Director's  Report
Director's Report
Maruti Suzuki India Ltd Industry:  Automobiles - Passenger Cars
BSE Code ISIN Demat Book Value(R) NSE Symbol Div Yield % Market Cap
(Rs.Cr)
P/E(TTM) EPS(TTM) Face Value(R)
532500 INE585B01010 615.03 MARUTI 0.4 59894.91 18.59 106.68 5



DIRECTORS' REPORT




Your directors have pleasure in presenting the 32nd annual report together with the audited accounts for the year ended 31st March 2013.

FINANCIAL RESULTS

The Company's financial performance during the year 2012-13 as compared to the previous year 2011-12 is summarised beLow:

(Rs. in million)
2012-13 2011-12
Total revenue 444,003 364,139
Profit before tax 29,910 21,462
Tax expense 5,989 5,110
Profit aftertax 23,921 16,352
Balance broughtforward 130,777 118,578
Addition on amalgamation 3,565 -
Profit available for appropriation 158,263 134,930
Appropriations:
General reserve 2,392 1,635
Proposed dividend 2,417 2,167
Corporate dividend tax 411 351
Balance carried forward to balance sheet 153,043 130,777

FINANCIAL HIGHLIGHTS

The total revenue (net of excise) was Rs. 444,003 million as against Rs. 364,139 million in the previous year showing an increase of 22 per cent. Sale of vehicles in the domestic market was 1,051,046 units as compared to 1,006,316 units in the previous year showing an increase of 4 per cent. Total number of vehicles exported was 120,388 units as compared to 127, 379 units in the previous year.

Profit before tax (PBT) was Rs. 29,910 million against Rs. 21,462 million showing an increase of 39 per cent and profit after tax (PAT) stood at Rs. 23,921 million against Rs. 16,352 million in the previous year showing an increase of 46 per cent.

DIVIDEND

The board recommends a dividend of Rs. 8 (eight) per equity share of Rs. 5 each for the year ended 31st March 2013 amounting to Rs. 2,417 million.

OPERATIONAL HIGHLIGHTS

The operations are exhaustively discussed in the report on 'Management Discussion and Analysis' which forms part of this annual report.

CRISIL RATINGS

The Company was awarded the highest financial credit rating of AAA/stable (long term) and A1+ (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 was again awarded ISO:27001 certification by STOC Directorate (Standardisation, Testing and Quality Certificate), Ministry of Communications and Information Technology, Government of India after re-assessment. The Company has established and is maintaining an Information Security Management System.

During the year, ISO 14001 Surveillance audit was carried out by M/s AVI, Belgium and the auditors recommended continuation ofthe ISO 14001.

The quality management system of the Company is certified against ISO 9001:2008 Standard. Re-assessment ofthe quality systems is done at regular intervals and re-certification assessments are done at every 3 years by an accredited third party agency. Also, the Company has an internal assessment mechanism to verify and ensure adherence of defined quality systems across the Company.

AWARDS/RECOGNITION/ RANKINGS

• J. D. Power Asia Pacific 2012 Customer Satisfaction Index (CSI) Study ranked the Company highest for the 13th time in a row.

• Golden Peacock Award - 2012 for occupational health and safety in automobile sector.

• Golden Peacock Award - 2012 for sustainability.

• Some of the awards given to Ertiga were:

• MUVof the year by Car India Awards

• MPV of the year by ET Zigwheels, Autocar India and BS Motoring 2013

• Compact SUV for the year by CNBC Overdrive

• Top Gear family car of the year Some of the awards given to Alto 800 were:

• Entry Hatchback Car of the Year 2012 by NDTV CNBC Awards 2013 Entry-level Hatchback Car of the Year by ET Zigwheels Awards 2012

• Best Value for Money Car of the year by Autocar Awards2013

• Compact Car of the year by CNBC Overdrive

• Viewers Choice by CNBC Overdrive • Some of the awards given to Swift DZire were: Compact Sedan of the year 2013

• Compact Sedan of the year by Car India Midsized Car of the year by CNBC Overdrive

• The Company ranked third in the list of 100 most successful and influential companies in India listed by TLG Partners, London.

Mr. R. C. Bhargava, Chairman was awarded the Automobile Person of the Year 2013 by NDTV Profit.

SUBSIDIARY COMPANIES AND THEIR ACCOUNTS

The Company's subsidiaries which were engaged in the business of insurance distribution in the past generated an investment income of Rs. 141.75 million including a dividend income of Rs. 8.93 million and long term capital gain of Rs. 132.82 million through mutual funds.

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 pre-owned cars under the brand Maruti True Value. It has contributed significantly to the efforts of customer retention by facilitating sale and re-purchase of new cars through exchange and has made significant contribution towards enhancing dealers' profitability.

In terms of the general circular dated 8th February 2011 issued by the Government of India, Ministry of Corporate Affairs, 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. Annual accounts of the subsidiary companies and the related detailed information shall be made available to shareholders of the Company and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiary companies shaLL also be available for inspection by any shareholder at the head office of the Company and of the subsidiary companies. Hard copy of details of accounts of subsidiaries shall be furnished to any shareholder on demand. Further, pursuant to Accounting Standard - 21 issued by the Institute of Chartered Accountants of India, consolidated financial statements presented by the Company include the financial information of its subsidiaries.

AMALGAMATION

During the year under review, Suzuki Powertrain India Limited (SPIL) was amalgamated with and into the Company vide the order of the Hon'ble High Court of Delhi dated 29th January 2013. The order was filed with the Registrar of Companies, Ministry of Corporate Affairs on 17th March 2013. The appointed date of amalgamation was 1st April 2012. Pursuant to the scheme of amalgamation, 1,3170,000 equity shares of Rs. 5/- each were allotted to Suzuki Motor Corporation on 29th March 2013 and the paid up equity capital stands increased to Rs. 1,510 million.

HUMAN RESOURCE DEVELOPMENT

To have a sustainable competitive advantage in the new knowledge economy, learning is a key catalyst for an organisation's survival and success. The Company, therefore, provided tremendous learning and development opportunities to its employees, starting from induction and orientation program for all the new joinees to regular training programs to develop and enhance the skill levels (functional and behavioral) for all the employees. The training programs varied and were tailored according to the business requirements, employee needs at various levels and are designed with the help of a thorough and well structured process of need identification connected to the business demands. The Company's annual training calendar encompassed training programs for all categories of employees i.e. associates, supervisors and junior, middle, senior and top management level. To ensure a well rounded development of all the employees, the training calendar comprised of behavioral, functional, safety and environment trainings.

In 2012 -13, a total of 48,300 man-days of training were conducted for the employees across all the levels. This translates to an average of 5.15 days of training per employee.

The functional and technical trainings formed an important part of the Company's annual training calendar as they are directly linked with the employees' role and on the job performance. These trainings were imparted by in-house subject matter experts as well as by identified external trainers.

Some of the functional trainings imparted internallyare 3G,3K,5S, Design Failure Mode Effects Analysis (DFMEA), environment, product training and Quality Control (OC) tools. Examples of few functional trainings which are done by external trainers are finance for non-finance, six sigma, project management, inventory and warehouse management, world class manufacturing practices, auto cad, MS excel, etc.

The behavioral trainings also formed a considerable portion of the training calendar and included trainings on subjects like negotiation skills, problem solving and decision making skills, presentation and communications skills, conflict management and resolution, assertiveness and self confidence, time management and multi tasking skills, leading effectively, inter personal relationships, personal effectiveness, work life balance, team working, competency based interviewing skills, etc.

Workshops were designed specifically for the women employees to help them understand challenges at work woman, managing perceptions, expectations and disappointments, self-esteem, balancing work and home and managing stress.

The Company also provided higher education schemes for its employees. It helped not only to groom and retain the high potential young managers but also enabled employees to fulfill their career enhancement aspirations, while still working in the organisation. The scheme included programs like - executive MBA (full time and part time) at select campuses. The scheme was available for employees at levels of assistant managers to managers.

DIRECTORS

Mr. Amal Ganguli, Mr. Keiichi Asai and Mr. D. S. Brar, Directors of the Company, retire by rotation at the ensuing annual general meeting and being eligible, offer themselves for re-appointment. Mr. M. S. Banga, Independent Director resigned from the board of the Company with effect from close of business hours of 26th October 2012. Mr. R. P. Singh was appointed as an Independent Director in the casual vacancy caused bythe resignation of Mr. M.S. Banga. Mr. Shinzo Nakanishi retired from the post of MD & CEO of the Company with effect from close of business hours of 31st March 2013. Mr. Kenichi Ayukawa was appointed as the MD & CEO of the Company with effect from 1st April 2013.

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(l)(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 agreement and the stipulated certificate of compliance is contained in this Annual Report.

AUDITORS

The auditors, M/s Price Waterhouse, Firm Registration Number FRN301112E, 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 (IB) 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 on 31st March 2014. The extended due date of filing the cost audit report for the financial year 2011-12 in 'Extended Business Reporting Language' (XBRL) format with the Ministry of Corporate Affairs was 28th February 2013. This report was filed within the stipulated time on 18th January 2013.

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 co-operation, 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

KENICHI AYUKAWA R.C. BHARGAVA
Managing Director & CEO Chairman
New Delhi
26th April 2013

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 2013.

A. ENERGY CONSERVATION

The Company continued its energy conservation drive with the main focus on improving efficiency through adoption of the new technology and optimisation of the operations. Energy saving initiatives throughout the Gurgaon and Manesar plant helped the Company in reducing energy consumption by more than 1 per cent in most of the areas. The Company achieved 20 per cent reduction in energy consumption during important work done on holidays and non working hours. Some of the activities carried out during the year towards environment, energy and water conservation are mentioned under.

1. Energy efficient equipments installed/replaced :

a) Energy efficient pumping system for Reverse Osmosis (RO) plant at Gurgaon plant.

b) Energy efficient motors in paint shop, air washers, cooling tower, boiler and power plant in both Gurgaon and Manesar plant.

c) Energy efficient transformers for new shops.

d) Replacement of standard blades of cooling tower fans with aerodynamic energy efficient Fibre Reinforced Plastic (FRP) blades.

2. Upgradation of RO system from two stage to three stage for reduction in fresh water consumption.

3. Inlet steam injection system in gas turbines for improving performance.

4. Optimisation / improvement of process:

a) Voltage reduction in Electro Deposition (ED) process in Gurgaon plant.

b) Re-sizing of motors and pumps rating as per process requirement in shops.

c) Voltage reduction in shops for lighting.

d) Reduction in startup time of shops by sequential operation as per process requirement.

e) Modified compressed air system for improvement in power consumption.

f) Improvement in air washers efficiency by replacing spray zone with celdec media.

5. Improvement in lightings:

a) Replacement of conventional tube lights with highly efficient LED (Light Emitting Diodes) tube lights in vehicle assembly shops, Gurgaon plant.

b) Improved natural lighting system in shops.

B. RESEARCH & DEVELOPMENT (R&D)

India is one of the most competitive automotive markets today. Increasing competition from the global OEM (Original Equipment Manufacturers), volatile commodity prices, highly fluctuating foreign exchange, stricter regulatory requirements and last but not the least the increasing customer expectations makes the Indian automotive market very challenging. With unparalleled dedication and zeal to succeed, the R&D team of the Company worked in line with the Company's vision to retain the market superiority and win a place in the customers' hearts. The Company's

R&D team achieved the capability for carrying out full body change and is working on various new projects for new model design and development. The Company's R&D team is now on the path of advancing this capability further. Systemic efforts are going on to enhance it in the near future via following:

• Establishment of world class test track and proving ground facility at Rohtak which will help in validating the various vehicle systems and models

• Facilitation of full in-house designing, development and evaluation of entire vehicle

• Overseas and in-house training of engineers

• Development of prototype build capability

• Advanced engineering projects

In 2012-13,the manpowerof Company's R&D team reached to 1,249. The focus was on consolidating the experience gained and training imparted to a large number of young engineers for challenging R&D roles in the future.

Specific areas in which R&D has happened:

• Significant efforts were made in the preparation of the product road map, product specification, tracking of new technology and its implementation. Various pre and post launch market research activities were conducted to capture the customer voice and incorporate customer feedback in the existing and future products.

Vehicle exterior and interior design capabilities were enhanced with smart BIW (Body in White) structure packaging and improved fit and finish in interior design. Use of high tensile steel and structure optimisation helped in achieving overall weight reduction to get higher fuel efficiency. New cost effective technology of painted instrument panel has been introduced thus showcasing the Company's capability in enhancement in instrument panel design and development.

• Consistent efforts were put for capability up-gradation in the automotive electrical and electronic area. New generator, cost effective EMS (Engine Management System) platform were developed along with supplier partner and implemented in Alto 800. For control software validation HIL (Hardware in Loop) system was setup during the year.

• Capability up-gradation was done in the areas of chassis design and development to meet growing customers' expectation for safety, performance, reliability and fuel efficiency. The extensive use of (CAE) Computer Aided Engineering on the chassis parts during the initial design phase enabled weight optimisation and reduction in design validation time, thus minimising the overall vehicle development time. Contemporary technology application and optimal tuning of steering and suspension has enabled introduction of new Alto 800 and Ertiga with best in class ride and handling to cater to customers' expectations in the area of vehicle dynamics.

• The design proto vehicle build capability was further enhanced during the year. In the area of body shell, new technologies and materials like coated and high tensile materials were inducted. Work is being done in the new areas of powertrain development with competencies being developed in prototype casting and machining providing further opportunities to evaluate alternative specifications for design and product optimisation.

• Cost control was under constant focus

in R&D. For new models, detailed feasibility analysis was done and stringent cost targets were set for engineers to work on. In order to reduce costs right from concept stage, cost analysis and design to cost techniques were adopted. VE (Value Engineering) ideas of the Company's engineers and also the suppliers were incorporated at the design stage itself. Focus on incorporating India specific cost reduction ideas right at the design stage for global models helped the Company in achieving stricter target costs. For existing models, focused value enhancement projects were taken up in the various models by cross functional teams across the Company to provide the higher value products at lower costs. This was also a step towards maintaining the profitability during adverse economic conditions. Localisation of imported parts was taken up with a renewed thrust. This was also a step towards de-risking from foreign exchange exposure and to reduce material cost. The Company saved Rs. 216.4 crores by localisation and Rs. 209 crores from implementation of VA /VE (Value Analysis/Value Engineering) proposals.

The ongoing advanced engineering projects in the Company depict the Company's vision towards future. Project dedicated to development of hybrid, electric vehicle, integration of advance technologies and addition of new features were taken up by the Company during the year to enhance capability in various fields and develop new technologies for future readiness.

The Company's engineers presented their findings through engineering research papers at various international forums such as SAE (Society of Automotive Engineers) International, SIAT (Symposium on International Automotive Technology) and other prestigious conferences which gave a broader outlook to the Company's engineers and displayed the dedication, focus and hard work with which the Company's R&D team worked.

• To enhance the virtual validation skills, accuracy and reduce design cycle time and design modification and development cost, high performance server was installed. The Company has an edge over its competitors in terms of computational skills.

New CAE (Computer Aided Engineering) system and methodologies were introduced to lay emphasis on doing the things first time rightand reduce the prototyping cost.

• To further improve the in-house testing capability for the impending safety regulation, new crash testing facility is under installation at Rohtak. This will further reduce the product development cost and skills.

Benefits derived as a result of above efforts

• Alto 800 the first full body change was indigenously and entirely designed and developed by the Company's engineers with support from Suzuki Motor Corporation, Japan.

.• Ertiga launched in April 2012 created an entirely new compact MPV (Multi purpose vehicle) segment due to its designing.

• Introduction of refreshed Ritz both with manual and automatic transmission features.

• Introduction of refreshed Wagon R with a new refined interiors and better fuel efficiency.

• Introduction of refreshed SX4 with touch screen audio and navigation feature.

• All existing and new models except Gypsy were made OBD (on board diagnosis) II compliant well before the deadline date during this year. Work is progressing to make Gypsy OBD (on board diagnosis) II compliant early next year.

• 25 patent applications and 8 industrial

designs were filed by the Company's R&D team in 2012-13.

• INVEST (Indian Value Engineering Society) has awarded HANDA GOLDEN KEY award 2011-12 to the Company for "Excellence in deploying value engineering as a corporate activity."

Future plan of action

The Company will continue to introduce new products to meet growing customers' expectations. The existing products wiLL be refreshed at regular intervals to suit the upcoming trends. The Company will pro-actively work on increasing the fuel efficiency of all its models to offer economically affordable and environment friendly vehicles to the customers. One of the significant steps will be to introduce alternate fuel options like LPG (Liquefied Petroleum Gas) and CNG (Compressed Natural Gas) in the Company's vehicles. The Company will continue to focus on developing more products with alternate fuel options. In the long term,the Company will focus on enhancing the capability in the field of EV-HEV (Electric Vehicle - Hybrid Electric Vehicle) and other environment friendly initiatives. Another step towards making vehicles more affordable will be by maintaining the cost of development of vehicle through VA/VE and weight reduction activities. The Company will continuously work on alternate materials and newer technologies to reduce the vehicle cost and weight. Safety of the customers was and will continue to be of primary importance to the Company. The Company will continue to focus on new technologies to enhance the safety of the occupants and also meet the future safety regulations.

C. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Efforts in brief made towards technology absorption, adaptation and innovation

Designing of components and systems including development of design review process.

Componentand sub component level localisation, development and testing of the parts for the existing and new models.

• Capability enhancement in component and vehicle evaluation, benchmarking and design optimisation.

• Capability enhancement in the area of alternative fuels and powertrain by various study projects.

VE (Value Engineering) during new model designing phase for maximising cost benefit.

Generation of newer ideas for future designing and cost reduction via teardown and benchmarking.

2. Benefits derived as a result of above efforts

• High localisation content in various vehicles has resulted in lower costs.

• Continuous reduction in product cost through VA/VE.

Significant cost reduction of parts of new models compared to existing models, ensuring profitability of new models.

3. Technology inducted

• All models were made compliant with on board diagnosis (OBD)-II regulations much ahead of the targeted time of implementation i.e.

April 2013.

• New CNG fuel injectors were designed and introduced in Alto 800 CNG and Wagon R CNG which resulted in huge cost saving and weight reduction. Due to more precise flow rates, C02 (carbon dioxide) emissions were reduced very significantly.

New and unique plastic fuel rail, which is being used for the first time in entire Suzuki group, was designed and introduced in Alto 800. This resulted in significant weight reduction and fuel efficiency.

ISS (Idle stop start) feature was introduced in the export market to meet the stringent emission regulation requirements like Euro 5.The Company is capable of meeting any emission regulation in future and this technology can be extended to vehicles in local market based on emission regulations and market trend.

SWT (Single Variable Valve Timing) technology was introduced in new Ritz leading to improve fuel economy and reduced emissions.

• The Company achieved 3 to 15 per cent increase in fuel efficiency during the year across all models among various fuel options by working on different technologies and areas like optimisation of crank and intake system, new low viscosity oil, use of new technologies for rolling resistance reduction on tyres, etc.

Year of Import: 2012-13

Status of absorption: The above technologies have been used in products introduced during the year.

Expenditure incurred on R&D

(Rs. in million)
Particulars 2012-13 2011-12
A Capital Expenditure 2,613 1,491 |
B Recurring Expenditure 2,533 2,226
TOTAL 5,146 3,717
Total R&D expenditure as a percentage of total income 1.16% 1.02%

D. FOREIGN EXCHANGE EARNINGS & OUTGO

(ACCRUAL BASIS)

(Rs. in million)
Particulars 2012-13 2011-12
Foreign exchange used: equivalent
Raw materials and components 42,344 30,451
Capital goods 14,762 11,625
Dies & moulds, maintenance spares & other items 791 1,147
Royalty, interest, dividend and others 32,379 24,855
Foreign exchange earned: equivalent 45,514 36,918

Activities relating to exports

i) Initiatives taken to increase exports: The Company continued its efforts to export to Latin American and African markets. The Company exported a total of 120,388 units during the year. The exports to Non-European market showed an increase of 10 per cent. Total exports crossed a landmark of 1 million units.

ii) Development of new export markets for products and services: KD operations during the year with Indonesia and Thailand were eventually expanded to Malaysia, Vietnam and Hungary as well. New model Splash A/T was introduced in Indonesia.

iii) Export plans for future: Due to the European economy being hit by Eurozone Sovereign Debt Crisis,the automobile industry is expected to shrink by 7.9 per cent in 2013. Therefore the focus will be on export of vehicles to Non-European markets.

For and on behalf of the board of directors

KENICHI AYUKAWA R.C. BHARGAVA
Managing Director & CEO Chairman
New Delhi
26th April 2013
   
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