Maruti Udyog Limited is a publicly listed company in India. It is a leading four-wheeler automobile manufacturer in South Asia. Suzuki Motor Corporation of Japan has the controlling stake in the company. It was the first company in India to mass-produce and sell more than 10 lakh (a million) cars in India. It is largely credited for having brought in an automobile revolution to India. To this day it is the market leader in India in its segment.

Founded: 1981
Headquarters: Gurgaon, Haryana, List of Maruti factories
Key people: Shinzo Nakanishi Chairman
Industry: Automotive
Products: Maruti Suzuki
Revenue: $2.5 billion (2005)
www.marutiudyog.com
Employees: 3,334

Maruti Udyog Ltd is one of India’s leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. 18.28% of the company is owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an Initial Public Offering of 25% of the company in June of 2003.

Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and other South Asian countries.

The company annually exports more than 30,000 cars and has an extremely large domestic market in India selling over five hundred thousand cars annually. Maruti 800, till 2004, was the India’s largest selling compact car ever since it was launched in 1983. More than a million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.

Due to the large number of Maruti 800s sold in the Indian market, the term “Maruti” is commonly used to refer to this compact car model. Till recently the term “Maruti”, in popular Indian culture, was associated to the Maruti 800 model.

Around 1970, Sanjay Gandhi, the then Prime Minister of India, Indira Gandhi’s younger son, envisioned the manufacture of an indigenous, cost-effective, low maintenance compact car for the Indian middle-class. Indira Gandhi’s cabinet passed a unanimous resolution for the development and production of a “People’s Car”. Sanjay Gandhi’s company was christened Maruti Limited. The name of the car was chosen as “Maruti”, after a Hindu deity named Maruti.

At that time Hindustan Motors’ Ambassador was the chief car, and the company had come out with a new entrant, the Premier Padmini which was slowly gaining a part of the market share dominated by the Ambassador. For the next ten years, the Indian car market had stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983.

Sanjay Gandhi was awarded the exclusive contract and licence to design, develop and manufacture the “People’s Car”. This exclusive rights of production generated some criticism in certain quarters, which was directly targeted at Indira Gandhi. Over the next few years, the company was sidelined due to the Bangladesh Liberation War and emergency.

In the early days under the powerful patronage of Sanjay Gandhi, the company was provided with free land, tax breaks and funds. Till the end of 1970s, the company had not started the production and a prototype test model was met with criticism and skepticism. The company went into liquidation in 1977. The media perceived it to be another area of growing corruption. Unfortunately, Maruti started to fly only after the death of Sanjay Gandhi, when Suzuki Motors joined the Government of India as a joint venture partner with 50% share.

After his death, Indira Gandhi decided that the project should not be allowed to die. Maruti entered into this collaboration with Suzuki Motors, The collaboration heralded a revolution in the Indian car industry by producing the Maruti 800. The car went on sale on December 14, 1983. It created a record by taking 13 months time to go from design to rolling out cars from a production line. By the year 1993 the company had sold up to 1,96,820 cars, mostly by selling its chief product the Maruti 800s. By March 1994, it produced one million vehicles, becoming the first Indian company to cross this milestone. It reached the two million mark in October, 1997 and rolled out its 4 millionth vehicle, an Alto-LX, on April 19, 2003.

Impact of Maruti Udyog

The introduction of the Maruti 800 in 1983, marked the beginning of a revolution in the Indian automobile industry. Maruti Udyog brought in the latest technology then available, more fuel-efficient cars, and brought down the prices of cars in India. This led to the creation of a huge market for all car segments as the Indian middle class grew in size. This in-turn brought in more players to this segment. A number of auxiliary car parts making units were setup as most car manufacturers realised it was more cost effective to make their car parts in India rather than import them. Maruti’s most major influence was in helping the component industry in the country because of its emphasis on localization and indigenisation. As in the beginning that sector hadn’t grown much, Maruti had to start a dozen joint ventures with Indian entrepreneurs. It got them foreign collaborations, that led to collaborations for other manufacturers so that over a period of time the whole component industry was able to upgrade itself and improve its quality. Leading to a major existing export potential in vehicle components. It also brought in better methods of financing that allowed more people, who given their income levels could not afford to buy a car on their own. It still remains the leader not only in terms of market share but also in customer satisfaction surveys - it has consistently topped J. D. Power quality surveys, including 2005

Disinvestment and public listing

The National Democratic Alliance Government headed by Atal Behari Vajpayee passed the resolution on December 22, 2003 to dilute its stake in the venture. Maruti was not a special case, but it was the policy of the government to reduce the public debt by offloading its stake in many public sector companies and joint ventures. The preparations had began much earlier. The Suzuki Motor Corporation suggested the government to offload its stake in the Capital Market. Some believed this was a ploy to gain control of the company at cheap price due to the unhealthy conditions of the capital market.

The red herring prospectus was filed with the Securities and Exchange Board of India on May 2, 2003. The Union Government made an offer of 7.22 crose shares representing 25 pecent of the fully diluted equity state of the Maruti Post offer. After the dilution, the government’s stake was reduced to 20.8 and the Suzuki Motor Corporation’s stake increased to 54.2 percent. The remaining equity belonged to institutional and individual investors . As the offer was oversubscibed by the general public, the Government raised the size of the Initial Public Offering by 10 percent. Investors had submitted bids ranging from Indian Rupees 115 to 360 per share. As per Bombay Stock Exchange data, about 69% or 5.83 crore (58.3 million) bids received were for Rs 120 per share.

The company has 28,89,10,060 shares As on February 15, 2006 the government stake has reduced to 18.28% and the Suzuki Motor Corporation has a stake of 54.21%. Currently 71.06% of the equity is held by foreign investors including Suzuki Motor Corporation [19]

Following are the codes assinged to Maruti Udyog Limited on Stock exchanges and news services

* Bombay Stock Exchange: 532500
* The National Stock Exchange: MARUTI
* Bloomberg: MUL@IN
* Reuters: MRTI.BO

Industrial relations

For most of its history, Maruti Udyog had relatively few problems with its labour force. Its emphasis of a Japanese work culture and the modern manufacturing process, first instituted in Japan in the 1970s, was accepted by the workforce of the company without any difficulty. But with the change in management in 1997, when it became predominantly government controlled for a while, and the conflict between the United Front Government and Suzuki may have been the cause of unrest among employees. A major row broke out in September 2000 when employees of Maruti Udyog Ltd (MUL) went on an indefinite strike, demanding among other things, revision of the incentive scheme offered and implementation of a pension scheme. Employees struck work for six hours in October 2000, irked over the suspension of nine employees, going on a six-hour tools-down strike at its Gurgaon plant, demanding revision of the incentive-linked pay and threatened to fast to death if the suspended employees were not reinstated. About this time, the NDA government, following a disinvestments policy, proposed to sell part of its stake in Maruti in a public offering. The Staff union opposed this sell-off plan on the grounds that the company will lose a major business advantage of being subsidised by the Government.

The standoff with the management continued to December with a proposal by the management to end the two-month long agitation rejected with a demand for reinstatement of 92 dismissed workers, with four MUL employees going on a fast-unto-death. In December the company’s shareholders met in New Delhi in an AGM that lasted 30 minutes. At the same time around 1500 plant workers from the MUL’s Gurgaon facility were agitating outside the company’s corporate office demanding commencement of production linked incentives, a better pension scheme and other benefits. The management has refused to pass on the benefits citing increased competition and lower margins

Authorized Service Station
Maruti is one of the companies in India which has unparalled service network. To ensure the vehicles sold by them are serviced properly Maruti had 1545 listed Authorized service stations and 30 Express Service Stations on 30 highways across India.

Service is a major revenue generator of the company. Most of the service stations are managed on franchise basis, where Maruti trains the local staff. Other automobile companies have not been able to match this benchmark set by Maruti. The Experss Service stations help many stranded vehicles on the highways by sending across their repair man to the vehicle

Maruti Insurance

Launched in 2002 Maruti provides vehicle insurance to its customers with the help of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram. The service was set up the company with the inception of two subsidiaries Maruti Insurance Distributors Services Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited

This service started as a benefit or value addition to customers and was able to ramp up easily. By December 2005 they were able to sell more than two million insurance policies since its inception

Maruti Finance

To promote its bottom line growth, Maruti launched Maruti Finance in January 2002. Prior to the start of this service Maruti had started two joint ventures Citicorp Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist its client in securing loan. Maruti tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank, and Sundaram to start this venture including its strategic parnters in car finance. Again the company entered into a strategic partnership with SBI in March 2003 Since March 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across India.

“Maruti Finance marks the coming together of the biggest players in the car finance business. They are the benchmarks in quality and efficiency. Combined with Maruti volumes and networked dealerships, this will enable Maruti Finance to offer superior service and competitive rates in the marketplace”.
Jagdish Khattar, Managing director of Maruti Udyog Limited in a press conference announcing the launch of Maruti Finance on January 7, 2002

Citicorp Maruti Finance Limited is a joint venture between Citicorp Finance India and Maruti Udyog Limited its primary business stated by the company is “hire-purchase financing of Maruti vehicles”. Citi Finance India Limited is a wholly owned subsidiary of Citibank Overseas Investment Corporation, Delaware, which in turn is a 100% wholly owned subsidiary of Citibank N.A. Citi Finance India Limited holds 74% of the stake and Maruti Udyog holds the remaining 26%. GE Capital, HDFC and Maruti Udyog Limited came together in 1995 to form Maruti Countrywide. Maruti cliams that its finance program offers most competitive interest rates to its customers, which are lower by 0.25% to 0.5% from the market rates.

Maruti TrueValue

Maruti True Value is a service offered by Maruti Udyog to its customers. It is a market place for used Maruti Vehicles. one can Buy, Sell or Exchange used Maruti Vehicles with the help of this service in India.

N2N Fleet Management

N2N is the short form of End to End Fleet Management and provides lease and fleet management solution to corporates. Its impressive list of clients who have signed up of this service include Gas Authority of India, DuPont, Reckitt & Benkiser, Sona Steering, Doordarshan, Singer India, National Stock Exchange and Transworld. This fleet management service include end-to-end solutions across the vehicle’s life, which includes Leasing, Maintenance, Convenience services and Remarketing

Accessories

Many of the auto component companies other than Maruti Udyog started to offer components and accessories that were compatible. This caused a serious threat and loss of revenue to Martui. Maruti started a new initiative under the brand name Maruti Genuine Accessories to offer accessories like Alloy Wheels, Body Cover, Carpets, Door Visors, Fog Lamps, Stero Systems, seat covers and other car care products. These products are sold through dealer outlets and authorized service stations throughout India.

Maruti Driving School

As part of its corporate social responsibility Maruti Udyog launched the Maruti Driving School in Delhi. Later the services were extended to other citites of India as well. These schools are modelled on international standards, where learners go through classroom and practical sessions. Many international practices like road behaviour and attitudes are also taught in these schools. Before driving actual vehicles participants are trained on simulators.

“We are very concerned about mounting deaths on Indian roads. These can be brought down if government, industry and the voluntary sector work together in an integrated manner. But we felt that Maruti should first do something in this regard and hence this initiative of Maruti Driving Schools.”
Jagdish Khattar, Managing Director, Maruti Udyog Limited at the launch ceremony of Maruti Driving School, Bangalore.

Exports

Maruti Exports Limited is the susidary of Maruti Udyog Limited with its major focus on exports and it does not operate in the domestic Indian market. The first commercial consignment of 480 cars were sent to Hungary. By sending a consignment of 571 cars to the same country Maruti crossed the benchmark of 3,00,000 cars. Since its inception export was one of the aspects government was keen to encourage. Every political party expected Maruti to earn foreign currency.

Angola, Benin, Djibouti, Ethiopia, Europe, Kenya, Morocco,Sri Lanka, Uganda, Chile, Costa Rica and El Salvador are some of the markets served by Maruti Exports