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Maruti Udyog Ltd
Company typePublic (BSE MARUTI, NSE MARUTI)
IndustryAutomotive
Founded1981[1]
HeadquartersGurgaon, Haryana
List of Maruti factories
Key people
Shinzo Nakanishi Chairman
ProductsMaruti
Suzuki
RevenueRs. 2209.6 million INR (2004) [29]
Number of employees
3,334 [2]
Websitewww.marutiudyog.com

Maruti Udyog Limited is a public listed company in India. It is a leading four wheeler automobile manufacturer in south east asia. Suzuki Motor Corporation of Japan has the controlling stake in the company.

Profile

The old logo of Maruti Udyog Limited later the logo of Suzuki Motor Corp. was also added to it

Maruti Udyog Ltd is one of India's leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. 18.28% of the company is owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an Initial Public Offering of 25% of the company in June of 2003.

Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and other South Asian countries.

The company annually exports more than 30,000 cars and has an extremely large domestic market in India selling over five hundred thousand cars annually. Maruti 800, till 2004, was the India's largest selling compact car ever since it was launched in 1983. More than a million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.

Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is commanly used to refer to this compact car model. Till recently the term "Maruti", in popular Indian culture, was associated to the Maruti 800 model.

History

File:Maruti Assembly Line.jpg
Maruti's assembly line is situated on old Gurgaon - Delhi Road, at distance of about 7 km from Gurgaon Bus Stand

Foundations for a company like Maruti Ugdog was laid initially in the year 1971. Sanjay Gandhi, the then Prime Minister of India, Indira Gandhi's eldest son envisioned the manufacture of an indigenous, cost-effective, low maintainence compact car for the Indian middle-class. Indira Gandhi's cabinet passed a unanimous resolution for the development and production of a "People's Car".

At that time Hindustan Motors' Ambassador was the chief car, and the company had come out with a new entrant, the Premier padmini which was slowly gaining a part of the market share dominated by the Ambassador. For the next ten years, the Indian car market had stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983.

Sanjay Gandhi was awarded the exclusive contract and licence to design, develop and manufacture the "People's Car". This exclusive rights of production generated some criticism in certain quarters, which was directly targetted at Indira Gandhi. Over the next few years, the company was sidelined due to the Bangladesh Liberation War and emergency.

In the early days under the powerful patronage of Sanjay Gandhi, the company was provided with free land, tax breaks and funds. Till the end of 1970s, the company had not started the production and a prototype test model was welcomed with criticism and skepticism. The media perceived it to be another area of growing corruption. The name of the car was chosen by Sanjay Gandhi as "Maruti", after a Hindu diety named Maruti. [3] Unfortunately, Maruti started to fly only after the death of Sanjay Gandhi, when Suzuki Motors joined the Government of India as a joint venture partner with 50% share.[4]

In December of the year 1983, Maruti entered into this collaboration with Suzuki Motors, The collaboration heralded a revolution in the Indian car industry by producing the Maruti 800. By the year 1993 the company had sold up to 1,96,820 cars, mostly by selling its chief product the Maruti 800s. By March 1994, it produced one million vehicles, becoming the first Indian company to cross this milestone. It reached the two million mark in October, 1997 and rolled out its 4 millionth vehicle, an Alto-LX, on April 19, 2003.

Partner for the Joint Venture

Pressure started mounting on Indira and Sanjay Gandhi to share the details of the progress on the Maruti Project. Since country's resources were made available by mother to her son's pet project. A deligation of Indian technocrats was assigned to hunt a collabarator for the project. Initial rounds of discussion were held with the giants of the automobile industry in Japan including Toyota, Nissan and Honda. Suzuki Motor Corporation was at that time a small player in the four wheeler automobile sector and had major share in the two wheeler segment. Suzuki's bid was considered negligible.

In in the intial rounds of discussion the gaints had their bosses present and in the later rounds related to the technical discussions executives of these automobile giants were present. Osamu Suzuki, Chairman and CEO of the company ensured that he was present in all the rounds of discussion. Osamu in article writes that it subtly massaged their (Indian deligation) egos and also convinced them about the sincerity of Suzuki's bid. In the initial days Suzuki took all steps to ensure the government about its sincerity on the project.[5]

Joint Venture Controversy

File:Maruti img factory.jpg
An aerial view of the Gurgaon Facility

Relationship between the Government of India and Suzuki Motor corporation over the joint venture was a point of heated debate in the Indian media till Suzuki Motor Corporation gained the controlling stake. This highly profitable joint venture and near monopolistic trade in the Indian automobile market was the reason for all the issues. In 1982 both the venture partners had entered into an agreement to nomininate their candidate for the post of Managing Director and every Managing Director will have a tenture of five years [6]

Initally R.C.Bhargava, was the managing director of the company since the inception of the joint venture. Till today he is regarded as instrumental for the sucess of Maruti Udoyog. Joining in 1982 he held several key positions in the company before heading the company as Managing Director. Currently he is on the Board of Directors. [7] After completing his five year tenure, Mr. Bhargava later assumed the office of Part-Time Chairman. The Government nominated Mr. S.S.L.N. Bhaskarudu as the Manging Director on August 27, 1997. Mr. Bhaskarudu had joined Maruti in 1983 after spening 21 years in the Public sector undertaking Bharat Heavy Electricals Limited as General Manager. Later in 1987 he was promoted as Chief General Manager, 1998 as Director, Productions and Projects, 1989 Director, Materials and in 1993 as Joint Managing Director.

The Suzuki Motor corporation didnt attend the Annual General Meeting of the Board with the resaon of it being called on a short notice. [8] Later suzuki Motor Corporation went on record to state that Mr. Bhaskarudu was "incompetent" amd wanted some one else. However the Minsitry of Industries, Government of India refuted the charges. Media stated from the maruti sources that Bhaskarudu was interested to indigenise most of components for the models including gear boxes especially for Maruti 800. Suzuki also felt that Bhaskarudu was a proxy for the Government and would not let it increase its stake in the venture. [9] If Maruti would have been able to indigenise gear boxes then Maruti would have been able to manufacture all the models without the technical assistance from Suzuki. Till today the issue of localization of gear boxes is highlighted in the press . [10]

The relation strained when Suzuki Motor Corporation moved to Delhi High Court to bring a stay order against the appointment of Mr. Bhaskarudu. The then Industries Minister, Marasoli Maran had even offered Suzuki to exit from the venture if they are not interested [11]


Bhaskarudu's appointment without consulting us violates the spirit of the 1982 pact, which commits the partners to consultations on all major decisions including key appointments
Osamu Suzuki, Chairman, Suzuki Motor Corporation in a press statement over the appointment of Mr. S.S.L.N. Bhaskarudu as the Manging Director


The issue was resloved in a out of court settlement and both the parties agreed that R S S L N Bhaskarudu would serve upto December 31, 1999, and from January 1, 2000, Jagdish Khattar, Executive Director of Maruti Udyog Limited will assume charges as the Managing Director. [12] Many Politicians belived, and had stated in parliament that the Suzuki Motor Corporation is unwilling to localize manufacturing and reduce imports. This remains true, till today the gear boxes are still imported from Japan and are assembeled at the Gurgaon facility

Disinvestment and Public Listing

The National Democratic Alliance Government headed by Atal Behari Vajpayee passed the resolution on December 22, 2003 to dilute its stake in the venture. Maruti was not a special case, but it was the policy of the government to reduce the public debt by offloading its stake in many public sector companies and joint ventures. The preprations had began much earlier. The Suzuki Motor Corporation suggested the government to offload its stake in the Captial Market, some believed this was a ploy to gain control of the company at cheap price due to the unhealthy conditions of the capital market. [13]

The red herring prospectus was filed with Securities and Exchange Board of India on May 2, 2003. The Union Government make an offer of 7.22 crose shares representing 25 pecent of the fully diluted equity state of the Maruti Post offer. After the dilution the government's stake was reduced to 20.8 and the Suzuki Motor Corporation's stake increased to 54.2 percent and the remaining was with the general public and instituional investors [14]. The offer was oversubscibed by the general public, the Government raized the size of the Initial Public Offering by 10 percent. Investors had submitted bids ranging from Indian Rupees 115 to 360 per share. As per a Bombay Stock Exchange data, about 69 % or 5.83 crore (58.3 million) bids received were for Rs 120 per share. [15]

The company has 28,89,10,060 shares As on February 15, 2006 the government stake has reduced to 18.28 % and the Suzuki Motor Corporation has a stake of 54.21%. Currently 71.06% of the equity is held by forigen investors including Suzuki Motor Corporation [16]

Following are the codes assinged to Maruti Udyog Limited on Stock exchanges and news services

  • Bombay Stock Exchange: 532500
  • The National Stock Exchange: MARUTI
  • Bloomberg: MUL@IN
  • Reuters: MRTI.BO

Services offered

Sales of Automobiles

The largest selling car from Maruti's stable, Maruti 800

In the order they were launched:

Authorized Service Stations

File:AMUL Maruti.gif
An Amul advertisement (released 1993) after Maruti Udoyg launched its luxzury compact car 'Zen'

Maruti is one of the companies in India which has unparalled service network. To ensure the vehicles sold by them are serviced properly. Maruti had 1545 listed Authorized service stations and 30 Experss Service Stations on 30 highways across India.

Service is a major revenue generator of the company. Most of the service stations are managed on franchisee basis, where in Maruti trains the local staff. Other automobile companies have not been able to match this benchmark set by Maruti. The Experss Service stations helps many stranded vehicles on the highways by sending across their repair man to the vehicle. [17]

Maruti Insurance

Launched in 2002 Maruti provides vehicular insurance facility to its customers with the help of National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram. The service was set up the company with the inception of two subsicdaries Maruti Insurance Distributors Services Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited [18]

This service started as a benifit or value addition to customers was able to ramp up easily. By December 2005 were able to sell more than two million insurance policies since its inception. [19]

Maruti Finance

To promote its bottom line growth, Maruti launched Maruti Finance in January 2002. Prior to the start of this service Maruti had started two joint ventures Citicorp Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist its client in securing loan.[20] Maruti tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank, and Sundaram to start this venture including its strategic parnters in car finance. Again the company entered into a stargeic partnership with SBI in March 2003 [21] Since March 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across India. [22]


"Maruti Finance marks the coming together of the biggest players in the car finance business. They are the benchmarks in quality and efficiency. Combined with Maruti volumes and networked dealerships, this will enable Maruti Finance to offer superior service and competitive rates in the marketplace".
Jagdish Khattar, Managing director of Maruti Udyog Limited in a press conference announcing the launch of Maruti Finance on January 7, 2002[23]


Citicorp Maruti Finance Limited is a joint venture between Citicorp Finance India and and Maruti Udyog Limited its primary business stated by the company is "hire-purchase financing of Maruti vehicles". Citi Finance India Limited is a wholly owned subsidary of Citibank Overseas Investment Corporation , Delaware, which in turn is a 100% wholly owned subsidary of Citibank N.A. Citi Finance India Limited holds 74% of the stake and Maruti Udyog holds the remaining 26%. [24] GE Capital, HDFC and Maruti Udyog Limited came together in 1995 to form Maruti Countrywide. [25] Maruti cliams that its finance program offers most competitive interest rates to its customers, which are lower by 0.25% to 0.5% from the market rates.

Maruti TrueValue

Maruti True Value is a service offered by Maruti Udyog to its customers. It is a market place for used Maruti Vehicles. one can Buy, Sell or Exchange used Maruti Vehicles with the help of this service in India.[30]

N2N Fleet Management

Maruti N2N provides lease and fleet management solution to corporates. Its impressive list of clients who have signed up of this service include Gas Authority of India, Dupont, Reckitt & Benkiser, Sona Steering, Doordarshan, Singer India, National Stock Exchange and Transworld. This fleet management service include end-to-end solutions across the vehicle’s life, which includes Leasing, Maintenance, Convenience services and Remarketing. [26]

Accessories

Maruti Driving School

As part of its corporate social responsibility Maruti Udyog launched Maruti Driving School in Delhi. Later the services were extended to other citites of India as well. These schools are modelled on the international standars, where learners go through class room and practial sessions. Many international practices like road behaviour and attitues are also taught in these schools. Before riding actual vehicles particpants are trained on simulators. [27]


“We are very concerned about mounting deaths on Indian roads. These can be brought down if government, industry and the voluntary sector work together in an integrated manner. But we felt that Maruti should first do something in this regard and hence this initiative of Maruti Driving Schools.”
Jagdish Khattar, Managing Director, Maruti Udyog Limited at the launch ceremony of Maruti Driving School, Bangalore.

Exports

Maruti Exports Limited is the susidary of Maruti Udyog Limited with its major focus on exports and it does not operate in the domestic Indian market. The first car commercial consignment of 480 cars were sent to Hungary. By sending a consignment of 571 cars to the same country Maruti crossed the benchmark of 3,00,000 cars. Since its inception export was one of the aspect, government was keen into. Every political party expected maruti to earn forigen currency.

Angola, Benin, Djibouti, Ethiopia, Morocco, Uganda, Chile, Costa Rica and El Salvador are the some of the markets served by Maruti Exports [28]

Reference and Notes

  1. ^ Maruti Udyog Ltd. Milesones,[1]
  2. ^ Yahoo! Finance, Maruti Udyog Ltd. Company Profile [2]
  3. ^ Asia Week Online Edition, Who needs an Asian Car?[3]
  4. ^ Rediff on the net [4]
  5. ^ The Hindu, Business Published on Monday, Nov 24, 2003. Osamu Suzuki's article was published in Kenshu, a Japanese quarterly publication of the Association for Overseas Technical Scholarship. [5]
  6. ^ Rediff on the Net: A successful marriage goes to court September 19, 1997 [6]
  7. ^ Rediff, On the Net - Date: September 3, 1997 [7]
  8. ^ Rediff, On the Net Date: August 27, 1997. [8]
  9. ^ Rediff on the Net Bhaskarudu: The man Suzuki loves to hate [9]
  10. ^ Business Linte: Maruti disinvestment -- Releasing the clutch Sunday, May 19, 2002 [10]
  11. ^ Rediff on the net - 'Suzuki can leave Maruti : Maran' September 20, 1997 [11]
  12. ^ Rediff: Government, Suzuki resolve Maruti row June 8, 1998 [12]
  13. ^ The Tribune, Online edition Clearance to Maruti disinvestment today Saturday, December 23, 2000, [13]
  14. ^ Business Line - Internet Editon May 04, 2003 Maruti's public offer process begins [14]
  15. ^ Business Line Internet Edition Jun 18, 2003 "Govt to retain part of Maruti oversubscription" [15]
  16. ^ The Bombay Stock Exchange [16]
  17. ^ 5 Paise Stock Broking's report on Maruti Udog Limited before the IPO (.pdf file) [17]
  18. ^ The Hindu Business:Saturday, May 11, 2002 - Maruti launches car insurance[18]
  19. ^ The Hindu Business Line Sunday, Dec 18, 2005 -Maruti Insurance ramps up sales [19]
  20. ^ Press Relase by Maruti, Cached page from Google [20]
  21. ^ Business Line,Saturday, Mar 15, 2003 , SBI ties up with Maruti for car loans [21]
  22. ^ Retail Yatra.Com, August 8 2003 -Maruti, State Bank of Bikaner & Jaipur join hands for car financing Jaipur [22]
  23. ^ Press Relase by Maruti, Cached page from Google [23]
  24. ^ The Hindu , Online edition of India's National Newspaper, Published: Thursday, July 26, 2001, Citicorp Maruti Finance gets P1 plus [24]
  25. ^ Maruti Finance, Joint Ventures [25]
  26. ^ Maruti N2N Fleet Management Services - Official Website [26]
  27. ^ Deccan Herald, Online edition of Sunday, March 20, 2005 "Maruti’s first driving school in Bangalore"[27]
  28. ^ Official website of Maruti Exports Limited. [28]
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