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Maruti Suzuki Results for FY 16 : Earnings Contract in Q4, But Strong Outlook Due To Brezza and Baleno


Today we bring you a coverage of the Maruti Suzuki India Q4 Earnings Call. You can read our earlier coverage of the fundamentals of Maruti Suzuki in the below posts Past to Present of Maruti Suzuki and Company Notes: Maruti Suzuki (Oct-Dec 2015)

Maruti Suzuki Main Logo

Maruti Suzuki – India’s leading passenger vehicle manufacturer reported an Overall Sales of 1.42 million units compared to 1.29 million units a year ago. The company has broken ground on the Gujarat plant which is expected to be commissioned in early January, 2017 (5 month ahead of its planned commissioning).

The share which opened at Rs. 3,704.05/- yesterday, closed at a high of Rs. 3,871.55/- (Notice the big increase in price)

Maruti Suzuki Share Price April 2016

Here is how the financials of the company stand at: Maruti Suzuki India March 2016 Results

Note: All values reported here are in crores and the source of the data is Company Presentation and Results for the Quarter ended 31st March, 2016)

Here is what the Managing Director had to say:

Maruti, which had been mandated by parent Suzuki Motor to produce and market vehicles for the African West Asian and some South Asian markets, has commenced feasibility studies to evaluate the potential of setting up a unit in Africa. But a final decision has not been taken yet.

Here is what the company Chairman had to add:

We are taking forward Make in India programme with our manufacturing and we hope to grow in double digits in 2016-17. We are again setting a target of repeating double-digit growth despite the many challenges in the way. It’s not going to be an easy year in any way.

Our current capacity is around 1.43 million units from the two plants. Our engineers are working to enhance it. We can stretch it up to 1.57 million units but will be mostly in Manesar since we cannot increase production at the Gurgaon plant much as movement of heavy trucks create inconvenience to the people staying around the plant.

On Africa – We have a team in place now for land acquisition. We have allocated Rs 800 crore for building sales and marketing infrastructure. If required, we can step this up further.

Here is the excerpt from the Management Call:

Maruti Suzuki Financial 2015-16


  • Marketing spending is expected to go up as the focus is now around new models and the Nexa channels.
  • 2400 Cr was the Capex for this year broadly in the category of new products, marketing spend, infra spend, R&D along with an annual maintenance expenditure 600-700 Cr.
  • For the next year the Capex budgeted is Rs. 4,400 Cr. i.e. new products, marketing infra, R&D and annual maintenance capex. Expenditure on new products would account for 40% of the budget.
  • Land investment allocation has been made for Rs. 800 Cr for the setup of regional offices and transit vehicle stock yard like the ones at Bangalore and Nagpur. For Siliguri stock yard, the land has been procured and this year it would be operational as well.


  • Product mix is very good with the launch of Brezza and Baleno and discounts in this quarter were lower in this quarter compared to precious i.e. Rs.4,000/- lesser.
  • Discounts have narrowed by large amounts. There are no discounts for the newer models such as the Baleno and Brezza and hence the discounts have narrowed down by a large amount.
  • Divergence in the discounts between Diesel and Petrol vehicles is currently very small and this is a tactical call taken out the ground level and not a strategic decision.
  • S-Cross compensation of around Rs. 80 million was provided to customers due to the reduction in the prices. Based on the ground report, the product was over-priced.


  • Revenue for the quarter stood at Rs.1,382 Cr. and for the year it stood at Rs. 5,134 Cr.
  • Volume growth for FY17 would remain flat looking at the overall economic condition. Current target is at 50,000 units for the whole year.
  • Sri Lanka was one of the key markets in FY16, sales to that market is going down due to increase in duties. Baleno exports to other countries will compensate for this and hence the exports will have flat growth.

Below chart shows the co-relation of Export Units and Export Revenue:

Maruti Suzuki Exports Volume Revenue 2015-16

Forex/ Royalty:

  • Royalty stood at 6.3% or Rs. 944 Cr for Q4.
  • Royalty was restated from Q3 to Q4 which had a 40 basis point impact in this current quarter.
  • A talk of future models royalty to be paid in INR and not JPY is still under discussion with the parent company. Brezza is the first model wherein the royalty is being paid in INR terms. Additionally, the INR royalty is lower than the normal rates for Brezza since Maruti has put in some efforts as well.


Production & Sales:

Maruti Suzuki Sales Volume Sub Segment for the year 2015-16

  • The current capacity is 1.4 million and the company produced 1.43 million ofr FY 2015-16. To achieve a double digit growth for Fy 2016-17, the company would have to produce 1.57 million units (this is only possible by increasing the shift operations and with hte introduction of some temporary lines.)
  • For Baleno – the target planned production is 10,000 units for this year. The company is looking for ways to to sque
    eze Baleno and Vitara production so as to reduce the waiting period of both the models.
  • Gujarat plant is expected to be commissioned by January 2017 and would take at least 6 months for full steam. Phase 2 of the plant is currently being reviewed.
  • Diesel volume sales for Q4 stood at 99,000 units.
  • Year gone by 9% growth (22% in the previous year) was achieved for rural market and the same in Urban market. However, due to bad monsoon – rural economy is under pressure and the revive will happen October onwards (for the first 6 months there won’t be any revivals of sales in the rural economy. Due to this the company is concentrating on increasing its reach (showrooms) and post October the company would start penetrating the untapped regions.
  • FY17 urban growth will be better than rural growth with the introduction of newer and upgraded models
  • Traction is still not being seen in the current market. There is excitement only in new models. Older models are still going slower and not at the general pace.
  • Post launch of Brezza, the company is now focused on the LCV launch by the end of Q1.



Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.


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