The Board of automaker Maruti Suzuki India on Monday approved termination of the contract manufacturing agreement with Suzuki Motor Gujarat Private Limited (SMG) and exercising the option to acquire the shares of SMG from Suzuki Motor Corporation (SMC). The acquisition of SMG from SMC will happen before March 31, 2024.

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"The Board, in its meeting held today, approved termination of the contract manufacturing agreement with Suzuki Motor Gujarat Private Limited (SMG) and exercising the option to acquire the shares of SMG from Suzuki Motor Corporation (SMC) subject to all legal and regulatory compliances including minority shareholders’ approval," the company said in a filing.

SMC currently holds 100 percent equity capital of SMG. The acquisition of 100 percent equity capital by Maruti Suzuki India from SMC is a related

party transaction and shall be done according to the prevalent law and regulations, the statement read.

The mode of acquisition including consideration to be paid to SMC shall be decided in a subsequent board meeting, the company said.

In terms of actual production, logistics, sales and the cost thereof, there will be no change as the cars earlier supplied by SMG as a contract manufacturer, will now continue to be supplied as before, it said.

Maruti Suzuki Q1 numbers

Maruti Suzuki India's net profit for the quarter ended June 2023 surged more than 2-fold year-on-year (YoY) to Rs 2,485 crore, and was in-line with the CNBC-TV18's poll of Rs 2,403 crore.

The steep growth in the net profit during Q1 was on account of larger sales volume, improved realization, cost reduction efforts, and higher non-operating income.

The company's revenue from operations grew 22 percent on-year to Rs 32,327 crore and was higher than the estimated Rs 31,437 crore.

Maruti Suzuki India's volumes during the quarter grew by 6 percent on-year to 4.98 lakh units.

The company's operating profit or EBITDA has grown by 56 percent YoY but missed analysts' expectations. Margins also expanded by 200 basis points from last year, but missed the 10.3 percent expectations.

Maruti Suzuki India attributed the margin expansion to improved realisations, softening of commodity prices, cost reduction efforts and higher non-operating income. These factors were partially offset by higher sales promotion expenses.

However, on a sequential basis, the automaker's EBITDA margin dropped by over 100 basis points due to higher sales promotion expenses, unfavourable forex variations and higher employee costs. These factors were partly offset by higher non-operating income.

The country’s largest automaker sold 498,030 units during the first quarter, which was 6.4 percent higher than the corresponding period of last fiscal. Sales in the domestic market grew 9 percent on-year to 4,34,812 units, while exports tumbled 9 percent on year to 63,218 units.

“Shortage of electronic components in the quarter resulted in over 28,000 vehicles not being produced,” the automaker said in a statement.

The pending customer orders stood at about 3,55,000 vehicles at the end of Q1, and the company is making efforts to serve these orders fast.

First Published:Jul 31, 2023 4:24 PM IST