MARUTI SUZUKI INDIA LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
Your directors have pleasure in presenting the 29th annual report together
with the audited accounts for the year ended 31st March 2010.
FINANCIAL RESULTS
The Company's performance during the year is summarized below:
(Rs. in million)
2009-10 2008-09
Gross total income 301,198 214,538
Profit before tax 35,925 16,758
Tax expense 10,949 4,571
Profit after tax 24,976 12,187
Balance brought forward 80,042 70,257
Profit available for appropriation 105,018 82,444
Appropriations:
General reserve 2,498 1,219
Proposed dividend 1,733 1,011
Corporate dividend tax 288 172
Balance carried forward to balance sheet 100,499 80,042
FINANCIAL HIGHLIGHTS
The gross revenue (net of excise) of the Company for the year was Rs.
301,198 million as against Rs. 214,538 million in the previous year showing
growth of 40%. Sales of vehicles in the domestic market increased to
870,790 as compared to 722,144 in the previous year showing a growth of
21%. Exports of vehicles grew at an impressive rate of 111% from 70,023 to
147,575 in the current year. The overall growth was 29%.
Earnings before depreciation, interest, tax and amortization (EBDITA) stood
at Rs. 44,510 million against Rs. 24,333 million in the previous year.
Profit before tax (PBT) stood at Rs. 35,925 million against Rs. 16,758
million in the previous year and profit after tax (PAT) stood at Rs. 24,976
million against Rs. 12,187 million in the previous year.
DIVIDEND:
The board recommends a dividend of Rs. 6.00 per equity share of Rs. 5.00
each for the year ended 31st March 2010 amounting to Rs.1733 million.
CRISIL RATING:
The Company has been awarded the highest financial credit rating of
AAA/stable (long term) and P1+ (short term) on its bank facilities by
CRISIL. The rating underscores the financial strength of the Company in
terms of the highest safety with regard to timely fulfillment of its
financial obligations.
QUALITY:
The Company has again been awarded ISO:27001 certification by STQC
Directorate (Standardization, Testing & Quality Certificate), Ministry of
Communications and Information Technology, Government of India after
reassessment. The Company is thus certified to meet international standards
for maintaining information security.
The Company's plants at Gurgaon and Manesar are ISO: 14001:2004 certified.
During the year, AIB-Vincotte International Ltd., Brussels, Belgium
conducted surveillance audit and recommended continuation of the
certification.
The quality management system of the Company is certified against ISO
9001:2000 standard. Re-assessment of the quality systems are done at
regular intervals by an accredited third party agency.
HIGHLIGHTS OF OPERATIONS
The operations during the year are exhaustively discussed in the report on
'Management Discussion and Analysis' which forms part of this annual
report.
AWARDS/RECOGNITION:
The Company won the following awards/recognition during the year under
review:
* A-star has been rated as No.1 environment friendly small car by Germany's
prestigious VCD environmental car rating;
* 'Manufacturer of the year' award by CNBC overdrive;
* Ritz has been awarded as the 'hatchback car of the year' by autocar UTVi
and 'car of the year' by Business Standard Motoring;
* National award for excellence in corporate governance' by Institute of
Company Secretaries of India;
* 'CII-ITC sustainability award 2009' for strong commitment to
'sustainability';
* 'Golden peacock award' for environmental initiatives;
* Gurgaon plant has been awarded the 'gold award' by Economic Times India
Manufacturing Excellence Awards (IMEA).
SUBSIDIARY COMPANIES AND THEIR ACCOUNTS:
The Company's six subsidiaries i.e. Maruti Insurance Business Agency
Limited, Maruti Insurance Distribution Services Limited, Maruti Insurance
Agency Solutions Limited, Maruti Insurance Agency Network Limited, Maruti
Insurance Agency Services Limited and Maruti Insurance Agency Logistics
Limited are engaged in the business to sell motor insurance policies to
owners of Maruti Suzuki vehicles.
In 2009-10, the Maruti Insurance business generated a total income of Rs.
1349.88 million which includes dividend income of Rs 46.10 million earned
from investments in mutual funds. Profit before tax (PBT) for 2009-10 was
Rs. 635.49 million. In March 2010, Maruti Insurance business achieved the
landmark figure of 10 million policies on a cumulative basis since the
inception of business in year 2002. 0.81 million new policies and 1.76
million renewals were issued during the year 2009-10.
The Company's subsidiary 'True Value Solutions Limited' has contributed
towards smooth operations of business processes and supported the
dealerships in enhancing the sale of certified pre-owned cars under the
brand 'Maruti True Value'. It has contributed significantly to the efforts
of customer retention by facilitating re-purchase of new cars and has made
significant contribution towards enhancing dealers' profitability.
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 subsidiary
companies have not been attached with the balance sheet of the Company.
These documents will be made available upon request by any investor of the
Company or subsidiary companies and shall be kept for inspection by any
investor at the registered office of the Company. However, as directed by
the Central Government, the financial data of the subsidiaries have been
furnished under 'Financial Statement of Subsidiary Companies' 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 the financial
information of its subsidiaries.
HUMAN RESOURCE DEVELOPMENT:
The Company has always focused on employees' development. A total of 46200
man-days of training were conducted for employees across all levels during
the year.
The training programmes vary according to the need of the employees at
various levels. Based on the behavioral traits, some of the trainings
introduced in 2009-10 were 'changing mindset-changing lives'; 'being the
best'; 'emotional intelligence'; 'planning organizing problem solving';
'assertiveness & self confidence'; and 'conflict management'. Some of the
trainings based on technical needs include 'market research'; 'capital
budgeting'; 'risk management & hedging'; 'unigraphics'; 'business
simulation games'; 'inhouse quiz'; 'cost management'; 'taxation'; 'motion &
time study'; 'design failure mode effect analysis' and 'geometric designing
& tolerancing'. Training for leader ship traits include 'departmental heads
convention'; 'divisional head training' and 'director re-treat'.
The Company also has higher education schemes for its employees.
DIRECTORS:
Mr. Kenichi Ayukawa, Mr. D.S.Brar and Mr. M.S.Banga, directors of the
Company, retire by rotation at the ensuing annual general meeting and being
eligible, offer themselves for re-appointment.
DIRECTORS' RESPONSIBILITY STATEMENT:
As required under section 217(2AA) of the Companies Act, 1956, your
directors confirm:-
a) that there were no material departures in the applicable accounting
standards followed while preparing the annual accounts;
b) having selected such accounting policies and applied them consistently
and made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the end
of the financial year and of the profit of the Company for that period;
c) having 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 the Company and for preventing and
detecting fraud and other irregularities; and
d) having 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, 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.
CONSOLIDATED FINANCIAL STATEMENTS:
In accordance with the Accounting Standard - 21 on Consolidated Financial
Statements read with Accounting Standard - 23 on Accounting for Investments
in Associates and Accounting Standard - 27 on Financial Reporting for
interest in Joint Ventures, the audited consolidated financial statements
are provided in the annual report.
CORPORATE GOVERNANCE:
The Company has complied with the corporate governance requirements, as
stipulated under clause 49 of the listing agreements and the stipulated
certificate of compliance is contained in this annual report.
AUDITORS:
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
under section 233B of the Companies Act, 1956 for the audit of the cost
accounts for the motor vehicles business for the year ending 31st March
2011.
ACKNOWLEDGMENT:
The board of directors would like to express its sincere thanks for the co-
operation and advice received from the Government of India and the Haryana
Government. Your directors also take this opportunity to place on record
their gratitude for timely and valuable assistance and support received
from Suzuki Motor Corporation, Japan. The board also places on record its
appreciation for the enthusiastic cooperation, hard work and dedication of
all the employees of the Company including the Japanese staff, dealers,
vendors, customers, business associates, auto finance companies, state
government authorities and all concerned without which it would not have
been possible to achieve all round progress and growth of the Company. The
directors are thankful to the shareholders for their continued patronage.
For and on behalf of the board of directors
Shinzo Nakanishi R.C. Bhargava
Managing Director & CEO Chairman
New Delhi 14th, July 2010
ANNEXURE-A
Information in accordance with the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988, and forming part of the
Directors' Report for the year ended 31st March 2010.
A. ENERGY CONSERVATION:
The Company has continued its thrust towards compliances of environmental
regulation and energy conservation to improve upon its past performance.
During the year, ISO 14001 surveillance audit was carried out by M/s AVI,
Belgium and the auditors recommended continuation of the ISO 14001 for the
year.
The Company also received the prestigious 'Golden Peacock Award' in the
category of 'Eco-Innovation' from World Environment Foundation.
Some of the activities carried out during the year towards environment and
energy conservation are given hereunder:
1. Use of variable frequency drives for motor operation.
2. Introduction of LED lights in place of CFL / HPSV lights for
illumination.
3. Motion sensors for auto operation of lights at common places in Manesar
plant.
4. Optimization of equipment start up time in paint shop in Manesar plant.
5. Automatic group operation of air compressor to reduce specific
electricity consumption in Manesar plant.
6. Optimisation of water and compressed air supply pressure in Manesar
plant.
7. Use of canal water in place of tube well water to the extent available
in Manesar plant.
8. Natural gas supplies to Manesar plant has commenced, conversion of all
equipment of the plant to natural gas shall result in a cleaner
environment.
The energy saving initiatives helped the Company in reduction of energy and
water consumption for the current year in comparison to last year. The per
vehicle reduction in electricity and water in Gurgaon plant was 2% and 9%
respectively, whereas the reduction in Manesar plant was 22% and 27%
respectively as compared to last year.
B. RESEARCH & DEVELOPMENT (R&D):
To meet ever changing customer needs, battle increasing competition from
global players and meet stricter regulatory requirements, R&D had envisaged
its vision in 2002-2003 in line with the Company's vision and has worked
since then towards meeting it.
R&D vision is 'Build on our engineering skills to design and develop cars
to delight the Indian consumer and establish Maruti as the R&D hub of
Suzuki Motor Corporation (SMC) in Asia outside Japan.'
The strategic objectives set up for achieving the vision are:
* Product design & development: concept car, new models & minor change
introduction;
* Engineering capability development: design & development of full body
change followed by development of new platform(s);
* Cost management: meet target cost for model development;
* Alternative fuel development: meet the future requirement of low
emissions and fuel economy.
The Company's R&D has already achieved capability for carrying out minor
change and carrying co-design activity with SMC for new models. The next
key milestone for the Company's R&D is to develop full body change
capability. Systematic efforts are on to achieve full body change
capability through the following:
* Full vehicle in-house design, development and evaluation;
* Training of engineers (overseas/in-house);
* Facilities up-gradation;
* Prototype build capability; and
* Exprimental projects.
One significant step in this direction has been the increase in manpower
from 729 nos. in 08-09 to 968 nos. in 09-10. Further the Company's R&D has
plans of increasing its manpower strength from 968 nos. to more than 1100
nos. in 10-11.
I. SPECIFIC AREAS IN WHICH R&D HAS BEEN CARRIED OUT
A. Building full model change capability:
A1. Vehicle design and development Vehicle planning and design:-
* ability in product planning from the concept stage has been enhanced by
strengthening activities of advance planning cell, which tracks the market,
its changing requirements, technology trends, future regulatory
requirements and competitor activity so as to work on a competitive product
roadmap.
Capability enhancement in complete exterior design of a car is being done
by activities like design trends study for arriving at a right design
language for Indian market.
For interior design of full body change, the Company enhanced capability in
areas of complete interior concept image generation, interior computer
aided design (CAD) based computer graphics (CG), full interior buck design
and layout of components based on engineering layouts and occupant
packaging.
Capability enhanced in exterior & interior design of concept car named 'R3'
and in-house development of concept car.
Engineering Design:
* Capability in the field of engine development was enhanced with the
design and development of the new 'K12M' and 'G12' engine and the up-
gradation of the Company's vehicles to meet BSIV norms. This was the result
of enormous R&D efforts and hours of design, validation and testing.
* Capability enhancement in transmission design and development with the
implementation of cable type gear shift mechanism in the Company's vehicles
to improve the gear shift feeling.
* Research in area of frugal electronic systems in cost sensitive models
like EECO and Alto.
* Capability in the area of body in white (BIW) design has taken the next
leap in its journey of achieving the full body change capability in coming
years. This will envisage capability to engineer the BIW, interior trims,
instrument panel, NVH (Noise Vibration & Harshness) and lighting system &
seats for the vehicle.
* Research in the area of new materials i.e. steel & polymer for
BIW/interior applications has helped in evaluating and using stronger,
lighter & safer materials contributing towards unmatched safety, fuel
efficiency & performance of the vehicles like A-star, Alto, etc.
* Capability in area of brake design & development has been enhanced with
the introduction of latest global technologies in the Company's vehicles.
These were supported by advanced technologies in the field of testing &
manufacturing of parts to provide high performance & quality parts to meet
growing expectations & rigorous demands of brake system in India's rigorous
traffic conditions.
* Capability enhancement in new platform design and development while
working on new platform for new 'Wagon-R'.
* Capability enhancement in areas such as instrument panel, door, fuel tank
& seating systems was done for carrying out full body change.
* Skills have been upgraded for evaluation of customer perception/feedback
for ergonomics, seating comfort and other parameters of interior design for
incorporating them in design from conceptual stage.
* The capability in the field of design and development of fuel injection
system, storage vessels, safety features like micro switch and structural
frames for alternate fuel vehicles.
* Design and development of hybrid & electric concepts of SX4 hybrid and
EECo electric models.
* Developing capability for making prototype vehicles for design
validation.
* Presentation of engineering design studies in the international platforms
like SAE (Society of Automotive Engineers) International, SIAM (Society of
Indian Automobile Manufacturers) & others during the last years, has given
a global outlook to the Company's engineers.
Virtual design validation:
To enhance the virtual validation skills and reduce design cycle time and
development cost, digital engineering & engineering information management
techniques are being effectively used.
Digital engineering:
* The Company has strengthened its capability on virtual engineering by
carrying out crash, NVH, strength and computation fluid dynamics (CFD)
simulations for new model development activity as well as up gradation of
existing models using various simulation tools.
* The computer aided engineering (CAE) simulations are carried out for full
vehicle and the component levels.
Engineering information management:
* The increased focus on R&D requires knowledge management strategy wherein
the knowledge gained is harnessed effectively for future needs. Knowledge
based engineering techniques have been employed wherein knowledge base of
various design processes have been maintained. This has reduced the time
taken by a designer/engineer for iterative design processes and capture
expertise knowledge to come up with accurate results in the minimum span of
time.
* The PLM (Product Life Cycle Management) system has been optimally
utilized with the increase of 'Team-center Community Usage' for information
exchange with suppliers.
* Tear down data management software is used to manage the component level
benchmark data and that has resulted in carrying out VAVE (Value Analysis
Value Engineering) effectively during the year.
* To streamline the process of technical specification repository, a web
based document 'life-cycle management system' is under implementation.
Development and testing:
* Research in the specific areas of emission reduction and emission testing
were carried out together with the engine development for BSIV
countermeasure. ECU (Engine Control Unit) calibration and engine
performance improvements were done in order to optimize the engine
performance.
* Fatigue analysis and endurance testing of vehicles, vehicle systems &
engines were conducted. Exterior & interior parts safety & strength testing
were also carried out for new model development.
* Passive homologation testing of domestic and export models were conducted
in-house.
* As part of the Company's consciousness towards environment, all the
models are being made ELV (End of Life Vehicle) compliant. The Company
shares the honors of being the 2nd company in world to comply with RRR
(Reuse-Recycle-Recovery) norms.
A2. Facility set up for R&D NVH:
* Semi anechoic chamber: An anechoic chamber is a shielded room designed to
attenuate sound or electromagnetic energy for testing under controlled
environment and low ambient noise conditions for better analysis / faster
identification of problem areas and implementation.
* Gear noise tester: The gear noise tester measures vibration and noise of
a specimen - transaxle, transmission or differential while applying
rotational and torque loads to the test specimens.
Engine and transmission testing:
New mass emission lab: Additional facility for testing vehicle exhaust
emission level has been set up. This lab is in addition to existing four
mass emission labs. New lab will help in gearing up for future emission
norms. The stringency of emission norms and increasing numbers of model for
which development is required, indicate the requirement of new gasoline
emission test facility.
Vehicle Performance:
* Brake noise chassis dynamometer with environment chamber: Brake noise
dynamometers can simulate the mass, inertia and performance capabilities of
a vehicle. It also allows laboratory simulation of braking situations under
varied driving conditions. This will result in improved braking performance
with reduced development cost & time.
* Hydraulic actuators: Four actuators have been installed to reduce the
lead time for evaluation of chassis / suspension parts. This will result in
faster part localization and new source development.
New design software and licenses:
* 103 licenses for CAD (Computer Aided Design) designing have been procured
to enhance designing capability of Company's engineers.
II. BENEFITS DERIVED AS A RESULT OF ABOVE R & D:
a) Launch of Ritz
b) Launch of K12M engine
c) BSIV compliance - Omni, Alto, Swift, A-Star, SX4, Zen Estilo
d) Launch of EECO
e) Zen Estilo minor change
f) SX4 minor change
g) Focused VA/VE
h) Future new model & engine development
i) ELV compliance
j) Next level of rust countermeasure
III. FUTURE PLAN OF ACTION:
* To develop capability for full model change in all aspects - planning,
design, development and testing.
* To develop more products with alternative fuel option.
* Compliance to safety and emission regulation such as offset, side impact,
etc.
* Carry out continuous up gradation of existing models.
* To build the Company's knowledge base and its image on technology by
designing and showcasing projects in auto exhibitions.
* Emphasis on VA/VE & innovative cost reduction ideas to cut down costs.
* Developing costing knowledge of various automotive technologies through
standard cost tables and cost benchmarking.
* Cost planning of new products right at the new product planning stage to
put cost in right perspective during the concept stage and give target cost
to designers.
* Emphasis on focused cost down models for competitiveness.
IV. EXPENDITURE INCURRED ON R & D (Rs. in million)
Particulars 2009-10 2008-09
A. Capital expenditure 623 244
B. Recurring expenditure 1110 666
Total 1733 910
Total R&D expenditure as a
percentage of total income 0.58% 0.42%
C. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:
Efforts in brief made towards technology absorption, adaptation and
innovation:-
* Design of components & systems including design review process.
* Component & sub component level localization, development and testing of
parts for existing & new models.
* Capabilities enhanced in component and vehicle evaluation, benchmarking
and design optimization.
* Capabilities being further enhanced in area of alternative fuels.
* VE (Value Engineering) at time of design to maximize cost benefit.
* Acquiring design & cost knowledge through teardown and benchmarking and
using it in future design & cost reduction.
Benefits derived as a result of above efforts:
* High localization content in various vehicles has resulted in lower
costs.
* Up-gradation of existing models for improved comfort, style and better
value for money.
* Continuous reduction in product cost through VA/VE (value analysis/ value
engineering).
* Significant cost reduction of parts of new model compared to existing
models, ensuring that the new models are profitable from day one.
* Continuous quality up-gradation and weight reduction in products.
Technology inducted:
The Company has been a pioneer in offering latest technologies at
affordable prices to its customers. As a market leader, the Company intends
to keep this momentum in future.
Technology imported:
* VVT (Variable Valve Timing) for ensuring better drivability to the
customers.
* Detent pin technology for providing smooth, precise and almost effortless
gear shift feeling.
* Year of Import: 2009-10
* Status of absorption: Above technologies have been used in products
introduced during the year.
d. foreign exchange earnings & outgo (cash basis) (Rs. in mimion)
Particulars 2009-10 2008-09
Foreign exchange used: equivalent
Raw materials and components 24,626 16,842
Capital goods 4,112 10,817
Dies & moulds, maintenance
spares & other items 427 720
Royalty, interest, dividend
and others 10,466 8,604
Foreign exchange earned: equivalent 45,573 12,648
Activities relating to exports:
i) Initiatives taken to increase exports: The Company's exports grew 111%
by exporting 147,575 units. It was the first time in its history that the
Company crossed the 100,000 vehicle exports mark. On a cumulative basis,
the exports crossed 700,000 units.
ii) Development of new export markets for products and services: South
Africa, Hong Kong and Norway were added as new markets during the year.
iii) Exports plans: The Company will continue to export 'A-Star' and other
models.
For and on behalf of the board of directors
Shinzo Nakanishi R.C. Bhargava
Managing Director & CEO Chairman
New Delhi
14th July 2010
MANAGEMENT DISCUSSION AND ANALYSIS
INDUSTRY OVERVIEW:
Year 2009-10 started against a backdrop of mixed macro-economic signals in
India. There was an unprecedented slowdown in the previous year, with
quarterly swings. By the end of 2008-09, while overall sentiment was
cautious, certain sectors had started to recover. At the start of 2009-10,
passenger vehicle industry growth projections ranged from -5% to +10%.
While most governments around the world had to take extreme steps,
policymakers in India gave a calibrated impetus to revive consumption.
Although this fiscal expansion increased government deficit, it arrested
the slowdown. The stimulus package in December-08 included a 4% reduction
in Cenvat rate. The Government also reduced fuel prices, and took steps to
improve liquidity and bring down interest rates. Together with this,
improved availability of car loans by public sector banks, resilient demand
from rural areas and government employees and manufacturers' marketing
efforts helped improve sentiment and customers returned to showrooms.
During the year, the economy posted a remarkable recovery and grew by 7.4%.
It was also a year of several model launches by the Indian car industry,
which boosted consumer sentiment. Passenger vehicle industry grew by 26%
after flat sales the previous year. The two-wheeler market benefited from
demand from rural and mid-urban India and grew by 26%. The commercial
vehicle industry saw more pronounced swings and grew at 38% after declining
22% the previous year.
Auto Industry Growth: Indian Automobile Domestic Sales Growth Rate (%)
Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Total Passenger Vehicles 18% 8% 21% 12% 0% 26%
- Passenger Cars 18% 8% 22% 12% 1% 25%
- A1 -31% -23% -11% -12% -29% 28%
- A2 34% 15% 31% 14% 3% 27%
- A3 26% 7% 6% 15% 7% 14%
- A4, A5 & A6 60% 7% 40% 4% -13% 35%
- Utility Vehicles 20% 10% 13% 11% -8% 21%
- MPVs 9% -2% 25% 21% 6% 41%
Total Two Wheelers 16% 14% 11% -8% 3% 26%
- Scooters 4% -2% 4% 12% 9% 27%
- Motorcycles 19% 17% 13% -12% 1% 26%
- Mopeds 5% 3% 7% 16% 4% 31%
Electric Two Wheelers -43% 49% -89%
Total Three Wheelers 8% 17% 12% -10% -4% 26%
Total CVs 22% 10% 33% 5% -22% 38%
M&HCVs 23% 5% 33% 0% -33% 34%
Total LCVs 21% 19% 34% 12% -7% 43%
Grand Total 16% 13% 13.7% -4.6% 1% 26%
COMPANY OVERVIEW:
Flexibility and Agility were identified as the mantras to win in a volatile
environment. This approach was communicated to all employees, vendors and
dealers. A close watch on demand in domestic and export markets, strong
inventory control, shorter lead times, a stretch on capacities, and better
product mix flexibility helped the Company achieve overall growth of 28.5%
over the previous year. The Company sold 1,018,365 vehicles during the
year. This comprised of 870,790 cars in the domestic market (growth of 21%)
and 147,575 in the export market (growth of 111%).
For the first time, Maruti Suzuki was able to make and sell more than a
million vehicles in a year.
The Company launched a new model, refreshed four existing models and
introduced its next generation K-series engines in four models.
The Company registered Net Sales of Rs. 289.5 billion, growing at 42.2%
over the previous year. Net Profit after Tax stood at Rs. 24.97 billion, a
growth of 105% over FY'09. Since the previous year was exceptional on
account of the global economic crisis, it may be relevant to look at the
financial performance over two years. In the two year period ending 31
March 2010, the Net Sales grew 62%, implying a CAGR of 27% and the Net
Profit grew 44% implying a CAGR of 20%. Capex for the year stood at Rs.
14.7 billion.
The Company started work on building an additional capacity of 250,000 cars
per year, at Manesar. As part of the efforts to build an R&D capability,
700 acres of land were procured for a world class proving ground at Rohtak.
The number of design engineers increased to 958, as planned.
SUSTAINABILITY:
The Company's relationship with its stakeholders is one of mutual well-
being and trust. As part of its National Road Safety Mission, the Company
trained 1,37,000 people in safe driving at Institutes of Driving Training
and Research and Maruti Driving Schools. Of these, training of 28,000
people was sponsored by the Company.
Top management reviews were instituted for all plant emissions and natural
resource consumption. Significant time, effort and management thought were
invested in training dealers and tier-1 and tier-2 vendors in business
excellence, corporate governance, professionalization, financial
sustainability and functional competencies. While this is inherently
sustainable and has been the Company's philosophy since inception, the
Company employed global best practices to proactively map the impact of its
business on its stakeholders from economic, environment and social
perspectives and published a sustainability report with the theme 'Give,
Get, Grow'. This report is a broadbased internal employee effort and
conforms to A+ level of international GRI guidelines. This will continue to
be a significant tool for self-improvement.
BUSINESS PERFORMANCE
Domestic Market:
Car demand growth started from the rural and smaller towns in the first
quarter and spread across India, including the top cities, by the last
quarter. The Company's extensive network, and innovative marketing
initiatives, enabled it to capture this demand.
The sales network added 121 outlets to reach 802. The number of cities
covered increased from 454 to 555. Similarly 127 more dealer service
workshops were activated. The total cities covered went up from 1314 to
1335. The Company tied up with five more public sector banks to promote car
loans.
There were several new model launches in the Indian market during the year,
including in the high volume small and compact segments. The Company has
always welcomed competition as it helps the Company grow and aids the
process of improvement.
The approach of the Company is to try and understand customer expectations
and strive to deliver global or customized products that meet them as
closely as possible.
Towards this aspiration, the Company launched its fifth world strategic
model - the Ritz. It has global styling and a powerful, best-in-class, fuel
efficient K-series engine. The Ritz clocked 50,000 unit sales in 9 months,
the fastest for any new model ever. The existing model in the same segment,
Swift, continued to be strong. Its sales grew from about eight thousand
cars to twelve thousand a month.
The Company launched the Eeco, a spacious multi-purpose van and the new
WagonR. It refurbished the SX4 engine to incorporate VVT (variable valve
timing) technology and introduced K-series engines in Swift, DZire, Estilo
and the new WagonR.
The Company's share in the domestic passenger cars and vans market stood at
51.7%. Since a number of models were on waitlist, the Company made efforts
to maximise output through better productivity, innovation and flexibility.
The Company strengthened its leadership in the sedan or A3 segment,
increasing market share from 31.4% to 36.0%. The Company's market share in
this segment has more than doubled in three years. The Company's average
realization per car has increased by about 32% in this period.
The Company showcased two new models at Auto Expo 2010, which fit with the
changing lifestyles of the Indian consumer. One was Concept rill, a three-
row family vehicle, designed by the Company's R&D engineers and body
stylists. The other was the global Suzuki car, the Kizashi, a major
attraction at Suzuki displays at motor shows in Tokyo and Geneva.
Servicing of the car in India and its ease, availability and friendliness
continues to be an important consideration in the purchase decision. The
Company's network serviced more than 12.9 million cars in the year.
Initiatives like a spruced-up customer lounge at workshops, use of high
productivity equipment and an IT enabled vehicle tracking system in
workshops, were taken. The Company seeks to have a service facility every
25 km on important stretches of major highways.
The Company was rated first in customer satisfaction (post sale service)
for the tenth year in a row in the annual survey by JD Power Asia Pacific.
The Company was also awarded the JD Power Award for the highest Sales
Satisfaction in India. Studies show a strong correlation between customer
satisfaction and customer repurchase and advocacy intent. This is also
supported by the 'Escaped Shoppers Study' of JD Power. It mentions that the
percentage of predetermined or loyal customers in the car industry is the
highest for Maruti Suzuki, at 78%.
With shortening car ownership cycles, the residual value of the car is
becoming an important determinant of total cost of ownership. The Company's
pre-owned car business sold 1,63,240 cars in the year, a growth of 33% over
the previous year.
The Company's insurance initiative facilitates the issue of insurance
policies and enables a single point cashless claim. In its ninth year of
operations, the insurance business reached a cumulative sale of 10 million
policies, out of which 2.5 million were in 2009-10.
Exports:
The Company clocked export sales of 147,575 units, its highest ever. This
is a 111% growth over the previous year's total of 70,023 units. On a
cumulative basis, exports crossed 700,000 units. Europe has accounted for
over 75% of the sales.
During the year, exports were helped by the launch of a world strategic
model of Suzuki, known as the A-star in India, the new Alto in European and
some other markets, the Celerio in various non-European markets and the
Pixo in Europe sold under the Nissan brand. The new Alto was received well
by customers on account of its styling, safety features and environment
friendly engine. In Chile, the launch of Suzuki Celerio was awarded the
best launch of the year. In Australia, Suzuki Alto won the nationwide event
'Green Challenge', recording the lowest CO2 emission and in Philippines,
the Suzuki Celerio was voted 'Car of the Year' and rated the most fuel
efficient car in its category.
The Company was aware that sales in Europe are being helped by scrappage
incentive schemes by various governments, and demand may slow down once the
schemes are withdrawn. While for the short term, there was focus on a lean
and agile supply chain, for the medium term, the Company developed several
non Europe markets. The Company now exports to more than a hundred
countries across the world.
Spares & Accessories:
The spares and accessories business grew at the pace of vehicles sales,
achieving a 29% year-on-year growth.
The focus was on ensuring timely availability of parts across the country,
at competitive prices. The Company also expanded the product range of
accessories, including high end categories.
A new state of the art warehouse has been constructed at Manesar.
Initiatives to reduce spare parts inventory at dealerships released
critical working capital for car sales.
ENGINEERING, RESEARCH & DEVELOPMENT:
Suzuki technology has through the years, given products which are just
right for India. The M800 car in the early eighties, Omni as the
multipurpose van, Swift as the premium compact car, Dzire and SX4 for the
upwardly mobile Indian are all examples of efforts to meet the consumer
lifestyle as closely as possible. The Company believes that the Indian
consumer is progressing at an impressive pace and deserves to get similar
enhancement in technology, features, styling, performance and cost
efficiency in the cars she buys.
While the Company gets excellent support from its parent in launching a
number of new models, it needs to supplement it with its own R&D
capability. The Company has moved in its R&D maturity path from parts
localization, to model facelifts, to collaborative design of global models.
The next step is full body capability. Towards building this capability,
the Company had embarked a few years ago on an integrated effort to induct
and train design engineers, put up world class proving grounds, crash test
facility, wind tunnel laboratory and other testing infrastructure, put up
shared IT infrastructure for computer aided engineering and try to build
live project experience with design engineers. The Company is on course on
these projects; 700 acres of land has been procured at Rohtak for the test
track and the strength of engineers is touching 1000.
The Company's designers showcased their imagination and styling prowess at
Auto Expo 2010 through the Concept rill. It is a three row family vehicle
seeking to compliment the lifestyle of consumers and giving them an avenue
to enjoy with friends and family. They also showcased an SX4 hybrid concept
car, on which lines cars will be used in the Commonwealth Games 2010.
During the course of the year, the Company launched several new and
refreshed models and introduced the K-series engines with a quantum jump in
technology.
It strengthened the premium compact segment with its new offering, the
Ritz. Sold in Europe with the brand name 'Splash', the Ritz comes with
contemporary European styling, advanced features like dual airbags,
electronic brake force distribution, steering mounted audio controls,
keyless entry, immobilizer. It is fitted with the next generation light
weight, low friction, and low noise K12 engine.
The K-series engines employ a plethora of technologies such as high
compression ratio, high atomisation injectors, offset crankshaft with light
weight piston and low tension rings, nutless conrod, rockerless DOHC,
plastic intake manifold, distributorless ignition and the like. The result
of these technologies is an unmatched combination of high power and high
fuel efficiency at the same time. The K-series engines were introduced in
the new Estilo, the new WagonR, the Swift and the Dzire.
The SX4 was refreshed with a face-lift and introduction of VVT (variable
valve timing) technology in the engine. The Company also launched a
refreshed model, the Eeco, with a 1.2 Litre engine which offers the
customer space and comfort at a very affordable price. The Company has
upgraded all its relevant models to Bharat Stage 4 emission norms.
The product design excellence of the Company was recognized by best in
category awards in four passenger car segments: WagonR in entry compact,
Ritz in premium compact, Swift Dzire in entry midsize and SX4 in midsize,
in the survey on Automotive Performance, Execution and Layout (APEAL)
conducted by JD Power Asia Pacific for 2009.
The Company has developed in-house systems for gas injected CNG powered
cars, which meet Bharat Stage 4 emission norms and deliver superior fuel
efficiency and power compared to conventional systems. CNG as an auto fuel
has low carbon dioxide emissions, is cost effective for the consumer and
has the potential of reducing the crude oil import of the country.
OPERATIONS:
The Company produced 33% more vehicles during the year compared to the
previous year, delivering much above installed capacity. The scale of
operations, the speed of demand recovery and the dynamism in product mix
put a huge requirement on the ability of the Company to stretch production,
be more flexible and more adaptive. The Company was prepared and in the
beginning of the year itself, the mantras of flexibility and agility were
adopted by the Company and business associates.
The Company has an integrated approach to deliver on its production
objectives in the form of a Production Management System or PMS. The core
of PMS lies in involvement of all levels of employees and generation of
ideas through a series of brainstorming sessions. These ideas are then
discussed within small groups and identified for implementation. This
approach unlocks organizational potential through clarity of goals and
ownership. The objective of PMS is to achieve manufacturing excellence in
four areas: Safety, Quality, Productivity and Cost. The Company benefits
from a powerful combination of Japanese best practices and Indian
innovation and information technology skills.
Skill and capability development at all levels is the next important
enabler. Associates on the shop floor had about 43,000 man-hours of
training in the year at the Company's technical training center.
Safety receives top management focus and a culture of zero tolerance is
being propagated within the Company. The Company leveraged training in root
cause analysis tools and with wide participation of associates in Quality
Circle activities was able to improve pre-delivery inspection results by
27%. Output and quality at the new K-series engine casting shop have
matched Suzuki levels in less than two years of operation.
The production teams worked on several cost reduction projects and achieved
substantial savings through machining tool cost reduction and automation of
material handling systems. Similar improvement projects have helped the
Company's machine shops to reach an overall equipment effectiveness of 91%,
at par with global levels.
Modernisation of Gurgaon Plant:
In line with introduction of new models and discontinuation of old ones,
some of the older production lines were reconfigured, merged and replaced
by highly flexible and productive lines with a net increase in throughput.
Swift Production at Gurgaon:
The Company has three plants in Gurgaon and one in Manesar. The Manesar
plant produces models like Swift, Dzire, SX4 and A-star. Following strong
demand in the Manesar models, the Company created facilities to co-produce
the Swift in the Gurgaon plant. The Company was able to deliver about
17,000 more Swift cars to waiting customers in the year through this
initiative.
KB series engine plant expansion:
The Company raised the capacity of its next generation K-series engine
plant to more than 500,000 units per annum. It is a state of the art plant
with features like in-process quality check machines, automatic leak
testing, automatic measuring machines, cold test bench and RFID & Ethernet
traceability systems.
Manesar capacity expansion:
The Company started work on an additional plant of 250,000 cars per annum
capacity at Manesar. The Company is making all efforts to maximize
capability through de-bottlenecking and productivity improvement to meet
market demand before the new facility comes up.
Tool & die design capability:
The Company has started the design & development of dies for critical sheet
metal parts and engine components. During the year, inhouse die development
for body parts of models like the Ritz, Eeco and Estilo helped the company
save cost over imported dies. In addition, significant cost saving was
achieved through better tool design to facilitate yield improvement and use
of alternate raw material. With faster product refreshment cycles in the
future, this capability will help the Company deliver new models in lesser
time and cost.
Information Technology:
Information technology serves as a strategic enabler. It helps the
management to effectively monitor performance of vendors and dealers using
Vendor Management System and Dealer Balance Scorecard. This throws up areas
of improvement, operationally and financially.
IT helps in providing a connected environment for seamless collaboration in
the entire value chain. At one end, IT connects suppliers on a real time
basis through an extranet to ensure on time delivery and supplier
enhancement. On the other, it supports all dealers on a real time basis for
sales and service transactions, and critical management information system
on customer behaviour and operational excellence.
The Company has initiated a project on analytics and business intelligence
using a customer database of about 6 million records.
The Company has taken adequate precaution for business continuity in any
unforeseen event affecting the information system.
COMPONENTS AND RAW MATERIAL PROCUREMENT:
The year 2009-10 was challenging for the auto component industry. After the
slowdown of 2008-09, it had to quickly adjust itself to a spurt in demand.
Its manufacturing capacities, human resources and finances came under
stretch. While the component vendors were able to support the Company,
there were select cases of supply disruptions owing to issues relating to
industrial relations or manufacturing operation.
The Company is helping component suppliers scale up, given their critical
role in the growth of the auto industry. The Company has, since inception,
facilitated more than a hundred technology collaborations for vendors and
shared its quality and manufacturing best practices with them. In addition,
the company is now engaging with vendors on professional management, HR
systems and best practices, financial sustainability and a culture that
fosters good quality at every step. This engagement is a very structured
exercise involving best in class consultants, vendor CEOs with a detailed
mapping of the current situation and recommended improvements.
The Company continued to deploy powerful techniques and methodologies of
cost reduction. Special emphasis was laid on localization of parts imported
by vendors as, apart from cost reduction, it provides immunity from foreign
exchange fluctuations.
Steel prices kept low for most part of the year, but climbed steeply
towards the end. On select commodities like copper and precious metals, the
Company took hedging calls and the experience has been positive. The
Japanese yen broadly continued to be strong, and poses a structural cost
disadvantage in imports.
FINANCE:
The fast-paced recovery of the economy in 2009-10 was largely supported by
a prudent policy response of the Government of India in the wake of the
financial crisis. The global economy, led by the Asian economies especially
China and India, has shown signs of recovery in 2009-10.
Industrial growth gathered pace in India in the second half of the
financial year and has averaged 9.3% for the whole year. Combined with good
growth in services (8.5%) and flat performance in agriculture despite a
dull monsoon, the economy grew by 7.4% in 2009-10. With the softening of
commodity prices, good growth in volumes resulting in economies of scale
and favourable exchange rate movement in Euro resulting in better export
realizations, the Company has shown decent improvement in sales as well as
profits.
Highlights
Domestic Volumes 21%
Export Volumes 111%
Net Sales 42.2%
PBT 114%
PAT 105%
The Company registered its highest ever sales of 1,018,365 vehicles in the
domestic and export markets during 2009-10.
This resulted in Net Sales of Rs. 289,585 million (excluding excise), a
growth of 42.2 per cent over 2008-09. The Company's sales growth, coupled
with continuous improvements in operational efficiencies has contributed to
its financial performance for 2009-10.
Earnings before depreciation, interest, tax and amortization (EBDITA) stood
at Rs. 44,510 million against Rs. 24,333 million in the previous year
recording a jump of 82.9%.
Net profit increased by 105 per cent, to Rs. 24,976 million from Rs. 12,187
million.
Earnings per share (EPS) increased from Rs. 42.18 in 2008-09 to Rs. 86.45
in 2009-10.
Table 1: Abridged profit and loss account for 2009-10(Rs. million)
Parameters 2009-10 2008-09 Change
1. Volumes (Nos.)
Domestic 870,790 722,144
Exports 147,575 70,023
Total 1,018,365 792,167 28.6%
2. Gross Sales 318,073 230,852
Vehicles 298,534 216,590
Spares, dies, moulds 19,539 14,262
3. Excise duty 28,488 27,269
4. Net sales (2-3) 289,585 203,583
5. Income from services 1,404 954
6. Total operating income 290,989 204,537
7. Other income 10,209 10,001
8. Total income 301,198 214,538 40.4%
9. Consumption of raw materials & 224,134 162,427
components, stores & traded goods
10. Employee costs 5,456 4,711
11. Manufacturing, administrative 17,938 15,685
and other costs
12. Selling and distribution expenses 9,160 7,382
13. Financial expenses 335 510
14. Depreciation 8,250 7,065
15. Total expenditure 265,273 197,780 34.1%
16. PBT (8-15) 35,925 16,758
17. Current tax 11,230 4,592
18. Deferred tax (281) (118)
19. Fringe benefit tax 0 97
20. PAT (16-17-18-19) 24,976 12,187 105%
Table 2: Financial Performance Ratios (As a Percentage of Net Sales)
Parameters 2009-10 2008-09 Change
Material cost 77.4% 79.8% -2.4%
Employee cost 1.9% 2.3% -0.4%
Manufacturing & 6.2% 7.7% -1.5%
admin expenses
Selling and distribution 3.2% 3.6% -0.4%
expenses
Depreciaton 2.8% 3.5% -0.7%
PBT 12.4% 8.2% 4.2%
Transition to International Financial Reporting Standards (IFRS)
The Institute of Chartered Accountants of India has mandated that Listed
Indian Companies should converge to IFRS by April 1, 2011. The Company has
taken steps towards convergence to IFRS. At the preliminary stages, the
impact of convergence on operations and financial performance has been
assessed. The Company is confident that it will be ready for convergence to
IFRS as per the stipulated time lines.
Working Capital Management:
Around 75% of the Company's components by value are outsourced, and
manufacturing is undertaken based on JustIn-Time (JIT) inventory
principles. Working capital management, therefore, plays a key role in the
Company's operations. The inventory turnover ratio of the Company has
increased from 16.7 in 2008-09 to 21.2 in 2009-10. The average receivables
holding period has decreased from 12.6 days in 2008-09 to 10 days in 2009-
10.
Treasury Operations:
The Company has efficiently managed its surplus funds through careful
treasury operations. The guiding principle of the Company's treasury
investments is safety and prudence. In view of this, the Company invested
its surplus funds in debt schemes of mutual funds and short-term bank fixed
deposits. This has enabled the Company to earn reasonable and stable
returns in a dynamic interest rate scenario.
Table 3: lists the different portfolios while Table 4 lists the return on
these surplus funds.
Table 3: Investment of surplus funds (Rs. million)
31-03-10 % of total 31-03-09 % of total
Bank fixed deposits 0 0% 17,000 38%
Debt mutual fund 67,930 100% 27,907 62%
Total 67,930 100% 44,907 100%
Table 4: Income from investment of surplus funds
(Rs. million) 2009-10 2008-09
Interest on fixed deposits 1,156 660
Dividend from debt mutual funds 1,531 1,399
Profit from sale of investments 1,257 2,137
Total 3,944 4,196
Foreign exchange risk management:
The Company is exposed to the risks associated with fluctuations in foreign
exchange rates mainly on import of components, raw materials, royalty
payments and export of vehicles. The Company has a well structured exchange
risk management policy. The Company manages its exchange risk by using
appropriate hedge instruments depending on the market conditions and the
view on the currency. With a quantum increase in exports in the year, the
Company became marginally surplus on foreign exchange, however with a
cross-currency exposure. Most of the exports being to Europe were
denominated in Euro and most of the imports being from Japan were
denominated in Japanese yen. With a view to protect its budgeted
assumptions, the Company took calibrated hedges on the ratio of euro to yen
and the experience has broadly been positive.
Internal controls and adequacy:
The Company has a proper and adequate system of internal control to ensure
that all assets are safeguarded and protected against loss from
unauthorized use or disposition, and that all transactions are authorized,
recorded and reported correctly. The internal control system is designed to
ensure that financial and other records are reliable for preparing
financial information and other data, and for maintaining accountability of
assets. The internal control system is supplemented by an extensive program
of internal audits, reviews by management, and documented policies,
guidelines and procedures.
HUMAN RESOURCES:
The Company has, over a period of time, inculcated an environment of
exceptional employee engagement, ownership, motivation and pride. The
people in the Company take the growth of the Company as a means of their
own advancement and believe in team spirit and collective progress. This
environment is a result of principles of equality, objectivity and
openness, examples set by top leadership, a fair, transparent and
interactive performance assessment and recognition system and a culture of
appreciation. The Company encourages people to look out for facts and do
root cause analysis with depth and rigour. The Company has since inception
followed practices like an open office, a common canteen for all levels,
common uniform all of which encourage openness and honesty. Similarly the
Company insists on 3G a Japanese principle meaning go to the spot, see the
problem for yourself, take countermeasure then and there. This is actually
a measure to encourage people to stay in touch with reality. Internal
communication is driven both culturally and through organized and
structured tools to facilitate flow of this wisdom. The Company believes
that this is the foundation of superior business performance and is strong
enough to create unprecedented results in market share, customer
satisfaction and financials.
The Company is adopting initiatives like 360 degree feedback for middle
management, tea group meetings with MD and top management and Stay-
Interview to take this openness to a still higher level. This translates to
better speed, responsiveness, commitment and people excellence.
The Company keeps realigning the organization structure with environment
and business needs. The HR organization in the Company split itself to have
dedicated HR departments for functions like R&D, Marketing and Production.
These departments are located in the offices of their respective functions
and have dual reporting to the HR head and to the functional heads. The
result is each function gets customized HR support in terms of policy and
training interventions. A company wide succession planning exercise was
undertaken for key roles to ensure the leadership pipeline stays full and
business continuity is assured.
Building engineering capability has been identified as a key strategic
imperative. Substantial steps were taken to create a large talent pool of
young engineers with a clearly defined skill building process within Maruti
and Suzuki, Japan. The company also went to the USA, Europe and Japan for
global hiring of engineering talent for imparting their knowledge to the
younger engineers and for specific competencies.
In depth thought was given to training needs at all levels and functions.
For instance, to help sales staff understand customer satisfaction better,
they were trained in 5-Why analysis, a tool normally associated with
engineering and quality function. Union members were sensitized to
macro-economic and business realities for a better appreciation of
management thought. The industrial relations were cordial and a long term
wage settlement was signed in April '09 with the help of a proactive, fair,
firm and transparent approach.
The HR division partnered with the Supply Chain division to engage the
company's vendors to facilitate HR functional maturity in a very structured
project. The Company believes, as in its own case, the scalability and
growth of component manufacturers will happen only if they place people
first.
RISK FACTORS:
The Company operates in an environment which is affected by various factors
some of which are controllable while some are outside the control of the
company. The activity of risk management in the company is reviewed by the
Audit Committee through a management sub committee, namely the Executive
Risk Management Committee (ERMC). The ERMC consists of Managing Director &
CEO and all executive officers of the Company. It reviews the risk
management activities on a regular basis in addition to scanning for any
new risks that may arise due to changes in the business environment. While
the possibility of a negative impact due to one or more such risks cannot
be totally precluded the Company proactively takes reasonable steps and
makes efforts to mitigate significant risks that may affect it. Some of the
risks that are potentially significant in nature and need careful
monitoring are listed hereunder:
* Macroeconomic Factors
* Inappropriate product portfolio
* Competition product launches
* Talent Acquisition & retention
* Continuance and growth of channel partners
* High Dependence on suppliers
* Geographic concentration
* Changes in Government policy and legislation
OUTLOOK:
The passenger vehicle market size in India is now comparable to some of the
developed economies of the world and ranks 7th globally. A simple
extrapolation of the past growth rates suggests that India will improve its
ranking from this level. If there is a steeper non-linear growth owing to a
household income tipping point, the ranking will improve more. The presence
of a number of global players, the introduction of technology, features,
styling and regulation indicate that the market is gradually attaining
maturity. While all indicators suggest a good growth path for the market, a
number of entrants are eyeing the same market.
The Company has in the past built a position for itself in terms of a
sizeable portfolio of relevant products, a wide network with good systems
and processes, strong customer equity, R&D capability, cost leadership, and
a profitable business model with healthy practices for its vendors, dealers
and itself. There is a well-defined roadmap for building on strengths like
products, total cost of ownership, sales and service network and systems
and processes for customer delight. They all augur well for the future, but
the risks to organizations at such levels are more internal than external.
The Company has to watch out for signs of complacence, self satisfaction or
sluggishness. The leader does not have the luxury of a visible and defined
benchmark or competitor, as it would be available to the other players. The
only benchmark has to be a sharper understanding and anticipation of the
stated and unstated need of the customer. The Company, therefore has to
keep attacking itself, keep challenging its own levels of past achievement,
keep setting high benchmarks for improvement and continue dedicating itself
to understanding and serving its customers.
Disclaimer:
Statements in this management discussion and analysis describing the
Company's objectives, projections, estimates and expectations are
categorized as 'forward looking statements' within the meaning of
applicable laws and regulations.
Actual results may differ substantially or materially from those expressed
or implied.
Important developments that could affect the Company's operations include a
downward trend in the domestic auto-industry, competition, rise in input
costs, exchange rate fluctuations, and significant changes in the political
and economic environment in India, environmental standards, tax laws,
litigation and labour relations.
SUSTAINABILITY @ MARUTI SUZUKI
The sustainability philosophy of Maruti Suzuki revolves around the theme of
'Give, Get and Grow' or 3G. We believe that Give is the starting point and
a route to Get and Grow. The resounding example is Maruti 800, the car
which gave the customers freedom to travel without worrying about
affordability, reliability and post-sale service. It got the distinction of
putting India on four wheels and Maruti Suzuki on the growth path.
The Company facilitated Indian entrepreneurs in partnering with foreign
component manufacturers when auto component industry was virtually non-
existent, launched relevant cars to suit customer requirements, and set up
a large sales and service network. These partnerships stood the test of
time and most of the suppliers and dealers who started business with the
Company are still part of Maruti Suzuki family.
Over its 26 years of journey, the Company transformed itself from a
successful Public Sector Company (PSU) to a vibrant and listed Multi-
National Company (MNC), sustained its leadership position and remained
profitable despite tough competition. Stakeholders supported the Company in
facing various challenges. The parent, Suzuki Motor Corporation played key
role in inculcating quality and cost consciousness among employees,
suppliers and in implementing Japanese manufacturing practices, Kaizen, 5S,
Suggestion Scheme, QC etc.
Economic Sustainability:
All financial and investment decisions are taken for the long term
sustainability and profitable growth of the Company and its stakeholders.
Temptations to achieve quick short term gains are avoided. Expansion
programmes are funded through internal accruals. The Company has a robust
liquid surplus of Rs. 67.9 billion as on 31st March 2010 and gearing of
0.07.
The Company has put in place a comprehensive Executive Risk Management
Framework and has a designated Chief Risk Officer. All risks to the
business arising out of internal and external environment are reviewed and
presented to the Board along with mitigation plans.
The operational efficiencies achieved through Production Management System
(PMS), productivity improvement initiatives, cost saving drives and
elimination of wastages give significant cost benefits to the Company.
Around 86% suppliers (by value) are located within a radius of 100 kms of
our manufacturing facilities thus reducing transportation and inventory
carrying cost.
Introduction of new technologies and contemporary designs gave sustained
demand growth for Maruti Suzuki cars, necessitating expansion of operations
both in the upstream and downstream and creating employment opportunities
for skilled and semi-skilled manpower. In addition, our dealers and
suppliers also increased manpower to keep pace with the growth of the
business. The Company contributed Rs. 54.6 billion to the national
exchequer in 2009-10.
Environmental Sustainability:
The Company remained ahead of regulations while introducing products,
setting up manufacturing facilities and in supply chain management. We
believe that steps taken to minimise environmental impacts ultimately help
the Company becoming more profitable and its products more acceptable to
customers. There are many firsts to Maruti Suzuki's credit in the area of
environment.
* 1st to set up effluent treatment facilities way back in 1984, when there
was no legal requirement
* 1st Indian automobile company to go for ISO 14001 certification in 1999
* 1st to use natural gas for power generation at its captive power plants
* 1st to introduce factory fitted LPG and CNG cars
* 1st to launch ELV compliant cars
* 1st to launch cars complying to Bharat Stage-IV emission norms
* 1st to voluntarily disclose fuel efficiency of cars at dealerships
Through various proactive initiatives, the Company has been able to reduce
its per vehicle energy consumption by 20%, water consumption by 60%, land
fill rate by 65% since the implementation of EMS (Environment Management
System) in 1999. With 100% recycling of waste water, the Company has
achieved zero waste water discharge status since 2003-04 at its Gurgaon
facility. In 2009-10, natural gas supply was extended to Manesar plant for
captive power generation.
The Company facilitates implementation of EMS at its suppliers. Periodic
briefing and training programmes are organised for suppliers on topics such
as EMS, Environmental law/regulations, Hazardous waste management, etc.
Recyclable packaging has been a major focus area and all new model parts
are supplied in recyclable packaging only.
Social Sustainability:
The Company's social sustainability initiatives cover customers, employees,
local community and society at large. Robust engagement processes are in
place to understand their needs.
Customers are central to the business and its long term sustainability.
Besides offering the customers safe and comfortable cars, the Company
sensitises them about the impact of spurious spare part usage on vehicle
performance, retro-fitment of unauthorized LPG/CNG kits on personal safety
and tips to achieve maximum fuel efficiency.
The Company provides conducive and healthy work environment to employees.
Utmost importance is given to employee training, development and career
growth. Employees and their dependent family members are provided with
medical facilities in the reputed hospitals. All employees over 40 years of
age have to compulsorily undergo an annual health check up. Employees are
encouraged to volunteer their time for the benefit of needy people. In
2009-10, employees contributed over 4000 volunteering manhours.
Road Safety and Vocational Training are the flagship CSR programmes of the
Company. The Road Safety journey of the Company began in 2000 with the
setting up of Institute of Driving Training and Research (IDTR) in
partnership with Delhi government. This was followed by a second IDTR in
Delhi in 2006. In 2009-10, two more IDTRs were activated; one each in
Gujarat and Uttrakhand, and two IDTRs are nearing completion in Haryana.
To expand reach of its road safety initiatives to a larger population, the
Company launched Maruti Driving Schools (MDS) in 2005. With the activation
of 27 new MDS in 200910, the number of MDS has reached 83 as on 31st March,
2010. In 2008-09, the Company launched its National Road Safety Mission to
promote road safety in the country through training, awareness and
advocacy. The Company took a target to train 500,000 people in safe driving
in three years. The Company is on course to achieve this target. In 2009-
10, 137,000 people were trained in safe driving.
In 2006, the Company, along with two of its suppliers partnered with the
state government to upgrade four ITIs in Haryana. In 2009-10, the Company
took this initiative forward by adopting a women's ITI at Gurgaon, Haryana.
An Institute Development Plan (IDP) has been prepared to upgrade this ITI
into 'Centre of Excellence' for apparels.
The Company considers the local community an important stakeholder. A
dedicated CSR team with an NGO partner works for the overall development of
four adopted villages surrounding Manesar plant. The key focus areas are
education, employability, health care and infrastructure development.
The Company spent Rs. 113 million in 2009-10 on CSR activities as compared
to Rs. 76.7 million in 2008-09.
In 2009-10, the Company published its first Sustainability Report as per
GRI G3 Reporting guidelines. This report is externally assured and conforms
to A+ level. The report is available on the Company's website
www.marutisuzuki.com. |