
The key product segments in the new plant are:
Initially the plant will manufacture 100,000 Swifts (including the Diesel one).
The new car to be manufactured for the joint-venture between Nissan and Suzuki would also
be produced in this new plant. Half of the 100,000 cars will be manufactured for Nissan, the rest
sold locally.
New engine and transmission facility
A new plant manufacturing engines and transmission assemblies for cars would be set up with an
investment of Rs.25bn. The initial annual capacity of this facility will be 100,000 diesel engines,
20,000 petrol engines and 140,000 transmission assemblies. It would be gradually expanded in
line with the market demand. This facility will be under a joint venture company, renamed
Suzuki Powertrain India Ltd. (earlier called Suzuki Metal India Ltd. or SMIL). Suzuki Motor
Corporation holds 70% stake in Suzuki Powertrain India Ltd. while MUL holds the remaining
30%. This too will come on stream from early 2007. We believe that MUL would treat this jointventure company as any other existing supplier to it but with a greater control over the
production schedules and quality (since MUL has a stake of 30%).
New product launches (including a Diesel Swift) to further propel growth
MUL has consistently launched new models along with variants of its existing models in the
past.
A phenomenon witnessed in the automobile industry is that a new model launch by a renowned
player like MUL results in spurt in sales for that model thereby resulting in incremental income.
For e.g. Swift has sold ~ 61,000 units in the first year of its launch. Going forward MUL will be
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launching 5 new models in the next five years which principally would be in the Compact
segment. MUL is expected to launch the diesel version of its Swift in Q3FY07. We believe that
given the technological capability and enormous brand name enjoyed by MUL, the new models
would help in improving or at least maintaining market share and stay one step ahead of
competition.
To manufacture cars for Nissan-Suzuki joint-venture
MULs parent company viz. Suzuki and Nissan have entered into a tie-up whereby Nissan would
source cars manufactured at Maruti for exports to Europe. We believe that this is an expression
of confidence in MULs manufacturing competence made by 2 global giants. The new car would
be manufactured in the plant at Manesar. The car would be sold in export market under the
Nissan badge and volumes of ~50,000 units are expected initially in 2008-09.
Overall a very strong financial profile
The capex of Rs.65bn over FY07-10 will be funded mainly through internal accruals. We have
factored in a capex of Rs.34bn over the next 2 years. Of this, Rs.40bn is to be invested in
replacement of dies/fixtures, upgradation of its existing facilities at Gurgaon. Remaining Rs.25bn
are to be invested in the new plant at Manesar.
Table 10: Capex program

Debt-equity position is comfortable, a large proportion of investments are non-strategic in nature


(93% for FY 06) i.e. Rs.19bn providing additional financial flexibility.
Table 11: Strong financial profile

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Valuation
The final valuation of MUL comes to ~Rs.1,068/share. According to our estimates, MUL likely
to achieve earning growth of 16.5% and 10.9% in FY07 and FY08, respectively. Our DCF values
MUL at Rs.1,068 on a standalone basis. We expect that the company would deliver basic EPS of
Rs.48.0 and Rs.53.2 in FY07 and FY08, a compounded growth of ~13.7% for the next two years.
At the current price of Rs.972, the stock is quoting at 20.3x FY07E EPS of Rs.48.0 and 18.3x
FY08E EPS of Rs.53.2.
Table 12: Discounted cash flow (Per Share)

Sensitivity analysis
Table 13: Sensitivity analysis

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Relative valuation
On a P/E basis, MUL commands a premium over Mahindra & Mahindra as well as Tata Motors.
The reason could be on account of leadership in passenger car industry, highest operating
margins and the MUL brand.
Table 14: Relative valuation

Relative valuation also gives a price range for MUL between Rs.858-Rs.1,015/share. We have
used Mahindra & Mahindra and Tata Motors as MULs key competitors. Based on latest Trial
Twelve Months (TTM), we have tried to use relative valuation ratios like P/E, EV/EBITDA and
EV/Sales.
Passenger cars segment extremely competitive
The passenger car segment in India is extremely competitive. Along with MUL, the other strong
players are TML, Hyundai, Ford India, Honda Siel cars, General Motors India etc. The table
below gives a snapshot of the key models of MUL and the competitive models of its competitors.

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Table 15: Extreme competition

The cheapest Indian car planned for launch in 2008


MULs key competitor Tata Motors is planning to launch the cheapest car in India, expected
launched targeted in 2008.
Priced at around Rs.100,000 it is expected to be extremely attractive to the Indian consumer
particularly the younger families. The styling and design of the car have been completed and
prototypes are being tested within the plant. It will be a rear-engine, 4-5 seat, 4-door car with
about a 30 horsepower engine.
MUL currently has its M800 which is the lone offering in the Mini segment with no competitor
for the last 25 years.
We believe that the competitive car from TML would create a newer segment at a price point
which is lower than M800.
Further, the new car from TML would be a diesel offering which would be a further upside for
the new car. We believe that this car would pull away volumes from the motorcycle segment

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(which is a total market of ~8m) and also the first time car buyer which principally go to MUL as
of today.
Absence of a successful product on the Diesel side
Out of the total cars sold in India, around 20-22% runs on diesel. This proportion is expected to
increase in the future as the petroleum prices keep on increasing everyday. However, the inherent
cost benefit of around Rs.14/litre between petrol and diesel coupled with the fact that diesel cars
generally give higher mileage has resulted in some of the new car buyers being attracted to
diesel.
MUL traditionally has been extremely strong in the petrol technology (due to its association with
Suzuki). It did have a few models with diesel option Zen and Esteem in the past. However, they
have not been that successful and currently MUL does not sell any diesel vehicle.
Rising raw material prices
The principal raw materials for the company are steel, non-ferrous metals, rubber and
engineering plastics. These prices have increased in the last 12-18 months as reflected by the
rising raw material to sales revenue ratio trend in the last 2 years.
Table 16: Rising raw material prices

The proportion of domestic and imported steel was 20:80. As of date, this proportion has become
50:50. This proportion is expected to increase in the future in favor of domestic steel.
Company profile

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Maruti Udyog Ltd. (MUL), a subsidiary of Suzuki Motor Corporation of Japan, has been the
leader of the Indian car market for about two decades. Its manufacturing plant, located some 25
Km south of New Delhi in Gurgaon, has an installed capacity of 3,50,000 units per annum, with
a capability to produce about half a million vehicles. The company has a portfolio of 11 brands,
including Maruti 800, premium small car Zen, Swift, international brands Alto and WagonR, offroader Gypsy, mid-size Esteem, luxury car Baleno, the MPV Omni, Versa and Luxury SUV
Grand Vitara XL7.
In recent years, MUL has made major strides towards its goal of becoming Suzuki Motor
Corporations R and D hub for Asia.
It has introduced upgraded versions of WagonR, Zen and Esteem, completely designed and styled
in-house.
Table 17: Milestones

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Passenger car industry in India


The passenger vehicle industry in India is sub-divided into passenger cars, utility vehicles and
multi-purpose vehicles.
The passenger car segment dominates the passenger vehicle industry with ~77% share (for
FY06). The overall industry has grown by ~14% CAGR for the last 4 years.
Table 18: Sub segment in passenger vehicle industry

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The passenger car industry in India can be divided into 6 sub-segments based on the length of the
car Mini (Upto 3,400mm), Compact (3,401-4,000mm), Mid-size (4,001-4,500mm), Executive
(4,501-4,700mm), Premium (4,701-5,000mm) and Luxury (5,001mm and above). Compact and
Mid-size sub-segments dominate the passenger car industry by contributing to around 88% of the
total domestic sales (cumulative figures between April to August 2006).
Figure 4: Compact and mid-size dominate the passeneger car industry in India

The top 2 players in each of the sub-segments along with their key brands and market share (as
of end August 2006).
Table 19: Key players in the passenger vehicle industry

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FINANCIALS OF MUL

The top line (revenues) has increased by 15.5% for H1FY07 vis--vis H1FY06. This growth has
been led by volume growth principally in the Compact sub-segment of the passenger car
segment. While exports showed a decline, multi-purpose vehicles showed a good growth of
~16%. The overall volume growth for the company in H1FY07 stood at 15.3% vis--vis
H1FY06.
The operating profit (EBITDA) for H1FY07 showed a jump of 35.7% vis--vis same period of
the earlier year. The EBITDA margins for H1FY07 have expanded to 18.3% as compared to
15.6% for H1FY06. Average vehicle realization of the Company was flat at around Rs2.15 lac
during H1FY07 vis--vis H1FY06. However, the margins showed improvement due to tighter
control over the raw material costs. Lower interest and depreciation costs resulted in net margins
for H1FY07 standing at 11.3% vis--vis 8.6% for H1FY06.
Table 20: H1FY07 volume numbers and financial discussion

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Table 21: Quarter history

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MULS MANAGEMENT

Page | 41

MULS MANAGEMENT

MULs inputs primarily comprise raw materials and purchased components. Only a small amount
of raw material and components consumed are imported and a much larger portion is purchased
from the sources within India.
Raw Material Suppliers
The raw materials used in the manufacturing process primarily comprise steel coils and paints. In
recent years, MUL is increasingly trying to localize the purchases of steel coils with a view to
reduce cost. Earlier MUL used to follow the tender system for the purchase of steel. Under this
system, specifications were advertised and accept the lowest price offered by a supplier who
could meet the specifications. In 2001 MUL moved to the quotation system which gives them the
flexibility to renegotiate the prices once an offer is submitted. Standard purchase orders are
issued covering a period of six months for purchase of steel from foreign suppliers for Indian
supplier the period extends up to one year. .
At MUL the role of the vendors has gradually evolved from tactical to strategically where the
vendors work in close coordination with MUL to meet our long-term goals in terms of:
Component development;
Quality;
Delivery; and
Cost control.
In order to improve quality and generate economies of scale, MUL has reduced the number of
vendors of components in India from 370 as of March 31, 2000 to about 100 as in 2005.

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In case of repair and replacements, costs of defective components supplied are borne by the
vendor.
Delivery by Vendors
MUL has a delivery instruction system that provides details of the component requirements for
every 15 days, across the different variants of the various models, to the vendors. Vendors are
linked to the MUL through the Internet-based information network, which maintains online
information regarding order status and delivery instructions. These has helped in reducing both
inventory levels and lead times required for the supply of various components and subassemblies, and enable the vendors to more efficiently plan and dispatch their products.
Vendors located within a radius of 100 kilometers from the manufacturing facility supply the
majority of the components. This has enabled the vendors to eliminate packaging and supply
components directly to the assembly line.
Reduction of Vendor Costs
In some of the major vendors MUL has implemented the MPS, which focuses on the elimination
of wasteful activities in their manufacturing processes. Vendors are helped in areas such as
improving their productivity, reducing the number of their components that are rejected, reducing
materials handling, improving their yield from materials, and reducing their inventories. This
helps reduce their costs of production, and also reduces the costs of the components required.
In addition the work is going on to integrate the vendors into the worldwide purchase system, or
WWP, whereby a vendor may become the sole supplier for a Suzuki product in several countries
including India. This would generate economies of scale for the vendor that will also result in the
reduction of the costs.

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Vendor Quality Control


Quality management system such as ISO 9000/ QS 9000 forms the basis for producing a
quality product. To assist small and medium vendors in achieving ISO 9000 certification, in 1995
MUL adopted a cluster approach wherein vendors are grouped together, are trained in quality
management and are assisted in obtaining ISO 9000 certification. This cluster approach was
extended to helping vendors attain QS 9000 certification. Periodic vendor quality system audits
are conduct in order to ensure that quality standards are sustained.
Imported components
Imported components are mainly purchase from Suzuki
Sales network
Dealers: MUL has the largest network of dealers amongst car manufacturers in India. As of
March 31, 2003, dealers had employed more than 3,500 sales executives. Sales network is linked
with the MUL through the secure extranet-based information network. The sales of spares,
accessories and Automobile-related services such as insurance and finance serve as additional
sources of revenue for the dealers. The availability of these related products and services at sales
outlets also helps to attract customers to the outlets and promotes sales of the cars.
Agreements with our dealers MUL dealers provide services to customers such as pre-delivery
inspection of vehicles, sales of cars, after sales service, supply of spare parts and other services
that promote sales of cars within
the territory for which they are appointed. Dealers are required to maintain their outlets in
accordance with thespecifications and employ well-trained sales staff. Agreements with the
dealers are usually of five years. These agreements are generally renewable for successive terms
of three years, by mutual agreement.
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Enhancing dealer performance: The performance of the dealers is followed and improvements
are suggested frequently. In order to assist the dealers in enhancing their performance and
capabilities, MUL has introduced a concept of Balanced Scorecard. Using this tool, the
performance of a dealership in several areas of operations, including sales, service, spares and
accessories, financial management and management systems is measured.
Dealers who perform well on the Balanced Scorecard are reward with a cash payment at the
end of the fiscal year. The Balanced Scorecard serves as an effective incentive for dealers to
enhance their performance.
After-sales Service Network
There are more than 400 Maruti dealer workshops and more than 1,500 Maruti Authorized
Service Stations, or MASSs, covering more than 900 cities in India. In addition, 24-hour mobile
service is also offered under the brand Maruti On-road Service. As a benchmark for dealers
with respect to service quality and infrastructure facilities, MUL has launched service stations
under the brand Maruti Service Masters, or MSMs. MUL also has service stations on highways
in India under the brand Express Service Stations. To promote sales of spare parts and the
availability of high quality, reliable spare parts for its products, spares are sold under the brand
name Maruti Genuine Parts, or MGP. These are distributed through the dealer network and
through the authorized sellers of the spare parts. Many of the MASSs are at remote locations
where MUL do not have dealers. In order to increase the penetration, in terms of sales volumes,
of its products in these remote areas, some of the MASSs are integrate into the sales process in
order to increase sales of the cars and related products and services such as spares and
accessories, insurance and financing
Information Technology
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The largest automobile manufacturer in India, Maruti Udtog Ltd. (a division of Maruti Suzuki)
produces half a million cars annually. But in the late 1990s, the company was facing rapid
technological obsolescence; spiraling IT and support costs; increased pressure on recruiting
skilled manpower and reducing high turnover; non-standard operational IT service levels and an
unstructured approach to problem management.
Maruti Udyog, at that time, was performing all IT support services in-house; Because of the
turnover, service levels were poor and not cost-effective. Maintaining people resources for so
many different things -- hardware,
software, networking, and systems software was the greatest problem for the MUL.
Outsourcing IT support and management to Compaq Computer Corporation (now known as HP)
turned the troubled situation into a highly successful operation. Compaq, at that time, had a
strong presence in India with a wealth of IT skilled employees
Today, Maruti Udyog possesses 51 percent of market share in its domestic market, uses worldclass best practices and program management, has greatly improved customer satisfaction and
achieves a higher return on investment (ROI) on its IT investments.
Lesson: Manufacturing companies often need a wide range of software and hardware skilled IT
personnel to manage and support their infrastructure. Outsourcing IT processes is the most costeffective means of handling the costly turnover.
Until 1993, MUL's IS environment was predominantly mainframe centric. In that year, the
company decided to move to an open environment. It drew up a plan that detailed the new
infrastructure and the applications to be run on the network. At the very outset, it decided to go
for fiber optic cabling, even though fiber was just introduced in India at that time. This gives

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them the fiber's reliability and scalability. They now have an infrastructure that can scale to
support applications which can be added in future.
Before a car is produced, the systems at the shop floor connect to a central database and query it
about the car model that needs to be manufactured. The response from the database takes less
than a few seconds, so that the assembly line can start running. For this, two critical issues taken
care of are : Reliability and throughput.
To ensure reliability, MUL chose a meshed network, so that if one link goes down, the shop floor
and the data center can still communicate through an alternative route. The entire infrastructure is
geared towards ensuring that the shop floor can run in real time.
MUL has also implemented an enterprise management system, called Unicenter TNG." The
software monitors all links. If something goes down, an automatic complaint is logged into
MUL's internal call center.
The IT applications MUL runs are mostly enterprise wide. Some of the critical or major
applications include materials for making and dispatching cars and spares to distributors. MUL
distributors, who interact with the company daily, also use a Web-based application to log in
their requirements for new cars, spares and accessories.
They can also track the status of their order. In fact, the system is being expanded to offer
finance, insurance and other intangibles to customers. All these applications run on the Internet
and connect to the databases in Gurgaon.
Dealer Management System (DMS)
Very recently Maruti Udyog Limited has joined hands with Wipro Infotech, the Asia Pacific and
Middle East information technology arm of Wipro Limited, for a nationwide Dealer

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Management System (DMS), which is the first of its kind information network system
implementation in India.
The system will enable the 450 dealerships of Maruti across India to access updated information
from the car manufacturer and a real time view of their operational processes for better
efficiencies.
The system will assist dealerships in customer retention and help build lasting relationships. As
far as the customers are concerned, they will benefit from the single face of Maruti irrespective
of the dealership. It will help raise customer service levels and enhance the quality of
management at dealerships, a company release said.
The system, apart from dealer integration with a central database, will also serve as a knowledge
repository from where dealerships can access information on customer schemes, product features
and price lists. Wipro, as the core IT partner with Maruti, would be responsible for
implementation, networking, training and sustenance of the dealer management system. The
system aims at issuing alerts to dealerships whenever they are falling short of performance norms
in various areas like level of customer complaints, handling and sales.
Maruti Computes
MUL's desktop applications run on the Citrix MetaFrame platform A need to replace old PCs
regularly was the key reason behind choosing MetaFrame. Most PCs in Maruti were bought
during the grand systems overhaul in 1993. Gradually, need arises for more memory and faster
processors.
As a result demands for replacements and upgrades were there. That's when MUL started
evaluating the need for thin client technology for desktop applications. Another factor that
influenced the deployment of Citrix's technology was the need to control users' access to
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desktops. In a normal PC environment, users tend to install many unauthorized applications via
CD-ROMs, floppies and even Internet downloads. Maruti faced a similar problem.
All these factors led to the MetaFrame deployment. The MetaFrame environment also enables:
An executive to sit on any PC and access her/his personal desktop with all her/his necessary
applications.
However, not all applications in MUL are supported on the MetaFrame platform like HR
applications for salary, reimbursements and the like, which are hosted in a client-server
environment. All these applications are ported onto the NFuse server . Even the developers' team
accesses its applications through NFuse.
The data story
MUL sure takes its business data seriously. The total data today hovers around the 2-Terabyte
mark. The storage infrastructure is based partly on SAN (Storage Area Network) and partly on
DAS (Direct Attached Storage). The company has a very good DR (Disaster Recovery) strategy.
There are two DR sites. The first one is 1.5 km from the central site and is connected through a
direct fiber link. MUL has a regular tape library backup at this site, managed by software from
Veritas. Plus, backups taken are randomly checked to ensure the data is readable off the tapes.
For mission-critical applications, like shop floor and dispatch applications, MUL has another DR
site in a separate location where there are full-fledged hot servers in place and the data is kept
synchronized using logs. So in case of a disaster, the data can be recovered up to the last log
applied. This way users don't suffer a long downtime.
Internet Approach:
For MUL the Internet link is highly critical. The entire business depends on transactions made
with distributors and suppliers. If MUL losse connectivity, the entire business would grind to a
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halt because of the absence of a manual ordering system. This is why MUL has invested in fully
redundant connectivity solution, which consists of a copper link (leased line) from BSNL, and an
RF (Radio Frequency) link from VSNL.
The key to security
MUL has a comprehensive corporate IT security policy in place. For example, if a new server
were to be installed, it would go through specified security checks and audits. The company has
already put major security components, including firewalls, virus scanners, etc in place.
One key aspect of the security policy is the provision for a security audit done by a third party.
This involves two key steps. First, the outside agency runs surprise checks on users' desktops,
checking for adherence to the security policy or instances of illegal software installed in violation
of the policy. The second step constitutes attack and penetration tests.
Engineers from the external agency sit outsides the MUL network. Armed with a few IP
addresses of the servers lying inside, they try to penetrate the network. This exercise helps them
in detecting the loopholes.
Customer Relationship Management
MUL has a comprehensive database of customers, the Customer Relationship Management,
which provides centralized access to dealers and MASSs and enables more efficient and
integrated management of sales and service network.
The future
Since the time Suzuki took a majority stake in the company, the IT divisions in MUL and the
Japanese auto major have been brought in greater alignment with each other.

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MUL has always benchmarked itself against Suzuki across various corporate parameters, like
basic frameworks and goals and the IT system is no exception. Hence continuous improvements
are going on taking the best of the facilities as the benchmark.

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Marketing
Marutis marketing objective is to continually offer the customer new products and services that:
reduce the customers cost of ownership of our cars; and
Anticipate and address the customers needs and preferences in all aspects and stages of car
ownership, to provide what MUL refer to as the 360 degree customer experience.
MUL has been aggressively cutting prices of its models since the beginning of the year. It began
the year by slashing the price of Esteem's diesel version followed by a by the reduction on the
premium segment Baleno.
Then the mid sized Versa's price was slashed, Alto's price tag was then pruned putting its base
variant at par with the AC version of M800.
The rationale behind the price cuts is the focus on offering new upgraded vehicles at a low price.
Warranty and Extended Warranty Program
MUL offer a two-year warranty on all the vehicles at the time of sale. The dealers are required to
address any claim made by a customer, in accordance with practices and procedures prescribed
by MUL, under the provisions of the warranty in force at that time. The dealers subsequently
claim the warranty cost from MUL.MUL analyze warranty claims from dealers and either claim
the cost from the vendors, in the case of defective components, or bear the cost ourselves, in the
case of manufacturing defects.
MUL also offers an extended paid-warranty program marketed under the brand, Forever Yours
for the third and fourth year after purchase. The extended warranty program is intended to
maintain the dealers contact with the customer and increase the revenue generated from sale of
spares, accessories, and automobile-related services. An effort is made during the period of the

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extended warranty to encourage the customer to exchange his existing Maruti car for a new
Maruti car, or upgrade to a new Maruti car.
True Value Solutions Limited (TVSL)
TVSL was incorporated on January 14, 2002 as a wholly owned subsidiary of Maruti with an
authorized capital of Rs. 5 million. It obtained the certificate to commence business on May 1,
2002 in NCT of Delhi and Haryana. TVSL provides value-added services to owners and users of
motor vehicles on matters relating to manpower services with regard to recruitment, training and
development. The company also intends to promote the business in the areas of pre-owned cars,
lease and fleet management, finance and insurance. These services include compliance with
predefined business processes at the dealership, continuous training of dealer staff in order to
ensure quality of operation to ultimately achieve the business objectives of TVSL.
Research and Development
R&D activities of Maruti have the twin objectives of reducing product costs by developing
capabilities of local vendors and becoming a regional R&D hub for all Suzuki operations.
The company has adopted a focused model cost reduction technique. Maruti has been
continuously engaging in Value Analysis/Value Engineering (VA/VE) activities across its
operations. Some areas in which MUL carry out research and development are localization and
development of components, cost reduction measures such as VA/VE, development of alternate
fuel (CNG and LPG) vehicles, performance-benchmarking to certain parameters such as noise,
ride handling and braking and development of power-steering for certain models. MUL regularly
upgrade its models and also launch variants by adding features developed through research and
development.
All this has resulted in significant reduction in the investment required for the modifications.
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As part of Suzukis plans to make Maruti its research and development center for cars in Asia
(outside Japan), it is expected to have full model change capability by fiscal 2007.
Manufacturing
The core focus areas of Marutis manufacturing division are:
Benchmarking against global standards so as to efficiently manufacture quality products.
Building a strong and motivated work force by emphasizing safety, education and continuous
improvement of the manufacturing capabilities and those of the vendors.
MUL Manufacturing Facility and Process
Facility
Marutis manufacturing facility comprises three integrated plants with flexible assembly lines
located at Gurgaon in the northern state of Haryana. The first plant was set up in fiscal 1984 with
an initial installed capacity to produce 20,000 vehicles per annum, which was augmented to
130,000 by fiscal 1991. Installed capacity was further increased with the second plant becoming
operational in fiscal 1995 to 200,000 vehicles per year. In fiscal 1996, with capacity increases in
each plant, installed capacity increased to 250,000. With the third plant becoming operational in
March 1999, installed capacity increased to 350,000 vehicles per year, which is the highest
among passenger car manufacturers in India and among the passenger car manufacturing
facilities of Suzukis subsidiaries outside Japan. 24 September 2004, Suzuki Motors and Maruti
decided to invest 32.7 billion rupees over the next five years to set up a new car assembly unit, a
diesel engine manufacturing unit and for increasing automation and efficiencies in Maruti's
current facilities. Maruti Udyog would hold a 70 per cent stake in the new joint venture, under
which a car assembly unit is being set up; Suzuki would hold the balance. The new unit, which
would make high-end cars, is being set up in Manesar, Gurgaon, and would have a capacity to
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produce 250,000 units a year. This plant will receive an investment of 15.2 billion rupees, which
is expected to begin its production by the end of 2006. The proposed diesel engine unit would be
set up under Suzuki Metals India, an existing 49:51 joint venture between Maruti and Suzuki,
respectively. The engine plant will have a capacity of 300,000 diesel engines and 20,000 petrol
engines. It will also make up to 140,000 transmission assemblies. The plant will supply diesel
engines to Maruti as well as export engines to Suzuki subsidiaries in Europe and Asia. This plant,
which will be set up at a cost of 17.5 billion rupees, will begin production by the end of 2006.
Suzuki would undertake a feasibility study to set up a gearbox production unit in India. This unit
would be set up under Suzuki Metals India, which is would be renamed as Suzuki Engineering
India. Marutis facility has advanced engineering capability and is upgraded on an ongoing basis
to improve productivity and quality. Maruti have 17 manufacturing shops and are capable of
producing more than 50 variants of the nine basic models manufactured, with different
specifications, within the same day. This is possible due to our information technology-enabled
vehicle build sequence system and vehicle tracking system.
Under the vehicle build sequence system, at the production planning stage, requirements are
communicated via our intranet (internally) and our extranet (to vendors) in advance as to the
time and place for delivery of components and other production inputs in order to fulfill
production targets. Our vehicle tracking system monitors and records the implementation of the
planning during production.
Utilities
Maruti do not have to rely on outside sources of power as they have a 60-megawatt gas turbine
captive power plant, which has multi-fuel capability. They also have our own reverse osmosis
water treatment plant and effluent and sewage treatment plant.
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Marutis Manufacturing Paradigm


Maruti has adopted a target control and PDCA approach as the underlying theme of all its
processes.
PDCA Constitutes:
Planning by setting a target and time-line, dividing into action plan with value to each
factor/element.
Doing the standardized operation as decided.
Hecking through gap analysis to check whether the operation is really giving the desired results
Acting to freeze if effective or correct.
Productivity
Improving productivity is an ongoing effort at Maruti, through the Maruti production system, or
MPS, which is derived from the Suzuki production system, and focuses on elimination of
wasteful activities taking place during manufacturing processes. In addition to MPS activities, inhouse automation, increasing utilization of production lines, outsourcing of low value-addition
jobs and reduction in materials handling have contributed to improvements in the productivity of
there employees and the efficiency of there operations. As shown in the table below, Marutis
employee productivity, measured as the ratio of production volume in a
fiscal year to the number of its permanent employees at the end of the fiscal year, increased by
approximately 79% from fiscal 1995 to fiscal 2002.
Conservation of energy
Maurti had followed the three principles of Reduce, Reuse and Recycle for conserving energy.
Between fiscal 1997 and fiscal 2004, they had reduced the consumption of electricity measured
as the ratio of kilowatt hours of power consumed to the number of vehicles produced, by
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approximately 35%. This was achieved by using energy saving lights and natural light, and also
the efficient usage of other electrical appliances, thus reducing wastage. In the same period,
reducing the consumption of water, measured as the ratio of the volume of water consumed to
the number of vehicles manufactured, by approximately 70%. This is achieved through the
recycling of waste water in their water treatment plant and effluent and sewage treatment plant.
Fiscal Year
1995
2001
2007

No. of Permanent
Employees
4840
5770
6627

Production Volume
206330
350376
458108

Production Vol Per


Employee
43
61
77

Quality
They had produce high quality products, some of which Maruti had been exporting to various
countries including the Netherlands, Italy, Germany, the United Kingdom and Switzerland.
Maruti was certified with ISO: 9001:2000 in 2001 and aim to achieve the TS-16949 certification.
In addition, they had made the following improvements in terms of producing defect-free
products:
DFC OK: Their Direct Final Check OK, or DFC OK percentage, which signifies the percentage
of vehicles that pass through the inspection stages as defect-free, improved from approximately
77% in March 2002 to approximately 90% in March2004.
Reduction in rejection: Their in-process rejection cost per vehicle, computed as the ratio of (1)
the cost of components rejected due to defects arising during our production process, to (2) the
number of vehicles sold, declined by approximately 65% from fiscal 2002 to fiscal 2004.
In house warranty: Their in-house warranty costs per vehicle, computed as the ratio of (1) the
aggregate cost of components incurred by us to service warranty claims arising from operational

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defects in our manufacturing lines, to (2) the numbers of vehicles sold in the fiscal year, declined
by approximately 85% between fiscal 2002 and fiscal 2004.
A new feather was added recently in Marutis cap in the field of quality when the Quality
Management System of its Press Shop & associated functions got certification for conformance
to the requirements of TS16949:2002 standard.
Suzuki Quality Management System
Based on a method adopted by Suzuki at its manufacturing facilities, the quality of a vehicle
dispatched from their facility is measured through a quality index audit on a daily basis. The
quality index is a relative measure of quality based on evaluation of vehicles selected at random
on a daily basis. In addition, Maruti had recently adopted Suzukis global customer audit index,
in order to provide a more customer-oriented focus to the entire organization, and channel
resources towards customer complaints for rapid response.
Quality Improvement Initiatives
For quality control Maruti had recently introduced:
Tracking surveys and direct customer contact in order to better understand customer
satisfaction levels and customers problems.
Full-time task forces for improvement in initial quality study problems and departmental crossfunctional teams to work on defined problems with challenging targets.
Quality gates at various stages in order to raise alarms for correction and immediate action on
defects;
Fool-proofing, or Pokayoke in Japanese, which comprises checks conducted in order to prevent
defects arising from human error during the manufacturing process; A real-time feedback system,
cross-linked with overall targets.
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The Pica Pica system, which aligns the sequence of components and vehicles in order to
prevent incorrect fitting of components.
Kaizen
Maruti had adopted the Japanese management concept of Kaizen, or continuous improvement.
The Kaizen activities had resulted in the improvement of the in house capabilities. For example,
they had manufactured 25 multi-axis robots and 16 multi-spot welders. Group discussions among
employees in different departments are conducted on a monthly basis in order to discuss and
resolve problems relating to their areas of operation, an activity referred as quality circle activity.
Based on the belief that individuals contribute to improvement in growth, there has been a
suggestion scheme in which they promote participation of all employees at all levels. The
average number of suggestions made per employee has improved by approximately 35% in fiscal
2004, when suggestion received were more than 80,000, as compared to fiscal 2002. Some of the
other improvements as a result of the Kaizen process have been increased automation through
automated material transport system.
Manufacturing Process
The manufacturing process at Maruti facility is depicted below:
The production of a car at Maruti facility occurs in the following stages:
Press Shop: Press shop has five transfer presses and two blanking lines. In the press shop, steel
coils are cut to the required size and panels are prepared by pressing them between various die
sets such as doors, roofs and bonnet.
An anti-rust coat is applied at this stage.
Weld Shop: There are three welding shops with 122 six-axis robots and 25 in-house
manufactured two-to-four axis robots. In this shop, various press metal components
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manufactured in the previous stage are spot-welded together to form the body shell. Various parts
such as the floor panel, side panel, doors and bonnet are subassembled in this shop.
Subsequently, the assembled parts undergo final welding. The welded body is sent to the paint
shop through a conveyor.
Paint Shop: There are three paint shops, within one of which the final outer body is fully painted
by robots. In the paint shop, the body undergoes various pre-treatment and electro deposition
painting processes to provide a high corrosion resistance to the body. The car body is given an
intermediate or primer coat before applying the storing topcoat paint. The intermediate and the
final coat are applied by using automatic electrostatic spray-painting machines (micro bells) and
robots, followed by a baking process.
Assembly Shop: Maruti has highly flexible assembly lines, which can simultaneously handle a
large number of variants as well as adapt to sequence changes. The painted bodies proceed for
final assembly in three stages. The first stage is the trim line wherein various components such as
roof head lining, windshield glass and interior trim components are fitted. Thereafter, the car is
transferred to an overhead conveyor, the chassis line, wherein components such as the engine,
gearbox and front and rear axles are assembled on the underbody. The vehicle is then lowered to
the final line on its own wheels and here components and parts such as seats, the steering wheel
and the battery are fitted. The completely assembled vehicle finally rolls out of the assembly
lines to the final inspection stages.

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Machine and engine shops: Assembling and testing of engines takes place at engine shops and
carry out precision machining of engine components in our machine shops.
License agreements with Suzuki
Suzuki has several license agreements with Maruti under which it has, since Marutis inception:
Provides with technical know-how, assistance and information for the manufacture, sale and
after-sales service of various products and parts.
Supplied components to Marutis passenger cars.
Deputed technical personnel to their facility;
Help them to develop manufacturing processes and integrate certain Japanese management
practices such as kaizen, which is Japanese for continuous improvement, in various plants.
Training of personnel.

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Help them to develop and manage the supply chain for their products. Maruti in return had
agreed with Suzuki that amongst other things:
Maruti will not manufacture in, or export products covered by agreements with Suzuki to, any
territory except those permitted by Suzuki.
Maruti will not enter into agreements with any other manufacturer to sell any product or part
that competes with any product or part covered by the license agreements with Suzuki.
Maruti will not otherwise sell, distribute or promote the sale of any product that competes with
products covered by the license agreements with Suzuki. Suzuki will not be liable to Maruti for
damages arising from the use of the licensed information and disclaims responsibility for all
representations and warranties made by them with respect to the licensed products.

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FINANCIAL POLICIES OF MUL


The company`s performance during the 2007 year as compared with that during the previous
year is summarized below.
Gross Total income 151,823 137,271 Profit Before Tax 17,500 13,049 Provision
for Taxation 5,609 4,513 Profit After Tax 11,891 8,536 Balance brought forward 34,421 27,574
Profit Available for Appropriation 46,312 36,110 Appropriations: Debenture Redemption
Reserve 31 175 General Reserve 1,189 854 Proposed Dividend 1,011 578 Corporate Dividend
Tax 142 82 Balance carried forward to Balance Sheet 43,939 34,421.
FINANCIAL HIGHLIGHTS
The gross sales revenue (net of excise) of your company for the year was Rs. 124,814 million as
against Rs. 113,465 million in the previous year showing an impressive growth of 10 per cent.
Profit before tax (PBT) stood at Rs. 17,500 million against Rs. 13,049 million in the previous
year recording a jump of 34.1 per cent. Profit after tax (PAT) of Rs. 11,891 million showed a
growth of 39.3 per cent over the previous year figure of Rs. 8,536 million.
DIVIDEND
The board recommends a dividend of 70% (i.e. Rs. 3.50 per equity share of Rs. 5 each) for the
year ended 31st March, 2006, amounting to Rs. 1,011 million as against a dividend of 40%
amounting to Rs. 578 million paid for the year ended 31st March, 2005.
HIGHLIGHTS OF OPERATIONS

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Vehicle Business
For the year 2005-06, your company achieved highest ever sales of 5,27,038 vehicles in
passenger cars (including MPV) category and grew by 8.4% over 2004-05, which is higher than
the passenger car industry growth of 7.2%. In 2005-06, Maruti strengthened its leadership
position by increasing its market share to 55.1% from 54.5% in 2004-05. Maruti further
consolidated its position in highly competitive A 2 (premium compact) segment with the
introduction of the Swift.The Swift received an overwhelming response and sold over 61,200
units in the first year of its launch. In the A2 segment, Maruti achieved a growth of 23.5% as
against the industry growth of 15.5% resulting in an increase in its market share in this segment
from 54.7% to 58.5%. Alto, another model in A2 segment continued to be India`s largest selling
passenger car model and grew by 26% in 2005-06. In the A3 segment, Baleno grew by 30% in
2005-06.
Exports
In 2005-06 we exported 34,781 vehicles to 45 countries. The top five export markets were
Algeria with 6,638 units, Sri Lanka with 6,028 units, UK with 4,421 units, Chile with 3,115 units
and Denmark with 3,193 units. In October 2005, we crossed the cumulative export volume of
4,00,000 vehicles. In 2005-06, Maruti made efforts to develop new export markets such as
Sudan, Oman and Nicaragua.
Spares and Accessories Business
The Spare Parts and Accessories Business witnessed a growth of approximately 26% in 2005-06.
New initiatives were taken for improving the material flow in the Spare Parts Warehouse to
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efficiently manage the operations in view of the continuous growth in business. Spare Parts
operations at the company were rated as the best amongst all Suzuki Motor Corporation`s
overseas subsidiaries. Efficient management of the spare parts operations in the dealer network
continued to be a focus area and actions were taken for optimizing the spare parts inventory at
dealerships.The range of Maruti Genuine Accessories was also increased substantially during the
year.
NETWORK
The record sales performance was effected through Maruti`s vast dealership network.The new
car sales network grew from 325 outlets to 375 during the year. These outlets cover 227 cities
across the country. In addition to this, there are 187 Maruti True Value outlets spread across 131
cities, which are engaged in the sale, purchase and exchange of pre-owned cars. Maruti True
Value is the largest organised pre-owned car sales network in India. The service network has a
total of 2,096 service outlets, covering 1092 cities.
EXPANSION OF MANUFACTURING FACILITIES
New Car Manufacturing Plant:
Maruti`s new car manufacturing plant at Manesar, with a total investment of Rs. 1,542 crores and
capacity of 1,00,000 units with scope to scale it up to 2,50,000 units, is planned to be ready for
commercial production by the end of September, 2006.The civil and utilities work in the plant is
currently under progress and all major plant & machinery has been ordered. The plant was being
set up by a subsidiary company Maruti Suzuki Automobiles India Ltd. (MSAIL), in which
Maruti held 70% equity stake, the balance 30% being held by Suzuki Motor Corporation (SMC).
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The board of directors of Maruti in their meeting held on 13th April, 2006, approved the proposal
for purchasing the entire shareholding of SMC in the subsidiary and merging it with Maruti with
effect from 1st April, 2006. Maruti accordingly now own MSAIL 100% and the process of
merger has been initiated.
New Engine and Transmission Facility
The project is being implemented in an existing joint venture company, viz. Suzuki Powertrain
India Limited. The total capacity will be 3,00,000 diesel engines per annum to be developed in
phases.The initial annual capacity will be 1,00,000 diesel engines, 20,000 petrol engines and
1,40,000 transmission assemblies, for which the investment is expected to be Rs. 17,477
million.The commercial production is likely to begin in October, 2006.
SUBSIDIARY COMPANIES
A brief note on the profile of the subsidiary companies and their financial performance for 200506 is provided below:
a) Maruti Insurance Brokers Limited : The company is engaged in the business of
selling insurance policies to Maruti owners in a tie-up with National Insurance Company Ltd.The
company, in its fourth year of operation, i.e. year ended 31st March, 2006 recorded total revenue
of Rs. 506.50 million, profit before tax of Rs. 142.62 million and profit after tax of Rs. 92.38
million.The year saw a substantial growth in the number of policies issued - both new and
renewals.

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b) Maruti Insurance Distribution Services Limited : The company is engaged in the business
of selling insurance policies to Maruti owners in a tie-up with Bajaj Allianz General Insurance
Company Ltd. The company, in its third year of operation, i.e. year ended 31` March, 2006
recorded total revenue of Rs. 90.62 million, profit before tax of Rs. 27.20 million and profit after
tax of Rs. 18.03 million.
c) True Value Solutions Limited: The company has contributed towards smooth operation of
the business processes at the Maruti True Value outlets and supported the dealerships in
enhancing the sale of certified pre-owned cars under the brand `Maruti True Value`. It has earned
an income of Rs. 28.81 million with an expenditure of Rs. 28.42 million and profit before tax of
Rs. 0.39 million in the financial year 2005-06.The board hopes that the company shall continue
its high standard of service in the financial year 2006-07.
d) Maruti Insurance Agency Solutions Limited: The company is engaged in the business of
selling insurance polices to Maruti owners in a tie-up with New India Assurance Limited. In the
second year of operation i.e. year ended 31st March, 2006 the company has recorded a total
revenue of Rs. 92.64 million, profit before tax of Rs. 27.68 million and profit after tax of Rs.
18.28 million.
e) Maruti Insurance Agency Network Limited: The Company is engaged in the business of
selling insurance policies to Maruti owners in a tie-up with Royal Sundaram Alliance General
Insurance Company Limited. In the second year of operation the company has recorded a total
revenue of Rs. 107.5 million, profit before tax of Rs. 32.14 million and profit after tax of Rs.
21.24 million. In the current year, the above companies are focusing further on customer

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retention and enhancing volume through renewals. Along with enhancing volumes, the
endeavour to improve the service levels to dealers and customers through a process driven
approach and effective use of information technology systems will continue.
f) Maruti Suzuki Automobiles India Limited: The Company was incorporated on 13th April,
2005, in collaboration with Suzuki Motor Corporation (SMC) for setting up a new manufacturing
plant at Manesar, Haryana. During the year the construction activities for the car manufacturing
plant were under progress and hence there was no revenue from operations. During the year the
company incurred a loss before tax of Rs. 43.64 million and loss after tax of Rs.84.08 million.
CORPORATE SOCIAL RESPONSIBILITY
As a responsible corporate citizen Maruti is well conscious of its social commitments and
believes in partnerships for pursuing activities related to Corporate Social Responsibility. The
initiatives such as Institute of Driving Training and Research (IDTR), Driving Training Schools
and adoption of Industrial Training Institutes (ITIs) in Haryana are taken in partnership with
State/Central governments, Maruti dealers and suppliers. Detailed discussion on these initiatives
is presented in the Management Discussion and Analysis section of this report.
DIRECTORS
As per the Articles of Association of the company and relevant provisions of the Companies Act,
1956, Mr. ShinichiTakeuchi, Mr. Hirofumi Nagao and Mr. Manvinder Singh Banga are liable to
retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for
re-appointment. Mr. Kinji Saito ceased to be a director of the company with effect from 12th
April, 2006.The board had recorded its appreciation of the invaluable contribution made by him
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during his tenure. At the meeting of the board of directors held on 13th April, 2006, Mr. Shuji
Oishi was appointed a director designated as Director (Marketing & Sales) liable to retire by
rotation in the casual vacancy caused by the resignation of Mr. Kinji Saito. In accordance with
the relevant provisions of the Articles of Association of the company and the Companies Act,
1956, Mr. Shuji Oishi holds office till the ensuing Annual General Meeting.The company has
received a notice in respect of Mr. Shuji Oishi, from a member under Section 257 of the
Companies Act, 1956 proposing his appointment as director liable to retire by rotation. Mr. Amal
Ganguli had resigned with effect from 24th December, 2005, and Mr. Kalyan Bose was
appointed as a non-executive independent director in his place. Mr. Amal Ganguli was reappointed in place of Mr. Kalyan Bose with effect from 13th April, 2006, due to the latter`s
resignation.The board had recorded its appreciation of the invaluable contribution made by Mr.
Kalyan Bose during his tenure. In accordance with the relevant provisions of the Articles of
Association of the company and the Companies Act, 1956, Mr. Amal Ganguli holds office till the
ensuing Annual General Meeting.The company has received a notice in respect of Mr. Amal
Ganguli, from a member under Section 257 of the Companies Act, 1956, proposing his
appointment as director liable to retire by rotation. Dr. Surajit Mitra ceased to be a director of the
company with effect from 8th July, 2006.The board had recorded its appreciation of the
invaluable contribution made by him during his tenure. At the meeting of the board of directors
held on 27th July, 2006, Mr.Tsuneo Kobayashi was appointed as an additional director liable to
retire by rotation in place of Dr. Surajit Mitra. In accordance with the relevant provisions of the
Articles of Association of the company and the Companies Act, 1956, Mr.Tsuneo Kobayashi
holds office till the ensuing Annual General Meeting. The company has received notice in
respect of Mr.Tsuneo Kobayashi, from a member under Section 257 of the Companies Act, 1956,
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proposing his appointment as director liable to retire by rotation. Mr. Kumar Mangalam Birla
ceased to be a director of the company with effect from 27th July 2006.The board had recorded
its appreciation of his association during the tenure. At the meeting of the board of directors held
on 27th July, 2006, Mr. D. S. Brar was appointed as a non executive independent director liable
to retire by rotation in the casual vacancy caused by the resignation of Mr. Kumar Mangalam
Birla. In accordance with the relevant provisions of the Articles of Association of the company
and the Companies Act, 1956, Mr. D. S. Brar holds office till the ensuing Annual General
Meeting.The company has received notice in respect of Mr. D. S. Brar, from a member under
Section 257 of the Companies Act, 1956, proposing his appointment as director liable to retire by
rotation. All the above appointments/re-appointments are subject to the approval of the members
in the ensuing Annual General Meeting.The brief resume/details relating to directors who are to
be appointed/re-appointed as stipulated under Clause 49(IV)(G) of the listing agreement
executed with the stock exchanges are furnished in the explanatory statement of the notice of the
ensuing Annual General Meeting.
DIRECTORS` RESPONSIBILITY STATEMENT
As required under Section 217(2AA) of the Companies Act, 1956, your directors confirm
having:
a)

followed, in the preparation of the Annual Accounts, the applicable accounting

standards with proper explanation relating to material departures;


b)

selected such accounting policies and applied them consistently and made

judgement and estimates that are reasonable and prudent so as to give a true and fair

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view of the state of affairs of your company at the end of the financial year and of the
profit of your company for that period;
c)

taken proper and sufficient care for the maintenance of adequate accounting

records in accordance with the provisions of the Companies Act, 1956, for safeguarding
the assets of your company and for preventing and detecting fraud and other
irregularities; and
d)

Prepared the Annual Accounts on a going concern basis.

Conservation Of Energy, Technology Absorption, Foreign Exchange Earnings, and Outgo


A statement giving details of conservation of energy, technology absorption and foreign
exchange earnings and outgo in accordance with the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988, is annexed as Annexure A.
PERSONNEL
As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with the
Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars
of the employees are set out in Annexure B to the Directors` Report. However, as per the
provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the annual report is being sent
to all the shareholders of the company excluding the aforesaid information. Any shareholder
interested in obtaining such particulars may write to the Company Secretary at the Registered
Office of the company.
SUBSIDIARY COMPANIES ACCOUNTS
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In terms of approval granted by the Central Government under Section 212(8) of the Companies
Act, 1956, copy of the balance sheets, profit & loss accounts, reports of the board of directors
and auditors of the subsisting subsidiaries have not been attached with the balance sheet of the
company. These documents will be made available upon request by any member of the company
interested in obtaining the same. However, as directed by the Central Government, the financial
data of the subsidiaries has been furnished under `Details of Subsidiaries` forming part of the
annual report. Further, pursuant to Accounting Standard AS-21 issued by the Institute of
Chartered Accountants of India, Consolidated Financial Statements presented by the company
include financial information relating to its subsidiaries.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read
with Accounting Standard AS-23 on Accounting for Investments in Associates, your directors are
pleased to provide the audited Consolidated Financial Statements in the annual report.
CORPORATE GOVERNANCE
The company has complied with the Corporate Governance requirements, as stipulated under
Clause 49 of the Listing Agreement. A separate report on Corporate Governance, along with a
certificate from the auditors of the company confirming such compliance is annexed and forms
part of this Report.
AUDITORS AND AUDITORS REPORT

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The Auditors, M/s Price Waterhouse, Chartered Accountants, hold office until the conclusion of
the ensuing Annual General Meeting and are recommended for re-appointment. A certificate
from the auditors has been received to the effect that their re-appointment, if made, would be in
accordance with section 224(1B) of the Companies Act, 1956.
COST AUDITORS
In conformity with the directives of the Central Government, the company has appointed
M/s R.J. Goel & Co., Cost Accountants as the Cost Auditors of the company under Section 233B
of the Companies Act, 1956, for the audit of the cost accounts of the company for the motor
vehicles business for the year ended 31st March, 2006.
RESEARCH & DEVELOPMENT (R&D).
1. Specific areas in which R&D has been carried out by the company.
a) Building Full Model Change Capability:
* Strengthening of facility and skill enhancement in styling concept generation, model making
and designing including class A surfaces.
* Design development capability for front and rear facia, front and rear underbody, instrument
panel and backdoor.
* Emission testing (Diesel).
* ECU calibration & performance improvement.

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* Tuning of suspension RHB and EPS.


* Full vehicle NVH testing.
* Bumper - Pendulum testing for meeting GCC & Indian regulations. Airflow check for engine
& A/C performance & engine cooling.
* Durability testing of diesel vehicle & engine.
* External and internal parts safety & strength testing.
* Auto AC evaluation and duct development.
* High temperature and low temperature testing of vehicle systems.
STRUCTURAL VIBRATION ANALYSIS
Motoring & Friction Test bench, thermal shock rig & 2 EC Dynos setup for engine and emission
testing.
* Synchromesh/slant tester for transmission evaluation.
* Hydraulic actuators - 16 channel analyzer for strength and safety evaluation. PLM to manage
CAD, CAM and CAE data for in-house and also to collaborate with SMC and suppliers.
* DMU (virtual design review).
b) Interior fittings testing facility.
c) Design capability for components/systems for VA/VE.

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d) Alternate Fuel LPG :


2. Benefits derived as a result of above R&D
a) Launch of Swift.
b) Launch of Wagon R Primea.
c) Launch of Omni LPG BS3.
d) Launch of Alto with facelift.
e) Compliance with interior fitting regulation.
3. Future plan of action:
a) To upgrade R&D capabilities for total evaluation of products.
b) To develop capability for full model change.
c) Emphasis onVA/VE to cut down costs.
d) Carry out continuous upgradation of existing models.
e) Maximum localisation for achieving cost reduction in existing as well as new models.
f) Compliance to Bharat Stage IV emission norm and other new regulations.
4. Expenditure incurred on R & D (Rs. in Million)

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a. Capital 275 b. Recurring 396 c. Total 671 d. Total R&D expenditure as a 0.44% percentage of
total turnover Technology Absorption, Adaptation and Innovation
1. Efforts in brief made towards technology absorption, adaptation, and innovation:
a) Localisation, development and testing of parts for existing & new models. b) Capabilities
strengthened in component and vehicle evaluation, benchmarking and design optimization
c) Capabilities being further strengthened in area of alternative fuels like Diesel. CNG and S.PG.
d) VA/VE at time of design & localization to maximize cost benefit.
2. Benefits derived as a result of above efforts:
a) Indigenisation of various vehicle aggregates at lower costs
b) Improvement and upgradation of existing models for improved comfort, style and better value
for money.
c) Continuous reduction in product cost through VA/VE
d) Compliance with new regulations
3. Imported technology:
Technology imported:
a) Body control module for wiring
b) Auto AC
c) Air bags and control module
d) ABS

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Year of Import: 2005-06 Status of absorption:


Above technologies have been used in products introduced during the year.
C. Foreign Exchange Earnings and Outgo
(Cash Basis) (Rs. in Million) Foreign Exchange used: Equivalent
1. Raw materials and Components 14,596 2. Capital goods 566 3. Dies and Moulds,
Maintenance spares and other items 883 4. Royalty, interest, dividend and others 2,392 Foreign
Exchange earned : Equivalent 5,734

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FINDING & ANLAYSIS

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FINDING & ANLAYSIS


Maruti operate in a highly competitive environment and competitive pressure on its
business is likely to continue.
Since the delicensing of the passenger car industry by the GoI in 1993, a number of international
and domestic automobile manufacturers have begun manufacturing passenger cars in India and
have entered the Indian passenger car market. As a result, the Indian passenger car market has
become highly competitive. In a growing market, our overall market share in terms of number of
passenger cars sold in the Indian market had declined from 83.1% in fiscal 1998 to 57.6% in
fiscal 2001 and increased in fiscal 2007 to 54.6%. We are primarily focused on the A and B
segments (priced below Rs.500, 000) which are particularly price-sensitive and together
constituted more than 76% of sales volumes in the Indian passenger car market in fiscal 2007.
Maruti market share for passenger cars in the B segment (priced between Rs. 300,000 and Rs.
500,000), declined to 36.9% in fiscal 2001 from 67.3% in fiscal 1998. In fiscal 2006, Maruti
market share in the B segment was 40.3%. Maruti sales volumes in the combined A and B
segments comprised 95.4% of its domestic sales volumes in fiscal 2006.
Maruti are currently the only manufacturer that sells passenger cars in the A segment. In segment
B, we compete primarily with three other manufacturers. In the future, Maruti may also face
competition from other domestic and international manufacturers that enter the A and B
segments, including international manufacturers that have been successful in foreign markets for
cars of a similar size but are yet to enter these segments in India. Some of the international
manufacturers that have entered the Indian market in recent years have significantly greater
financial resources than us, which may enhance their ability to compete with Maruti. The C

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segment (priced between Rs. 500,000 and Rs. 1,000,000), which comprised 4.2% of our
domestic sales volumes in fiscal 2007, is significantly more fragmented than the A and B
segments and Maruti face competition from several manufacturers in this segment.
Maruti exported passenger cars comprising 3.9%, 3.1%, 2.6% and 6.9%, of Maruti total sales in
fiscal 2004, 2005, 2006, and the nine months ended December 31, 2007, respectively, to many
countries including countries in Western Europe. Maruti expect to continue to face competition
in the export markets, which may reduce demand for our products in those markets.
Since most of Maruti cars run on petrol, Maruti also compete with manufacturers of cars with
diesel engines. Maruti may also face competition from public transportation systems in India as
they improve.
Maruti compete primarily based on price, product performance, brand image, new model
launches, distribution network and the availability of value-added after sales services and after
sales support. If Maruti are unable to compete effectively based on these factors, competition
may reduce Maruti market share in individual segments of the passenger car market as well as
our overall market share in the future. Maruti expect competitive pressure on its business to
continue.
Maruti net profits have fluctuated during the last three fiscal years, including a net loss in fiscal
2001. While Maruti achieved profitable operations in fiscal 2002, Maruti may face a decline in
our profits or a reduction in sales volumes in the future due to intense competition.
Maruti are substantially dependent on the Maruti 800, which comprised 42.5% of our
domestic sales volumes in fiscal 2002.
At present, Maruti are the only manufacturer in India to produce passenger cars in the A segment
(priced below Rs.300,000), which contributed approximately 60% of Maruti domestic sales
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volumes in fiscal 2002. A substantial portion of our sales volumes is derived from the sales of the
Maruti 800 model, which is an A segment car. In fiscal 2002, Maruti 800 accounted for 42.5% of
their domestic sales volumes. We anticipate that the Maruti 800 will continue to dominate the
small car segment and account for a substantial portion of Maruti sales. Consequently, Maruti
future success will, to a large extent, depend on continued demand for and market acceptance of
the Maruti 800, company ability to enhance and develop the Maruti 800 to meet the evolving
needs of the customers, and ability, following the end of the product life cycle of the Maruti 800,
to find another model that will generate similar sales volumes in a similar price range. A change
in consumer preferences, technological change or other factors could reduce demand for the
Maruti 800, which could lead to a material adverse affect on Maruti business and results of
operations. In addition, a competitor could start manufacturing cars in the A segment to compete
with the Maruti 800.
Maruti could face competition from imports of new or pre-owned cars of various
categories, and from cars manufactured or assembled in India using imported components.
In April 2001, all quantitative restrictions on the import of automobiles into India were removed.
The GoI has, since March 2002, allowed automatic approvals for foreign equity ownership of up
to 100% in entities manufacturing automobiles and components in India. There remain relatively
high tariffs on imports of automobiles and components and other restrictions such as quantity
restrictions. Maruti expect that tariffs on the import of components, CKDs or CBUs will be
reduced in the near future in order to comply with Indias obligations under the World Trade
Organisation agreement. If tariffs on the import of new or pre-owned cars or components are
reduced, or other restrictions on such imports are removed, Maruti could face increased

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competition from automobile manufacturers that import new or pre-owned passenger cars to
India or manufacture passenger cars in India using imported components.
Maruti ability to reduce its cost of production and thereby increase our operational
efficiency is an essential part of their business strategy and Maruti cannot assure you that
its cost reduction measures will continue to achieve the operational efficiencies they have
done in the past.
Reducing Maruti cost of production is essential to their business strategy in a highly competitive
market environment. Maruti has significantly reduced costs through a combination of measures
such as increasing the use of locally manufactured components for their products, reducing the
cost of manufacturing and increasing productivity. In the past, these measures have allowed us
greater flexibility in reducing the prices of Maruti products in an increasingly competitive market
environment. Maruti measures to increase their operational efficiency may not yield similar
results in the future, which may adversely affect Marutis sales volumes or profit margins.
Suzuki has the ability to exercise significant control over Maruti and its interests may
conflict with your interests as a shareholder.
Suzuki owns 54.2% of our outstanding equity shares and is Maruti scontrolling shareholder. As
a result, Suzuki has the ability to exercise significant control over most matters requiring
approval by shareholders, including the election and removal of directors and other significant
corporate transactions. In addition, Suzuki could, by exercising its powers of control, delay or
defer a change in control of our Company or a change in our Companys capital structure, delay
or defer a merger, consolidation, takeover or other business combinations involving Maruti, or
discourage a potential acquirer from making a tender offer or otherwise attempting to obtain
control of Maruti. Following Suzukis acquisition of a controlling interest in us, the success of
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Maruti s business also depends on its continued ability to integrate Suzuki personnel into Maruti
management structure.
Suzuki is a major manufacturer and exporter of passenger cars and motorcycles. Approximately
20% of Suzukis outstanding equity shares are owned by General Motors of Canada Ltd., which
is part of the General Motors group. The General Motors group also has an Indian venture
competing with us in segment C of the automobile industry. Maruti has entered into several
nonexclusive agreements with Suzuki and its affiliates for the supply of technical know-how,
assistance and information related to our products and after-sales service, and for the supply of
raw materials, components, and other inputs. These agreements place restrictions on Maruti s
ability to export and to manufacture and sell products that compete with the products covered by
the agreements. Suzukis global interests and Maruti s interests as a company may not always be
aligned in the future. Suzuki has the ability to change Maruti s business strategy. In addition, if
there is a change of control of Suzuki, Suzukis relationship with us and our business strategy
may change in the future.
Maruti are substantially dependent on Suzuki.
Suzuki, which became Marutis controlling shareholder in 2002, has several license agreements
with Suzuki under which it has, since Maruti inception:
provided us with technical know-how, assistance and information for the manufacture, sale and
after-sales service of our products and parts;
supplied components for our passenger cars;
deputed technical personnel
helped us develop manufacturing processes and integrate certain Japanese management
practices such as kaizen, which is Japanese for continuous improvement, in our plants;
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trained our personnel; and


helped us develop and manage the supply chain for our products.
Suzuki has agreed to no longer charge royalty for the Maruti 800, Omni, Gypsy, Esteem and Zen
models, which arrangement is subject to revision in the event of the introduction of new
technology or upgradation in specifications due to changes in market conditions or requirements
of new laws or norms. In addition, Suzuki will provide a 10% discount on knocked down
components imported by us, except those imported for the Alto model built for exports, for the
period April 2003 to March 2005. Suzuki is entitled to terminate any of its existing licence
agreements with us by giving notice six months before the end of the original term and each
renewal period. In addition, Maruti has commercial relationships with some of Suzukis affiliates
relating to the supply of materials, services, spares and accessories, vendor assistance, including
guarantees and co-lease arrangements, and the purchase of dies and moulds and capital
equipment. If Suzuki terminates any license agreement or any of its affiliates terminate their
agreements with us, we may be unable to obtain necessary inputs, information or services for our
business from alternative sources or at a reasonable cost. Since we are substantially dependent on
Suzuki and Suzukis technical personnel, if a material adverse change occurs in
Suzukis business, or if Suzuki ceases to provide technical know-how and assistance,
components, training and other aid, our business may be adversely affected.
Maruti are dependent on a limited number of vendors for the supply of critical
components, consumables and raw materials used in the manufacture of their products.
Maruti depend on external suppliers, whom Maruti refer to as vendors, for the supply of raw
materials, components and spare parts for our products. As of March 31, 2003, Maruti had an
aggregate of 299 vendors of components in India. Maruti had strategic equity interests through
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joint venture agreements in 13 of these vendors. Maruti collaborate closely with many of our
vendors in order to secure a reliable supply of components that meet our requirements and to
generate economies of scale. As a result of this approach, for several inputs in Maruti
manufacturing process such as glass, seats and axles, we rely on a sole vendor or only a limited
number of vendors. The failure by a vendor to adhere to Maruti technical specifications, quality
requirements and production and delivery schedules could disrupt our manufacturing process. If
a vendor fails to meet quality standards, it could be exposed to warranty and other product
liability costs, and exposes us to the risk of product liability claims. In addition, a vendor on
whom Maruti are dependent may raise its prices or a dispute may arise between us and the
vendor. If Maruti are dependent on a sole vendor or a limited number of vendors for a critical
input, Maruti may find it difficult to replace a vendor on a timely basis and at reasonable cost,
and its business and results of operations may be adversely affected. For example, labour unrest
in February 2003 at one of Maruti vendors facilities disrupted the supply of engine cylinder
blocks to us, which had an adverse impact on their production volumes in March 2003.
Further, the unauthorised market for Maruti spares and accessories will become stronger should
vendors decide to supply such spares and accessories directly to the market.
Maruti are subject to risks of assuming product warranty, recall and product liability costs
due to defects in our products or related after-sales services, which could generate adverse
publicity and adversely affect our business, results of operations and financial condition.
Defects, if any, in Maruti products could require us to publicly undertake service actions or recall
campaigns. Such actions could require us to expend considerable resources in correcting these
problems and could adversely affect demand for its products. Defects in Maruti products that
arise from defective components or spare parts supplied by its vendors may be covered under
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warranties provided by their vendors. Maruti are not covered by insurance for product warranty
claims for cars sold in India. Maruti product warranty insurance only covers claims that are
asserted during the third and fourth year in the life of a car and are covered by extended
warranties purchased by customers. An unusual number or amount of warranty claims against a
vendor could affect its adversely because Maruti depend on a limited number of vendors for the
supply of raw materials and components. Repeated warranty claims may result in a rise in our
insurance premium.
In addition, such claims could have an impact on our consolidated results of operations and
financial condition as some of Marutis vendors are their affiliates and for some of its vendors we
are guarantors on outstanding loans or lease payment obligations. Further, any defect in our
products or after-sales services provided by authorized dealers or third parties could also result in
customer claims for damages. In defending such a claim, Maruti could incur substantial costs and
receive adverse publicity. Management resources could be diverted away from Maruti business
towards defending such claim. As a result, Maruti business, results of operations and financial
condition could suffer. Maruti cannot assure you that the limitations of liability set forth in their
contracts with vendors will be enforceable in all instances or will otherwise protect us from
liability for damages.
Further, Maruti are not fully insured against all potential hazards incidental to their business. For
example, Maruti insurance does not cover replacement cost of plant and machinery, product
liability costs for cars sold in India and losses related to recall of cars for design defects or
replacement of components or spare parts.

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Potential delays in the launch of new models in the market and lower-than-anticipated
market acceptance of new or existing models can cause us to lose market share and
adversely affect their results of operations.
In a highly competitive environment where the passenger car industry has excess capacity,
competitors can gain a significant advantage by bringing a new model to market in a particular
segment before we do. For example, a delay in the launch of one of our models has, in the past
allowed a competitors model to precede it in the market and develop a competitive advantage.
In addition, the launch of a new model usually requires substantial capital investment and costs
of production of new models are higher since, at least initially, new models have high import
content. The capital investments in plant and machinery associated with the launch of a new
model may result in higher levels of depreciation. Maruti loss in fiscal 2001 was partially
attributable to these factors. Similar investments by Maruti future may have an adverse impact
on their profitability. Therefore, if market acceptance of any of Maruti new models is lower than
anticipated, Maruti may be unable to gain the intended economic benefits of their investments
and higher cost of production, and Maruti results of operations may be adversely affected.
Maruti had negative cash flows in fiscal 2001 and issued an aggregate amount of Rs.3, 000
million secured non-convertible redeemable debentures to help fund its capital expenditure
requirements. As of December 31, 2002, Maruti had cash and bank balances and current
investments amounting to Rs. 9,992 million. If Maruti are unable to fund its working capital or
capital expenditure required for the launch of new models and other purposes using cash from
their operations, Maruti may need to incur indebtedness. In addition, Maruti major capital
projects may not be completed, completed in the timeframe or at the cost levels originally
anticipated.
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Maruti employees are represented by a trade union and any labour unrest at our manufacturing
facility or our vendors facilities could adversely affect their operations and profitability.
On March 31, 2003, Maruti had 4,590 employees, of which 2,999 are represented by a trade
union.
Maruti manufacturing operations were affected by a strike from October 12, 2000 to January 8,
2001 arising from a dispute between the management and the union regarding the specifics of a
new incentive scheme proposed by the management. The strike was resolved with the signing of
a good conduct agreement between the workers and the management. While Maruti production
volumes were not significantly affected during the strike, future labour unrest at Maruti facility
or at the facilities of their vendors could adversely affect its manufacturing operations and
operating results.
Maruti are involved in negotiations with the union for the renewal of a wage settlement
agreement, which expired in March 2000, the terms of which may adversely affect our results of
operations and financial condition. At March 31, 2003, 2,999 of Maruti employees were
represented by the Maruti Udyog Kamgar Union, or the MUKU. Maruti are involved in
negotiations with the MUKU for the renewal of a wage settlement agreement, which expired in
March 2000. In the previous wage settlement agreement, entered into in February 1998, Maruti
had agreed to provide retrospective wages from April 1996 until the date of the agreement for
certain categories of employees, and other benefits such as transport subsidies and increases in
the amounts of permissible advances. Maruti had also agreed to set up a pension scheme with
more favourable terms for employees than the statutorily required employee provident fund.
Breakdowns in Maruti information technology based communication systems may disrupt
Maruti operations.
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Maruti rely on an information technology based communications infrastructure which links their
offices, vendors, dealers and Suzuki, and is essential to the management of Marutis supply
chain, inventory, manufacturing and new businesses. It also forms an integral part of Maruti
internal communications and management information systems. In the case of a breakdown, the
ordering and follow-up system with vendors and dealers will be affected, which could lead to
production stoppages, significant increases in levels of inventory and lead times. It may also
disrupt our internal decision-making process by causing loss of data and making it difficult for
members of Maruti management team to communicate with each other in a timely manner.
Maruti have launched several new businesses and we cannot assure you that Maruti will
remain successful in these businesses or that they will yield the intended economic benefit.
To complement Maruti core business of manufacture and sale of passenger cars, Maruti have
recently entered into alliances with third parties for the sale of pre-owned Maruti passenger cars,
providing financing for purchases of their products, providing automobile insurance for Maruti
products, and providing leasing and fleet management services in relation to Maruti products, in
each case using the Maruti brand name. These businesses form an integral part of Maruti
business strategy to offer a one-stop shop for the needs of the Indian consumer in order to
foster brand loyalty and benefit from Maruti extensive dealership network for distribution of the
services. Maruti have launched these businesses during and after fiscal 2002, and they are in
their early stages. Some of the business models Maruti are using are relatively new to the Indian
passenger car industry and Maruti cannot assure you that these business models will gain
widespread acceptance. Governmental regulation may also have an adverse impact on the
economic viability of these business models. Maruti have limited experience in these businesses
and are substantially dependent on our alliance partners in the case of each of our new
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businesses. Maruti cannot assure you that we will succeed in developing the management skills
required to be successful in these businesses. In addition, since Maruti brand is associated with
these businesses, their failure may weaken its brand. Although we have limited our liability
towards our alliance partners and their customers, we anticipate that customers will require us to
fulfil expectations related to the services provided by its alliance partners since their brand is
associated with these businesses.
On January 14, 2002, Maruti incorporated three wholly owned subsidiaries and made capital
investments of Rs. 0.5 million in each of these companies: True Value Solutions Limited, or
TVSL, to facilitate the business of selling pre-owned Maruti passenger cars through their
dealership network, and Maruti Insurance Distribution Services Limited, or MIDSL, and Maruti
Insurance Brokers Limited, or MIBL, as insurance intermediaries to facilitate the distribution of
automobile insurance in alliance with certain insurance companies. In the nine months ended
December 31, 2002, TVSL, MIDSL and MIBL generated a profit after tax of Rs. 596,000, Rs.
184,000 and Rs. 1,597,000, respectively. Maruti conduct our automobile finance business in
alliance with finance companies, and their leasing and fleet management business in alliance
with providers of automobile financing and insurance, dealers and car rental agencies. These
investments may not yield the intended economic benefits.
Maruti strategic investments in, and capital commitments for the benefit of, vendors may
adversely affect their consolidated results of operations and financial condition.
Close collaboration with vendors is an important part of its business strategy. Maruti have made
strategic equity investments in 13 vendors that supply critical raw materials and components for
the manufacture of its products, some of which have yielded low or negative returns on
investment or have been generating losses in the course of the last three fiscal years. In the case
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of some of our vendors, Maruti have made capital commitments as their guarantors for their
obligations under leases or loan agreements. The future performance of these vendors may
therefore adversely affect their results of operations and financial condition.
Maruti contingent liabilities as per Indian Accounting Standards are as follows:
As of December 31, 2002, our contingent liabilities not accounted for were as follows:
Claims against Maruti not acknowledged as debts in the aggregate amount of Rs.12,692 million
due to sales tax, excise, customs, income tax and disputed claims us.
Guarantees given by Maruti to HDFC in the aggregate amount of Rs. 350 million against a
term loan of Rs.350 million given by HDFC Limited to Maruti Employees Co-operative House
Building Society Limited, Bhondsi. The aggregate amount outstanding under the loan as of
December 31, 2002 was Rs.190 million.
Guarantees given to finance companies in the aggregate amount of Rs. 497 million for term
loans and lease finance provided to various vendors for the purchase of dies and moulds of
certain models.
Leasing commitments in the aggregate amount of Rs. 2,645 million as co-lessee under certain
agreements between various vendors, as lessees, and finance companies or banks, as lessors, for
the leasing of dies and moulds for certain models.
To the extent that any of these contingent liabilities become actual liabilities, they will adversely
affect Maruti results of operations and financial condition in the future.
Maruti are dependent on our dealership network for the sales and distribution of our
products.
Maruti believe that its extensive network of 178 authorised dealers as of March 31, 2003 is one
of Maruti most important competitive advantages in the passenger car industry. Maruti maintain
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close contact with our dealers and monitor their performance, but Maruti do not have control
over them. Since the dealers have direct contact with the retail customers at the time they
purchase the product and during after-sales services and support, their conduct has a significant
impact on the consumers perception of its products and our brand. Maruti are therefore subject
to the risk that dealers fail to adhere to the quality standards we set for them in respect of
providing sales and after-sales service and support, and thereby negatively affect market
perception of our products.
In addition, in the recent past, intense competition among Marutis dealers or with dealers of
competitors products and other factors beyond our control have negatively affected the financial
condition of some of its dealers. If this happens on a large scale, a significant portion of Maruti
dealers businesses would be affected and therefore they may be unable to provide after-sales
service and support to customers. Further, Marutis dealers could engage in other businesses that
could hinder them from providing quality services. Finally, Maruti bear the risk of dealer default
to customers and consequent customer recourse to Maruti. Although Maruti are not contractually
liable to the customer in these instances, Maruti have to expend considerable resources defending
such claims and ensuring that defaulting dealerships are terminated. In addition, sales and
distribution of Maruti vehicles may be affected if Maruti are unable to deliver them to dealers in
a timely manner due to disruptions in railway or road transportation networks due to weather
related events, labour strikes or otherwise. For example, in April 2003, a nation-wide strike by
truck drivers in India adversely affected our distribution channels. All these factors could erode
one of Maruti major competitive advantages and could adversely affect their business and results
of operations.

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Maruti are dependent on our key management personnel and our ability to attract and
retain talented professionals.
Maruti rely on the expertise and services of key members of their senior management such as our
Managing Director and our Marketing Director. If Maruti lose any of these key personnel, Maruti
may find it difficult to find replacements with similar knowledge and experience, especially in
relation to their business and Company, and integrate them into organization. As a result,
Marutis business, results of operations and financial condition could be adversely affected. In
addition, Maruti compete with other companies in and outside its industry to recruit and retain
highly skilled professionals trained in automobile engineering, product development and
marketing. If Maruti are unable to attract highly skilled professionals, fail to integrate them into
organization, or fail to retain them after Maruti have invested resources in their training, Maruti
ability to compete and results of operations may be adversely affected. In addition, Maruti do not
have any noncompetition agreements with any of their senior management or other members of
our management team.
Maruti are yet to receive certain statutory approvals required in the ordinary course of
business.
Maruti are yet to receive the following renewals and approval:
The Haryana State Pollution Control Board (HSPCB) consent relating to the discharge of
effluents by Maruti, was valid till March 31, 2003. Maruti filed an application for the extension
of this consent for FY2004 and FY2005 on December 20, 2002.
The HSPCB consent setting permissible emission levels was valid till March 31, 2003. Maruti
filed an application for the extension of this consent for FY2004 and FY2005 on December 20,
2002.
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Failure to obtain these renewals, which have been regularly obtained in the past, would adversely
affect their business.
In addition, Maruti have not received building completion certificates and approvals under the
Punjab Schedule and Controlled Areas (Restriction of Unregulated Developments) Act, 1963 for
any of Maruti buildings in our manufacturing facility. Maruti have applied for the approval of the
building plans and submitted the required plans, drawings and other relevant documents.

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CONCLUSION
After studying current car market and increasing craze of keeping cars is concluded that today
cars becomes a necessarily among all groups whether they are working class group, house wives
etc. by keeping this in mind various companies emerges an lead to cars revolution in India started
two years later in which MARUTI is the top one. Among different companies MARUTI is one
spreading its market rapidly. The MARUTI give the customers a safe way of driving with their
high pickup cars. On comparing MARUTI car with other cars it is analyzed that the cars
designed by the MARUTI are much more like by the customers than that of the others. Also the
market survey witnesses the fast growing demand of the MARUTI un-geared cars as compared
to others. The brand name of MARUTI cars is a symbol or reliability amongst the customers.
Whereas other cars are slowly-slowly widen the whole world in its network in very many
affordable charges. The marketing strategies adopted by the MARUTI are really appreciable as
their strategies leads to a two fold benefit. According to the survey it is realized that for almost
all group of people use some cars for their daily use. A large part of the demand comes from
commercial and industrial sector; even the govt and housewife is a major customer which
generally belongs to a service class. Even the school and college going students prefer cars. Thus
the demand of cars is growing rapidly at the rate of 85% per annum. Thats why the competition
between the MARUTI and other cars is very high. As per the dealers people go in for the quality
of the product as far as purchase of cars is considered and also look for the fuel consumption,
average and pickup before making the purchase decision. Dealers say that the features of all the
branded cars are almost similar and thus these two factors affect the buyers buying decision.

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RECOMMENDATIONS
Maruti must try to improve its service centers and the way of advertisement as they affect their
reputations. Also Maruti must have to improve its service centers as they affect marketing
strategies adopted by them. Maruti must have to concentrate on quality of their sets and service
centers to attract the customers. Maruti must also try to make a market presence by using
advertising techniques and to keep an educated group for advertising and also a promotion drive
across the country to make people aware of its world-class product range and features via free
test rides. It must also try improving on relationship with dealers by adopting more dealeroriented schemes to make them committed to the company. It must also improve on after Sales
service for all its customers and also introduce customer oriented schemes to attract new
customers. And thus fulfill the commitment given to the customers during the purchase.

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BIBLIOGRAPHY

MARUTI LTD. Annual Report 2006-2007

Marketing Management by Philip Kotler

http://www.marutiauto.com

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