92 MARUTI SUZUKI INDIA LIMITED

Management Discussion
& Analysis

Overview The Company was able to increase its domestic sales by 11.5%.
India’s economy showed gradual recovery in 2015-16. Fiscal deficit This was the fourth year in a row when the Company’s market
and inflation were under control. Public investment was up. Interest share improved over the previous year. It stood at 46.8%, the
rates were reduced. But rural demand and private investment highest in 14 years.
remained weak. The fall in global prices of oil and commodities
benefited the economy and the automobile sector. However, the MSIL Segment Wise Performance (Domestic)
slowdown in the global economy led to weak export demand. (%)
MSIL
Industry
India’s GDP Growth Rate
(%) 38.4

5.6 6.6 7.2 7.6

9.6 7.9 11.2 11.5

6.3 7.2
3.6
Passenger UVs Vans PVs
Cars
Source: SIAM

FY’13 FY’14 FY’15 FY’16

Source: CSO
MSIL Market Share
(%)
India’s passenger vehicle market grew by 7.2%, compared to
3.9% in 2014-15. Growth was limited to a few manufacturers
in the industry and this was achieved mainly with the help of 38.3 39.4 42.1 45.0 46.8
new models. Sales promotion support remained high. Although
Reserve Bank of India cut interest rates, this was not passed on
fully to consumers. The benefit of lower interest rates is expected
to be realised in 2016-17.

Domestic Passenger Vehicle Industry Growth FY’12 FY’13 FY’14 FY’15 FY’16
(%)
Source: SIAM
28.2 5.1 1.3 -6.1 3.9 7.2

The Company launched three new models. These were well

received by customers for their design, performance and
features. By introducing Smart Hybrid vehicles and offering the
latest infotainment features, the Company enhanced sales and
reinforced its position as a technology pioneer in the segments
where it operates.
FY’11 FY’12 FY’13 FY’14 FY’15 FY’16
The Company launched a new retail channel, Nexa. This helped
Source: SIAM
expand the Company’s presence, especially in metros and tier II cities.
 STATUTORY REPORTS | MANAGEMENT DISCUSSION & ANALYSIS 93

Nexa is designed considering the changing needs and Domestic Sales

expectations of urban customers, and will enable the Company The domestic automobile market remained challenging.
to attract new categories of buyers into its fold. Consumer sentiment continued to be subdued. Competition
increased with the launch of several new models in the segments
The Company took important measures to enhance passenger in which the Company operates.
safety. Features such as airbags and anti-lock braking systems
(ABS) were offered as standard in certain models, and as an The Company increased its share in the top 10 markets of the
option in all variants of most other models. country. Rural demand moderated following second successive
year of below normal monsoon, leading to a drought-like situation
The Company’s exports grew by 1.8%. The fall in global commodity in certain parts of the country. The Company was able to grow
prices and a currency crisis in certain markets adversely impacted sales in small towns and rural areas by 9%, largely by expanding
demand. But exports received a boost with the launch of Baleno, reach to newer towns and villages.
a premium hatchback model, in overseas markets in the fourth
quarter. Baleno is the first model of the Company to be exported MSIL Rural Coverage
to Japan. Manufactured only in India, it is to be exported to nearly
100 countries. Baleno was duly recognised as an example of No. of Villages Covered
‘Make in India’ by the Prime Minister, Shri Narendra Modi.
44,139 93,499 124,620 144,215
Total sales, at 1,429,248 units, were the highest ever for the
Company, registering an overall volume growth of 10.6% over the
previous year.

MSIL Sales (Domestic + Exports)

(Units)
FY’13 FY’14 FY’15 FY’16
Source: Company
1,133,695 1,171,434 1,155,041 1,292,415 1,429,248

During the last few years, the industry has witnessed a downward
trend in demand for diesel models, primarily due to reduction in
the gap between the prices of petrol and diesel fuels. During the
year, an order by the Supreme Court, prohibiting sales of diesel
cars with an engine size of 2 litre and above in National Capital
Region (NCR), caused concern among the potential buyers of
FY’12 FY’13 FY’14 FY’15 FY’16 diesel vehicles, especially in NCR. Although the Company does
Source: Company
not offer vehicles in the 2 litre engine category, the adverse
consumer sentiment impacted the share of diesel models.
The Company was able to achieve growth in profits and improve
profitability. Besides higher volumes, the Company was helped The share of diesel vehicles in industry sales declined from
by favourable currency and low commodity prices. Marketing and 48% in 2014-15 to 44% in 2015-16. The Company was able to
sales expense remained high to support entry-level models and grow sales of its diesel vehicles through higher sales promotion,
diesel variants in a highly competitive market. The Company’s besides introduction of Smart Hybrid technology on few of its
continued initiatives to improve efficiency and reduce wastage popular diesel vehicles.
also contributed to margins.
With 70% of the Company’s sales being contributed by petrol
In November 2015, the Company had sought approval of public vehicles, the Company is well positioned in this segment with
shareholders for a related party transaction with Suzuki Motor 58.7% market share.
Gujarat, for entering into a contract manufacturing agreement
for production and sale of vehicles. The resolution was passed Industry Petrol Diesel Mix
with nearly 90% votes in favor of the arrangement. (%)
Diesel
With this arrangement in place, the Company is able to provide more Petrol
focus to strategic areas including Research and Development, new
products and infrastructure for marketing and sales, while parent
company Suzuki Motor Corporation, Japan, shares the responsibility
52 42 47 52 56
of producing and supplying vehicles over the Company’s existing
capacity of 1.5 million units. The first car from SMC’s Gujarat plant
48 58 53 48 44
is expected to be rolled out in early 2017.

FY’12 FY’13 FY’14 FY’15 FY’16

Source: SIAM
94 MARUTI SUZUKI INDIA LIMITED

The Company’s pre-owned car operation continued to support The popular Automatic Gear Shift technology, introduced in India
new car sales. Trade-ins grew by 9% and accounted for 30% of by the Company in 2014, was extended to more models.
new car sales. Fleet sales surged 60%, although on a low base,
mainly on account of demand from taxi aggregators. The share Launch of Nexa
of vehicles financed reached 77.4%, the highest in nine years. The new retail channel was well accepted. Over 125 Nexa outlets
were set up by dealers during the year. Nearly 70,000 cars were
sold through this channel. The Company expects to double the
MSIL Finance Penetration
number of Nexa outlets during 2016-17.
(% of Domestic Sales)
The Company also strengthened the existing network by adding
68 72 74 75 77 over 200 outlets during the year taking the total number of
outlets to 1,820 in the existing channel.

MSIL Sales Network (Existing + Nexa Outlets)

Existing Channel
NEXA
FY’12 FY’13 FY’14 FY’15 FY’16
Source: Company
1,100 1,204 1,310 1,619 1,947
New products
The Company’s product-related initiatives contributed
significantly to higher sales and market share. The Company
127
launched S-Cross, India’s first premium cross-over, Baleno, a
premium hatchback, and Vitara Brezza, a compact SUV. 1,820

S-Cross offers customers power and performance in their

vehicle without compromising on the comfort and refinement of
a sedan. It is designed in a bold cross-over shape, with dynamic FY’12 FY’13 FY’14 FY’15 FY’16
character lines and many sophisticated touches. The interiors
are plush and spacious with high-quality fit and finish. Source: Company

The Company was ranked first in customer satisfaction in after-

Baleno comes with a sophisticated design, rich interiors, host of
sales service among mass market brands, as measured by
premium features and advanced technology. It is built on a brand
J.D. Power. This was the 16th year in a row that the Company
new Suzuki platform which is stronger and safer. It offers superior
achieved the top position. Studies by J.D. Power, and by the
performance due to a higher power-to-weight ratio and offers best-
Company, suggest that high satisfaction with after-sales service
in-class fuel efficiency in both, petrol and diesel options. Baleno
translate into high repurchase and advocacy.
has received a resounding response since its launch in October.
Over 44,000 Balenos have been sold, and close to 50,000
During the year, 137 dealer workshops were added taking the total
customer orders remain to be served at the end of the year.
service workshops to 3,145 in 1,506 cities and towns. Besides
expanding the network of service workshops, the Company also
S-Cross and Baleno are sold exclusively through the new retail
offered doorstep service to nearly 90,000 customers through
channel, Nexa.
1,425 Maruti Mobile Support vehicles.
Vitara Brezza, launched in early March, marks the Company’s
Flood Affected Cars in Chennai
entry into the compact SUV segment. It delivers an outstanding
Floods in Chennai caused loss of life and property. Several
fuel efficiency of 24.3 km per litre, the highest in the SUV
vehicles suffered extensive damage. To repair these vehicles
category and 10-20% superior to existing models in the segment.
and support customers, the Company mobilised technicians and
With class leading features, personalisation options, future
mechanics from other parts of the country. Parts were rushed
ready safety and an attractive price, Vitara Brezza has received
to ensure speedy repair. The Company partnered with insurance
a positive market response. Over 35,000 customer orders have
companies to facilitate claims. Nearly 9,000 damaged vehicles
been received in the first few weeks.
were repaired and handed back to customers within three
months of the floods.
The introduction of Smart Hybrid technology by the Company
in Ciaz and Ertiga, which enhances fuel efficiency by between
7 and 18%, boosted demand for these models. By offering the
Parts and Accessories
The Parts & Accessories business registered an impressive
advantages of hybrid technology at a reasonable price, Smart
growth of 19% during the year. Apart from robust growth in parts
Hybrids have benefited customers and the environment, besides
sales, the Company was able to grow the sales of Maruti Genuine
supporting the Government’s efforts to promote hybrid vehicles
Accessories through innovative marketing activities including
in the country.
 STATUTORY REPORTS | MANAGEMENT DISCUSSION & ANALYSIS 95

usage of tablets to showcase the accessories range to customers generated, leading to a potential saving of over ` 2,800 million.
and introduction of lifestyle and theme based accessories. The Company is screening these ideas for trials and subsequent
implementation.
Exports
The fall in global prices of commodities impacted demand in Energy Conservation and Environment
certain export markets. Currency crisis in certain economies Sensitivity
also affected demand adversely. In Sri Lanka, import duty was The Company continued its energy conservation initiatives.
brought down for a few months. Sales surged during this period. The focus was on reducing energy cost, conserving water and
The share of Sri Lanka in overall export sales increased to 32%, improving efficiency through new technology and optimisation in
from 10% in the previous year. operations. A separate section in this Annual Report, ‘Business
Responsibility Report’ discusses the environment-related and
Baleno, launched in overseas markets in the fourth quarter, will social performance of the Company in detail.
play an important role in export sales. The Company commenced
exports of this car to Europe, besides Japan. The Company Quality
continued its efforts to expand the network of sales and service Besides ensuring quality on the shop floor, the Company works
outlets and improve processes in export markets. closely with suppliers and helps them upgrade by sharing
knowhow. The Company has set up special teams on quality
During the year, the Company exported 123,897 units, a growth to work with tier I and tier II suppliers. These teams studied all
of 1.8% over the previous year. quality related aspects at suppliers and jointly created action
plans. During the year, over 2,100 visits to supplier shop floors
were carried out by these quality teams. This contributed to over
Export Sales 20% improvement in supplier parts quality compared to 2014-15.
(Units)
Non Europe
Europe Supplier Defect Reduction (Indexed)
(%)
No. of types of defect
127,379 120,388 101,352 121,713 123,897 100 95 88 78 59

43,047 27,964 15,946 7,648

92,424 28,730
84,332
72,622 105,767 116,294
FY’12 FY’13 FY’14 FY’15 FY’16
Source: Company
FY’12 FY’13 FY’14 FY’15 FY’16
Source: : Company Operator skill plays an important role in ensuring quality. The
Company is supporting suppliers in improving the skill sets of
Operations their employees. Over 1,200 supplier personnel have been
During the year, the challenge was to manufacture a higher trained at the Company’s shop floor and training centre. Further,
volume of vehicles and introduce multiple new models while training centers that replicate shop floor situations (Dojo Centre)
maintaining high levels of quality and productivity. The Company are being established at certain suppliers’ locations with the
further improved processes and systems to meet this challenge. Company’s support, to strengthen operator skill sets regularly.

The combined output capacity of all plants in Gurgaon and The Company has begun analysing data and patterns generated from
Manesar stands at about 1.5 million units annually. The Company operations to anticipate defects, and take preventive measures.
is focused on enhancing manufacturing capability through
better utilisation of facilities, higher flexibility in plant-model Enhancing Value in the Supply Chain
combinations and flexible lines. This will enable the Company to The Company continued its partnership with suppliers in value
meet market demand before SMC’s Gujarat plant starts supply analysis/value enhancement (VA/VE) projects. Joint efforts were
of cars in early 2017. also made in yield improvement. Along with this, the Company
worked on localisation of parts imported by vendors to mitigate
To enhance efforts in safety, the Company consolidated all risk arising out of foreign exchange exposure and to bring down
related functions into a dedicated division to impart focus and input cost.
cohesion.
During the year, the Company localised child parts and assembly
The Company’s Suggestion Scheme encourages employees at operations of its popular Auto Gear Shift (AGS) technology. The
all levels to generate and execute new ideas for improvement Company is in touch with Indian steel makers to further enhance
and efficiency. During the year, over 698,000 suggestions were use of local steel. The scope of raw material yield improvement
96 MARUTI SUZUKI INDIA LIMITED

activities was extended beyond the traditional sheet metal areas and low rolling resistance tyres contributed to its best-in-class
to plastics, electrical and castings to enhance savings. fuel efficiency. Besides, Vitara Brezza is the first vehicle in the
country to be certified by the homologation authority, for offset
The Company undertakes commodity hedging to prevent input and side impact crash compliance.
cost inflation. The Commodities Risk Management Committee
(CRMC) reviews the commodity hedging status periodically and Another new model, Baleno, combines harmoniously flowing
takes hedging positions. During the year, favorable hedge rates curves, elegant styling, a superior power to weight ratio and smart
helped in achieving gains in major base and precious metals. packaging to offer a premium hatchback experience to mature
car buyers. Numerous first-in-class features were introduced
Through the supplier risk management system, the Company in the product including smartplay infotainment system with
monitors the health of suppliers’ businesses in areas like navigation, colour TFT multi-information speedometer display
operations and finance. Operational risks are assessed in the and UV cut glasses, to appeal to the target consumer segment.
areas of industrial relations, quality, delivery performance and
tier-II suppliers’ management. Financial risk is assessed in the The Company will continue to participate in more new vehicle
areas of profitability, liquidity and working capital and funding development projects.
management.
Scaling up product development demands a solid back-end of
The Company continued the safety assessment of plants of local R&D infrastructure, design capability and capacity and skill
tier-I suppliers. The assessment is carried out by experts who upgradation of engineers. In the last few years, the Company has
comprehensively study suppliers’ plant facilities and prepare consistently upped its focus on R&D to design and develop new
time-based improvement plans along with the suppliers’ products for local and export markets, using in-house capability
management. A reassessment audit will be carried to check the and capacity. The R&D Centre at Rohtak, equipped with world class
improvement in safety preparedness. test and evaluation facilities, will play a pivotal role in achieving the
Company’s ambitions going forward. The local R&D facility will also
Research and Development serve as an advantage to meet the challenges posed by changes
It is important to understand the stated and unstated needs of the in regulations and towards conforming to new regulations thereby
consumer for every segment and evolve products and technologies reducing the time to market. During the year, a number of facilities
accordingly. Based on this, the Company does a careful selection like test tracks, a passive safety lab, a vehicle dynamic lab, Noise,
of technologies and features for each segment of cars. Vibration and Harshness (NVH), ride handling and a braking and
structural durability lab were made operational.
The compact SUV, Vitara Brezza, launched during the year is the
first model to be conceptualised, designed and developed in India Financial Performance
using Suzuki core technology and platform/engine. Extensive The Company registered Net Sales of ` 563,504 million and
research was carried out across India to finalise the concept Profit after Tax of ` 45,714 million, a growth of 23.2% over the
of the model, to make it appealing for everyday use. During the previous year. This growth was driven by increase in volumes,
course of development, various Suzuki platform/powertrain besides favourable commodity prices and continued efforts on
options were studied and after weighing all the options, cost reduction initiatives. However, Marketing and Sales expense
Suzuki C-Platform with DDiS 200 engine with 5-speed manual remained high to support entry level models and diesel variants
powertrain was chosen. This combination of powertrain, along in a tough market.
with new-age technologies like intelligent battery management

(` million)
Abridged profit and loss account for 2015-16

Parameters 2015-16 2014-15 Change (%)

1 Volumes (Nos.)
Domestic 1,305,351 1,170,702
Export 123,897 121,713
Total 1,429,248 1,292,415 10.6%
2 Gross Sale of Products 638,669 537,685
Vehicles 582,950 490,806
Spare parts/ dies & moulds/ components 55,719 46,879
3 Excise duty 75,165 51,630
4 Net sales (2-3) 563,504 486,055
5 Other operating revenue 13,959 13,651
6 Other income 4,619 8,316
7 Total revenue (4+5+6) 582,082 508,022 14.6%
8 Consumption of raw materials, components & traded goods 387,800 350,080
9 Employee benefit expenses 19,887 16,066
10 Finance Costs 815 2,060
11 Depreciation and amortisation 28,239 24,703
 STATUTORY REPORTS | MANAGEMENT DISCUSSION & ANALYSIS 97

(` million)
Abridged profit and loss account for 2015-16

Parameters 2015-16 2014-15 Change (%)

12 Other expenses 79,991 66,431
13 Total expenses 516,732 459,340 12.5%
14 Profit before tax (7-13) 65,350 48,682 34.2%
15 Current tax (Net of MAT Credit availed) 20,414 12,322
16 Deferred tax (778) (752)
17 Profit after tax (14-15-16) 45,714 37,112 23.2%

Treasury Operations Table 2 (%)

The Company has efficiently managed its surplus funds through Financial Performance – Ratios
careful treasury operations. The guiding principle of the (As a Percentage of Net Sales)
Company’s treasury investments is safety and prudence. In view
of this, the Company invested its surplus funds in debt schemes
Parameters 2015-16 2014-15 Change
of mutual funds and bank fixed deposits. This has enabled the
Company to earn reasonable and stable returns. Material cost 68.8 72.0 3.2
Employee benefit expenses 3.5 3.3 (0.2)
Depreciation and
Table 3 lists the investment of surplus funds while Table 4 lists 5.0 5.1 0.1
amortisation
the return on these surplus funds.
Other expenses 14.2 13.7 (0.5)
Profit before tax 11.6 10.0 1.6
Foreign exchange risk management Profit after tax 8.1 7.6 0.5
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 Table 3 (` million)
a well-structured exchange risk management policy. The Company Investment of surplus funds
manages its exchange risk by using appropriate hedge instruments
depending on market conditions and the view on currency.
31-03-16 31-03-15

Internal controls and adequacy Debt Mutual Fund 176,158 126,442

The Company has a proper and adequate system of internal
control to ensure that all assets are safeguarded and protected Table 4 (` million)
against loss from unauthorised use or disposition, and that all Income from investment of surplus fund
transactions are authorised, recorded and reported correctly.
The internal control system is designed to ensure that financial
2015-16 2014-15
and other records are reliable for preparing financial information
and other data, and for maintaining accountability of assets. The Interest on fixed deposits - 325
internal control system is supplemented by an extensive program Dividend from debt mutual funds - 473
of internal audits, reviews by management, and documented Net Gain on sale of investments 3,002 6,690
policies, guidelines and procedures. Total 3,002 7,488

Human Resources helped drive several new initiatives like implementation of a

The Company acknowledges that the key to its sustained success 5-day week, creation of recreational centres with sports facilities,
is its employees and realises that the capability, motivation, awareness sessions on HR Policies, among others.
sense of ownership and satisfaction of its people are the most
important drivers for its continued success. Various employee-related policies were revised to take care of
business needs and employee requirements. Apart from a range
Employees’ voice and feedback are extremely important and of engagement initiatives, regular health checkups and health
greatly impact the direction of the Company. There are various awareness sessions were conducted to promote healthy living
communication and feedback-seeking forums to capture and improve Health and Wellness Index of the organisation.
employee feedback. Apart from these forums, as part of regular
performance and career development reviews all regular For enhancing people connect, the Company created several
employees undergo a KRA setting exercise in the beginning of opportunities like Parivar Milan, Diwali Mela and Family Day.
the year followed by mid-year and annual appraisal.
The Company continued to have cordial relations with its unions
The Company realises that the three factors which are important and workforce. To take its communication with unions to a higher
for an employee point-of-view are: Work Life Balance, Employee level, the Company invested significant time and resources to
Engagement and Family Connect. Feedback from employees enhance awareness of union representatives in areas like
98 MARUTI SUZUKI INDIA LIMITED

economic & business and Japanese systems & processes. review were captured for further action by risk owners. The key
Besides, orientation sessions were held with unions on employee risk areas were related to business continuity, supply disruptions,
grievance redressal, group dynamics, team skills and spiritual managing quality across the value chain, talent acquisition and
well-being. retention, etc.

A team led by the Managing Director regularly interacts with the In line with the risk management policy, and following certain
union. During the year, a wage settlement agreement for the next changes in the operating environment, the Committee has
three years was also concluded amicably with the Union. recommended a review of the key risks library during 2016-17.

With the recruitment of around 961 people this year, employee Outlook
strength reached 13,259 people. The Company has been able to The Company’s goal is to achieve sales of 2 million cars annually
limit the attrition to 2.9%. in 2020. During the year, it put in place several building blocks
towards this objective and beyond. The launch of three new
Information Technology models, start of a new retail channel, strengthening product
The Company has robust systems, processes and technologies design and development capabilities and enhancing vehicle
to manage the size and complexity of its business. The Company safety in preparation for new regulations are some of the
is perhaps the only one in the Indian manufacturing sector to initiatives for the future.
be certified at Level Three of the Capability Maturity Model
(CMMI) for software development in processes. The Company The Company has consistently grown faster than industry in the
was also recently recertified as an ISO 27001:2013 compliant context of an overall market slowdown. New products, design
organisation ensuring the highest levels of information security. and technologies that meet the needs of the evolving Indian
customer will continue to have an important role in the future.
The Company is using data generated in operations to improve The Company will build further on its network strength to get
the efficiency of various processes and identify opportunities for closer to customers in urban areas as well as in small towns.
improvement.
New regulations for safety and emission are likely to play an
Self-service mobile apps (Maruti Care) have enabled the important role in the medium term. The Company is gearing up
Company to improve the connection with customers. Sales to meet regulations while trying to minimise the impact on the
teams of dealers and the Company have been provided mobile customer.
apps that enable them to access real-time data and take quick
decisions. Business Intelligence applications were revamped to As the Indian economy attains a higher growth trajectory in the
enable the management to monitor performance indicators and medium term, as is widely expected, the Company would be in a
quickly identify improvement areas. sound position to capitalise on the opportunity.

During the year, a separate team was created (IT New Initiatives) Disclaimer
to focus on identifying and implementing new technologies to Statements in this management discussions and analysis
help us stay ahead of the curve. describing the Company’s objectives, projections, estimates and
expectations are categorised as ‘forward looking statements’
Risk Management within the meaning of applicable laws and regulations. Actual
The Company has a robust risk management framework which results may differ substantially or materially from those
was implemented several years ago. The top management expressed or implied. Important developments that could
periodically reviews the library of key risks and their appropriate affect the Company’s operations include trends in the domestic
mitigation plans. auto industry, competition, rise in input costs, exchange
rate fluctuations, and significant changes in the political and
During the year, top management reviewed the status of progress economic environment in India, environmental standards, tax
of the risk mitigation plans. Key action points derived out of the laws, litigation and labour relations.