DRAFT RED HERRING PROSPECTUS
Please read Section 60B of the Companies Act, 1956
Dated [·] (Will become Prospectus on the date of filing with the RoC)
(Draft Red Herring Prospectus will be updated upon RoC filing)
100% Book Building Issue
Maruti Udyog Limited
(Incorporated on February 24, 1981 under the Companies Act, 1956)
Registered Office: 11th Floor, Jeevan Prakash Building, 25, Kasturba Gandhi Marg, New Delhi – 110 001
Tel no.: +91-11-2331-6831; Fax no.: +91-11-2371-3575/2331-8754; E-Mail: investors@maruti.co.in; Website: www.marutiudyog.com
Factory: Palam- Gurgaon Road, Gurgaon – 122015, Haryana
Tel no.: +91-124-234-6721; Fax no.: +91-124-501-5701
OFFER FOR SALE OF 72,243,300 EQUITY SHARES OF RS. 5/- EACH AT A PRICE OF RS. • FOR CASH
AGGREGATING RS. • MILLION (HEREINAFTER REFERRED TO AS THE “OFFER”). THE OFFER
WOULD CONSTITUTE 25% OF THE FULLY DILUTED POST OFFER PAID-UP CAPITAL OF THE
COMPANY.
THE SIZE OF THE OFFER MAY BE ENHANCED TO THE EXTENT OF UPTO 10% OF THE OFFER I.E. BY
UPTO 7,224,300 EQUITY SHARES OF RS.5/- EACH IN CASE THE SELLING SHAREHOLDER DECIDES
TO RETAIN ANY OVER-SUBSCRIPTION. IN SUCH A CASE, THE SIZE OF THE OFFER MAY INCREASE
UPTO 79,467,600 EQUITY SHARES OF RS.5/- EACH
FLOOR PRICE RS. _____ PER EQUITY SHARE OF FACE VALUE RS. 5/The Offer is being made through the 100% Book Building Process wherein a maximum of 60% of the Offer shall be offered on a
discretionary basis to Qualified Institutional Buyers. Further, not less than 15% of the Offer shall be available for allocation on a
proportionate basis to Wholesale Bidders and not less than 25% of the Offer shall be available for allocation on a proportionate basis to
Retail Bidders, subject to valid bids being received at or above the Offer Price.
RISK IN RELATION TO FIRST OFFER
This being the first Offer of equity shares of Maruti Udyog Limited (our “Company”), there has been no formal market for the equity shares
of the Company. The Offer Price (as determined by the Selling Shareholders in consultation with our Company, the Book Running Lead
Manager and Co-Book Running Lead Managers, on the basis of assessment of market demand for the equity shares by way of book
building) should not be taken to be indicative of the market price of the equity shares after the equity shares are listed. No assurance can
be given regarding an active and/ or sustained trading in the equity shares of the Company nor regarding the price at which the equity
shares will be traded after listing.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Offer unless
they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an
investment decision in this offering. For taking an investment decision, investors must rely on their own examination of the Company and
the Offer including the risks involved. The equity shares offered in the Offer have not been recommended or approved by the Securities
and Exchange Board of India (SEBI), nor does SEBI guarantee the accuracy or adequacy of this Draft Red Herring Prospectus. Specific
attention of the investors is invited to the summarized and detailed statements in Risk Factors beginning on page no. i.
COMPANY’S ABSOLUTE RESPONSIBILITY
Maruti Udyog Limited, having made all reasonable inquiries, accepts responsibility for and confirms that this Draft Red Herring Prospectus
contains all information with regard to Maruti Udyog Limited and the Offer, which is material in the context of the Offer, that the
information contained in this Draft Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material
respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which
makes this Draft Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions
misleading in any material respect.
LISTING
The equity shares offered through this Draft Red Herring Prospectus are proposed to be listed on the National Stock Exchange of India
Limited and The Stock Exchange, Mumbai. We have received in-principle approval from these Stock Exchanges for the listing of our equity
shares pursuant to letters dated _________, _________ and ___________respectively.
BOOK RUNNING LEAD MANAGER
Kotak Mahindra Capital Company Ltd.
3rd Floor, Bakhtawar
229, Nariman Point
Mumbai – 400021
Tel no.: 91-22-5634 1100:Fax no.: 91-22-2284 0492
Email: maruti.ipo@kotak.com
CO-BOOK RUNNING LEAD
MANAGER
ICICI Securities Ltd.
41/ 44, Minoo Desai Marg, Colaba
Mumbai – 400005
Tel no.: 91-22-2288 2460
Fax no.: 91-22-2283 7045
Email: mul_ipo@isecltd.com
REGISTRAR TO THE OFFER
MCS Limited
Sri Venkatesh Bhavan
212-A, Shahpurjat
New Delhi – 110 049
Tel no.: 91-11-2649 4830;Fax no.: 91-11-2649 4152
Email: mulipo@mcs.com
CO-BOOK RUNNING LEAD
MANAGER
JM Morgan Stanley Pvt. Ltd.
141, Maker Chambers III
229, Nariman Point
Mumbai – 400021
Tel no.: 91-22-5630 3030
Fax no.: 91-22-2202 8224
Email:marutiipo@jmmorganstanley.com
CO-BOOK RUNNING LEAD
MANAGER
HSBC Securities and Capital
Markets (India) Pvt. Ltd.
52/ 60, Mahatma Gandhi Road, Fort,
Mumbai – 400001
Tel no.: 91-22-2267 4921
Fax no.: 91-22-2263 1984
Email: mul_ipo@hsbc.co.in
OFFER PROGRAM
BID/ OFFER OPENS ON
BID/ OFFER CLOSES ON
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TABLE OF CONTENTS
DEFINITIONS AND ABBREVIATIONS ................................................................................... 3
FORWARD-LOOKING STATEMENTS ................................................................................... 10
CERTAIN CONVENTIONS; USE OF MARKET DATA................................................................ 11
RISK FACTORS ............................................................................................................... 14
THE OFFER .................................................................................................................... 27
SUMMARY ...................................................................................................................... 28
GENERAL INFORMATION ................................................................................................. 32
GOVERNMENT APPROVALS .............................................................................................. 46
CAPITAL STRUCTURE ...................................................................................................... 51
OBJECTS OF THE OFFER .................................................................................................. 57
INDUSTRY OVERVIEW ..................................................................................................... 58
OUR BUSINESS .............................................................................................................. 66
OUR HISTORY ................................................................................................................ 89
SELECTED UNCONSOLIDATED FINANCIAL DATA................................................................ 92
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ................................................................................................................. 95
OUR MANAGEMENT ....................................................................................................... 117
OUR PROMOTER ........................................................................................................... 126
GROUP COMPANIES ...................................................................................................... 134
RELATED PARTY TRANSACTIONS .................................................................................... 158
REGULATIONS AND POLICIES ........................................................................................ 169
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ............................................. 172
DIVIDEND POLICY ........................................................................................................ 190
BASIS OF ISSUE PRICE ................................................................................................. 191
OTHER REGULATORY DISCLOSURES ............................................................................... 194
UNCONSOLIDATED FINANCIAL STATEMENTS ................................................................... 195
SUMMARY OF DIFFERENCES IN INDIAN GAAP AND US GAAP ............................................. 233
CONSOLIDATED FINANCIAL STATEMENTS AS PER AS 21................................................... 239
CONSOLIDATED FINANCIAL STATEMENTS AS PER AS 21, AS 23 AND AS 27 ........................ 252
TERMS OF THE OFFER ................................................................................................... 272
STATUTORY AND OTHER INFORMATION .......................................................................... 296
MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF MARUTI UDYOG LIMITED ................. 304
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTIONS ............................................ 327
DECLARATION.............................................................................................................. 329
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DEFINITIONS AND ABBREVIATIONS
DEFINITIONS
Term
“Maruti” or “our
Company” or “Maruti
Udyog Ltd” or “MUL”
Description
Maruti Udyog Ltd, a public limited company incorporated under
the Companies Act, 1956
“we”, “us” and “our”
Unless the context otherwise requires, refers to Maruti Udyog
Limited
OFFER RELATED TERMS
Term
Acquisition Act
Articles/ Articles of
Association
Description
Maruti Limited (Acquisition and Transfer of Undertakings) Act,
1980
Articles of Association of our Company
Auditors
The statutory auditors of our Company: Price Waterhouse,
Chartered Accountants
Banker(s) to the Offer
[]
Bid
An offer made during the Bidding Period by a prospective
investor to acquire the equity shares of the Company at a price
at or above the Floor Price, including all revisions and
modifications thereto
Bid Amount
The highest value of the optional Bids indicated in the Bid cum
Application Form and payable by the Bidder on submission of the
Bid in the Offer
Bid / Offer Closing Date
The date after which the Members of the Syndicate will not
accept any Bids for the Offer, which shall be notified in a widely
circulated English national newspaper and Hindi national
newspaper with wide circulation
Bid cum Application
Form
The form in terms of which the Bidder shall make an offer to
purchase equity shares of our Company and which will be
considered as the application for transfer of the equity shares in
terms of this Draft Red Herring Prospectus
Bid / Offer Opening Date The date on which the Members of the Syndicate shall start
accepting Bids for the Offer, which shall be the date notified in
an English national newspaper and a Hindi national newspaper
with wide circulation
Bidder
Any prospective investor who makes a Bid pursuant to the terms
of this Draft Red Herring Prospectus
Bidding Period/ Offer
Period
The period between the Bid/ Offer Opening Date and the Bid/
Offer Closing Date inclusive of both days and during which
prospective Bidders can submit their Bids
-3-
Term
Board of Directors/
Board
Description
The Board of Directors of Maruti Udyog Limited or a committee
thereof
Book Building Process/
Method
Book building route as provided in Chapter XI of the SEBI
Guidelines, in terms of which this Offer is made
BRLM
Book Running Lead Manager to the Offer, in this case being
Kotak Mahindra Capital Company Limited
CAN/ Confirmation of
Allocation Note
Means the note or advice or intimation of allocation of equity
shares sent to the Bidders who have been allocated equity
shares in the Book Building Process
Co-BRLMs
ICICI Securities Ltd., JM Morgan Stanley Pvt. Ltd. and HSBC
Securities and Capital Markets (India) Pvt. Ltd.
Companies Act / The Act The Companies Act, 1956, as amended from time to time
COPRA
Cut-off Price
Depositories Act
Consumer Protection Act, 1986
The price above which Bidders are not allowed to submit Bids in
the Offer. The Cut Off Price shall be advertised on the date of
the Offer Opening Date.
The Depositories Act, 1996, as amended from time to time
Depository
A depository registered with SEBI under the SEBI (Depositories
and Participant) Regulations, 1996, as amended from time to
time
Depository Participant
A depository participant as defined under the Depositories Act
Designated Date
The date on which funds are transferred from the Escrow
Account to the Public Offer Account after the Prospectus is filed
with the RoC, following which the Board of Directors shall
transfer equity shares to successful bidders
Director(s)
Director(s) of Maruti unless otherwise specified
Draft Red Herring
Prospectus
Means this Draft Red Herring Prospectus issued in accordance
with Section 60B of the Companies Act, which does not have
complete particulars on the price at which the equity shares are
offered and the size of the Offer. It carries the same obligations
as are applicable in case of a Prospectus and will be filed with
RoC at least three days before the Bid/ Offer Opening Date. It
will become a Prospectus after filing with Registrar of Companies
after the pricing
Escrow Account
Account opened with Escrow Collection Bank(s) and in whose
favour the Bidder will issue cheques or drafts in respect of the
Bid Amount when submitting a Bid
Escrow Agreement
Agreement entered into between the Syndicate Members, our
Company, the Selling Shareholder, the Registrar, BRLM and CoBRLMs for collection of the Bid Amounts and refunds of the
amounts collected to the Bidders.
-4-
Escrow Collection
Bank(s)
The banks at which the Escrow Account for the Offer will be
opened
FEMA
Foreign Exchange Management Act, 1999, as amended from
time to time, and the regulations framed thereunder
FII/ Foreign Institutional
Investor
Foreign institutional investor (as defined under SEBI (Foreign
Institutional Investors) Regulations, 1995) registered with SEBI
under applicable laws in India
Financial year/fiscal/FY
The twelve months ended March 31 of a particular year
First Bidder
The Bidder whose name appears first in the Bid cum Application
Form or Revision Form
Floor Price
The price advertised by our Company prior to the Bid/Offer
Opening Date, below which the Offer Price will not be finalized
and below which no Bids will be accepted
I.T. Act
The Income-Tax Act, 1961, as amended from time to time,
except as stated otherwise
Joint Venture
Agreement/JVA/RJVA
The Joint Venture Agreement between our Company and Suzuki
dated October 2, 1982 as superseded by the Revised Joint
Venture Agreement between our Company, the Selling
Shareholder and Suzuki on May 15, 2002.
License Agreements
Unless specifically provided for, the license agreement between
our Company and Suzuki dated October 2, 1982, dated
December 14, 1992, dated March 26, 1997, dated December 15,
1998, dated August 3, 1999 and dated January 9, 2001]
Margin Amount
The amount paid by the Bidder at the time of submission of
his/her Bid, being 0% to 100% of the Bid Amount
MUL-EMBF
The Maruti Udyog Ltd. Employees’ Mutual Benefit Fund
Memorandum/
Memorandum of
Association
The Memorandum of Association of our Company
MRTP
MRTPC
Non Residents
Monopolies and Restrictive Trade Practices Act, 1969
Monopolies and Restrictive Trade Practices Commission
All Bidders who are not NRIs or FIIs and are not persons resident
in India
Non-resident Indian, is a person resident outside India, as
defined in FEMA and who is a citizen of India or a Person of
Indian Origin, and as defined under FEMA (Transfer or Issue of
Security by a Person Resident Outside India) Regulations, 2000
NRI/ Non Resident
Indian
OCB/ Overseas
Corporate Body
Overseas corporate body, is a company, partnership, society and
other corporate body owned directly or indirectly to the extent of
atleast 60% by NRI’s and includes overseas trusts in which not
less than 60% of beneficial interest is irrevocably held by NRIs
directly or indirectly as defined under FEMA (Transfer or Issue of
Security by a Person Resident Outside India) Regulations, 2000
-5-
Offer/Offer for Sale
The offer for sale by the Selling Shareholder of our Company of
72,243,300 equity shares of Rs.5/- each at the Offer Price in
terms of this Draft Red Herring Prospectus
The size of the Offer may be increased to the extent of upto 10%
of the Offer i.e. upto 7,224,300 equity shares of Rs.5/- each, in
case the Selling Shareholder decides to retain any oversubscription. In such a case, the size of the Offer may increase
upto 79,467,600 equity shares of Rs.5/- each.
Offer Price
The final price at which equity shares will be transferred in terms
of this Draft Red Herring Prospectus, as determined by GoI, in
consultation with our Company, the BRLM and the Co-BRLMs, on
the Pricing Date
Pay-in Date
Bid Closing Date or The last date specified in the CAN sent to
Bidders, as applicable
Pay-in-Period
This term means (i) with respect to Bidders whose payment has
not been waived by the Members of the Syndicate and are
therefore required to pay the maximum Bid Amount into the
Escrow Account, the period commencing on the Bid Opening
Date and extending until the Bid Closing Date, and (ii) with
respect to Bidders whose payment has been initially waived by
the members of the Syndicate and are therefore not required to
pay the maximum Bid Amount into the Escrow Account on or
prior to the Bid Closing Date, the period commencing on the Bid
Opening Date and extending until the closure of the Pay-in Date
Pricing Date
The date on which GoI, in consultation with our Company, the
BRLM and the Co-BRLMs, finalize the Offer Price
Promoters
Selling Shareholder, i.e. the GoI, Department of Heavy Industry
and Suzuki
The Prospectus to be filed with the RoC containing, inter alia, the
Offer Price that is determined at the end of the Book Building
process, the size of the Offer and certain other information
Prospectus
Public Offer Account
Account opened with the Bankers to the Offer to receive monies
from the Escrow Account for the Offer on the Designated Date
Qualified Institutional
Buyers or QIBs
Public financial institutions as specified in Section 4A of the
Companies Act, FIIs, scheduled commercial banks, mutual funds
registered with SEBI, multilateral and bilateral development
financial institutions, venture capital funds registered with SEBI,
foreign venture capital investors registered with SEBI and state
industrial development corporations
Registered Office of our
Company
11th Floor, Jeevan Prakash Building, 25, Kasturba Gandhi Marg,
New Delhi – 110 001
Registrar to the Offer
Registrar to the Offer, in this case being MCS Ltd having its
registered office as indicated on the cover page of this Draft Red
Herring Prospectus
-6-
Retail Bidder(s)
Individual Bidders (including HUFs and NRIs) who have not Bid
for more than 1,000 equity shares in any of the bidding options
in the Offer
Retail Portion
The portion of the Offer being 18,060,900 equity shares of
Rs.5/- each available for allocation to Retail Bidder(s)
Revision Form
The form used by the Bidders to modify the quantity of equity
shares or the Bid Price in any of their Bid cum Application Forms
or any previous Revision Form(s)
SCRR
Securities Contracts (Regulation) Rules, 1957, as amended from
time to time
SEBI
The Securities and Exchange Board of India constituted under
the SEBI Act
SEBI Act
Securities and Exchange Board of India Act, 1992, as amended
from time to time
SEBI Guidelines
SEBI (Guidelines for Disclosure and Investor Protection) 2000
issued by SEBI effective from January 27, 2000, as amended,
including instructions and clarifications issued by SEBI from time
to time
Selling Shareholder
The President of India acting though and represented by the
Joint Secretary, Department of Heavy Industry, Ministry of
Heavy Industries and Public Enterprises, GoI
Stock Exchanges
BSE and NSE
Syndicate
The BRLM, the Co-BRLMs and the Syndicate Members
Syndicate Agreement
[
]
Syndicate Members
[
]
TRS/ Transaction
Registration Slip
The slip or document issued by the members of the Syndicate to
the Bidder as proof of registration of the Bid
Underwriters
The BRLM, the Co-BRLMs and Syndicate Members
Underwriting Agreement
The Agreement between the Syndicate, our Company and GoI to
be entered into on the Pricing Date
All Bidders that are not Qualified Institutional Buyers or Retail
Bidders
Wholesale Bidders
Wholesale Portion
The portion of the Offer being 10,836,500 equity shares of
Rs.5/- each available for allocation to Wholesale Bidders
-7-
ABBREVIATIONS
Abbreviation
AS
BSE
CAGR
CDSL
EGM
EPS
FCNR Account
FEMA
FIPB
GIR Number
GoI
HSBC
HUF
I-Sec
JMMS
JPY
KMCC
LCO
MACT
NAV
NRE Account
NSDL
NSE
P/E Ratio
PAN
RBI
RJVA
RoC
RONW
Suzuki
Full Form
Accounting Standards as issued by the Institute of Chartered
Accountant of India
The Stock Exchange, Mumbai
Compounded Annual Growth Rate
Central Depository Services Limited
Extraordinary General Meeting
Earnings Per equity share
Foreign Currency Non Resident Account
Foreign Exchange Management Act, 1973
Foreign Investment Promotion Board
General Index Registry Number
Government of India
HSBC Securities and Capital Markets (India) Private Limited
Hindu Undivided Family
ICICI Securities Limited
JM Morgan Stanley Private Limited
Japanese Yen
Kotak Mahindra Capital Company Limited
Labour Conciliation Officer
Motor Accident Claims Tribunal
Net Asset Value
Non Resident External Account
National Securities Depository Limited
National Stock Exchange of India Limited
Profit/Earnings Ratio
Permanent Account Number
Reserve Bank of India
Revised Joint Venture Agreement
Registrar of Companies, National Capital Territory of Delhi and
Haryana located at New Delhi
Return on Net Worth
Suzuki Motor Corporation
In this Draft Red Herring Prospectus, references to “allotment” of equity shares in this Offer,
unless the context otherwise requires, also include a reference to “transfer” of equity shares.
In this Draft Red Herring Prospectus, any discrepancies in any table between total and the sum
of the amounts listed are due to rounding.
GLOSSARY OF TECHNICAL AND INDUSTRY TERMS
Term
CBU
CFTs
CKD
CNG
CRM
CSI
DFC OK
EPS
FOB
Description
Completely Built Up units
Cross Functional Teams
Completely Knocked Down condition
Compressed Natural Gas
Customer Relationship Management
Customer Satisfaction Index
Direct Final Check OK
Earnings per Share
Free on Board value
-8-
GDP
LIBOR
LPG
MASSs
MGA
MGP
MIBOR
MPS
MSMs
MUV
NAV
Parc/ car parc
Parc Density
PAT
PDCA
QRs
SIAM
SKD
small car
small car segment
TQM
VA
VAT
VE
VRS
Gross Domestic Production
London Interbank Offered Rate
Liquefied Petroleum Gas
Maruti Authorised Service Stations
Maruti Genuine Accessories
Maruti Genuine Parts
Mumbai Interbank Offered Rate
Maruti Production System
Maruti Service Masters
Multi-utility vehicle
Net Asset Value
Cumulative number of cars sold by a company, since its
inception, less the number of cars that have been scrapped
Passenger cars per 1000 persons
Profit after tax
Planning, Doing, Checking, Acting, an approach used as
underlying theme of our processes
Quantitative Restrictions
Society of Indian Automobile Manufacturers
Semi Knocked Down condition
Cars belonging to segment A or segment B
Segment A and segment B taken together
Total Quality Management
Value Analysis
Value Added Tax
Value Engineering
Voluntary Retirement Scheme
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FORWARD-LOOKING STATEMENTS
This draft red herring prospectus contains certain “forward-looking statements”. These forward
looking statements generally can be identified by words or phrases such as we “believe”,
“expect”, “estimate”, “anticipate”, “intend”, “plan” or other words or phrases of similar import.
Similarly, statements that describe our objectives, plans or goals also are forward-looking
statements.
All forward looking statements are subject to risks, uncertainties and assumptions about us that
could cause actual results to differ materially from those contemplated by the relevant forwardlooking statement. Important factors that could cause actual results to differ materially from our
expectations include, among others:
•
•
•
•
•
•
•
•
General economic and business conditions in India;
Our ability to successfully implement our strategy, our growth and expansion plans and
technological changes;
Changes in the value of the Indian rupee and other currency changes;
Changes in the Indian and international interest rates;
Changes in laws and regulations that apply to the Indian automobile industry;
Increasing competition in and the conditions of the Indian automobile industry;
Changes in political conditions in India;
Changes in the foreign exchange control regulations in India; and
For further discussion of factors that could cause our actual results to differ, see “Risk Factors”
beginning on page (i) of this Draft Red Herring Prospectus. By their nature, certain market risk
disclosures are only estimates and could be materially different from what actually occurs in the
future. As a result, actual future gains or losses could materially differ from those that have been
estimated. Neither our Company nor the members of the Syndicate, nor any of their respective
affiliates have any obligation to update or otherwise revise any statements reflecting
circumstances arising after the date hereof or to reflect the occurrence of underlying events,
even if the underlying assumptions do not come to fruition. In accordance with SEBI
requirements, our Company, the BRLM and the Co-BRLMs will ensure that investors in India are
informed of material developments until such time as the grant of listing and trading permission
by the Stock Exchanges.
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CERTAIN CONVENTIONS; USE OF MARKET DATA
Except where the context otherwise requires, all references to “India” contained in this draft red
herring prospectus mean the Republic of India, all references to the “U.S.” or U.S.A.”, or to the
“United States” are to the United States of America, all references to “China” are to the People’s
Republic of China and all references to “Taiwan” are the Republic of China. Unless the context
indicates or otherwise requires, references to “we”, “us”, “our”, the “Company” or “Maruti” mean
Maruti Udyog Limited, not including its subsidiaries. All references to “Suzuki” mean the Suzuki
Motor Corporation. All references to the “Selling Shareholder”, the “GoI”, the “Government” or
the “Central Government” mean the Government of India.
Market data used throughout this Draft Red Herring Prospectus was obtained from internal
company reports and industry publications. Industry publications generally state that the
information contained in those publications has been obtained from sources believed to be
reliable but that their accuracy and completeness are not guaranteed and their reliability cannot
be assured. Although we believe market data used in this Draft Red Herring Prospectus is
reliable, it has not been independently verified. Similarly, internal company reports, while
believed by us to be reliable, have not been verified by any independent sources.
According to the Japan Automobile Manufacturers Association, or JAMA, mini cars in Japan are
generally defined as vehicles with a length of less than 3.4 meters, height of less than 2.0
meters, width of less than 1.4 meters and exhaustion volumes of less than 0.66 liters under
Japanese standards. The term “mini car” used in this Draft Red Herring Prospectus shall have the
same meaning ascribed to it as in the abovementioned definition by JAMA.
There are two principal systems of classification in the Indian passenger car industry:
Price based classification
Classification based on price is widely accepted in the Indian passenger car industry. Maruti has,
since its inception, classified its different models on the basis of ex-showroom prices of the base
model in Delhi. As of December 31, 2002, the different price segments used by Maruti were as
follows:
• Segment A – cars priced lower than Rs. 300,000
• Segment B – cars priced between Rs. 300,000 and Rs. 500,000
• Segment C – cars priced between Rs. 500,000 and Rs. 1,000,000
• Segment D – cars priced between Rs. 1,000,000 and Rs. 2,500,000
• Segment E – cars priced above Rs. 2,500,000
Length based classification
In April 2002, SIAM introduced a new segmentation of cars on the basis of the length of the cars,
in order to establish a uniform industry standard. The new segmentation of passenger vehicles is
as follows:
1. Passenger cars
• Segment A1
• Segment A2
• Segment A3
• Segment A4
• Segment A5
• Segment A6
(Mini) – cars having a length up to 3,400mm
(Compact) – cars having a length of 3,401- 4,000mm
(Mid-size) – cars having a length of 4,001- 4,500mm
(Executive)– cars having a length of 4,501- 4,700mm
(Premium) – cars having a length of 4,701- 5,000mm
(Luxury) – cars having a length of more than 5,000mm
2. Utility vehicles
• Weight upto 3.5 tonnes
o Seating capacity not exceeding 7 (including driver)
o Seating capacity between 7 and 9 (including driver)
• Weight upto 5 tonnes
o Seating capacity not exceeding 13 (including driver)
• Multi-purpose vehicles (Weight upto 3.5 tonnes)
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Classification used in this Draft Red Herring Prospectus
Unless otherwise indicated, in this Draft Red Herring Prospectus, models of different
manufacturers are classified in different segments in accordance with the price-based
classification. We have generally classified models in different segments on the basis of available
information on the ex-showroom price of the base model in Delhi as of December 31, 2002.
We also consider industry perceptions of segmentation while classifying models, and therefore
there may be some variants of models manufactured by others or us, which if strictly classified
on the basis of price would fall into a different segment. For example, one of Maruti’s products,
the Versa, is significantly larger than cars in the B segment and for the purposes of this Draft
Red Herring Prospectus, has been classified in the C segment despite the fact that it is priced
below Rs.500,000.
Market data
Unless otherwise indicated, in this Draft Red Herring Prospectus, we have used CRIS INFAC
Annual Review of 2001 or 2002, as the source for financial and statistical data relating to the
automobile industry. The CRIS INFAC Annual Review of 2002 uses the length-based classification
in presenting data for sales volumes of models. We have used the sales volumes of models
provided by the CRIS INFAC Annual Review of 2002 to compute market share using our price
based classification.
The classification of models of cars in the Indian passenger car market in accordance with the
length-based classification and our price-based classification is presented below:
Manufacturer
1.
Daewoo Motors India Ltd
2.
Daimler Chrysler India Pvt. Ltd.
3.
Fiat India Automobiles Pvt. Ltd.
4.
Ford India Ltd.
5.
General Motors India Ltd.
6.
Hindustan Motors
7.
Honda SIEL Cars India Ltd.
8.
Hyundai Motor Company Ltd.
Name of the
model
Cielo
Matiz
C Class
E 250
S Class
Fiat Palio
Fiat Siena
Fiat Uno
Palio Adventure
Escort
Ikon
Mondeo
Opel Astra
Opel Corsa
Opel Swing
Ambassador
Contessa
Lancer
Accord
City
Accent
Santro
Sonata
- 12 -
Segment as per
length-based
classification
A3: Mid-size
A2: Compact
A4: Executive
A5: Premium
A6: Luxury
A2: Compact
A3: Mid-size
A2: Compact
A3: Mid-size
A3: Mid-size
A3: Mid-size
A5: Premium
A3: Mid-size
A3: Mid-size
A3: Mid-size
A3: Mid-size
A4: Executive
A3: Mid-size
A5: Premium
A3: Mid-size
A3: Mid-size
A2: Compact
A5: Premium
Segment as per
price-based
classification
C
B
E
E
E
B
C
B
C
C
C
D
C
C
C
B
C
C
D
C
C
B
D
9.
Maruti Udyog Ltd.
10.
PAL-Peugeot Ltd.
11.
Premier Automobiles Ltd.
12.
13.
Skoda Auto India Pvt. Ltd.
Tata Engineering & Locomotive
Company Ltd
Maruti 1000
Maruti 800
Alto
Baleno
Esteem
WagonR
Zen
Versa
Omni
118NE
Peugeot 309
Premier
Padmini
Octavia
Indica
- 13 -
–
A3: Mid-size
A1: Mini
A2: Compact
A3: Mid-size
A3: Mid-size
A2: Compact
A2: Compact
Utility vehicles
Utility vehicles
A3: Mid-size
A3: Mid-size
A2: Compact
C
A
B
C
C
B
B
C
A
B
C
A
A5: Premium
A2: Compact
D
B
RISK FACTORS
An investment in equity shares involves a high degree of risk. You should carefully consider all
of the information in this Draft Red Herring Prospectus, including the risks and uncertainties
described below, before making an investment in our equity shares. If any of the following risks
actually occur, our business, financial condition and results of operations could suffer, the trading
price of our equity shares could decline, and you may lose all or part of your investment.
Unless stated otherwise, the financial data in this section are derived from our unconsolidated
financial statements prepared in accordance with Indian GAAP, included elsewhere in this Draft
Red Herring Prospectus.
Unless otherwise indicated, all financial and statistical data relating to the automobile industry in
the following discussion are derived from the CRIS INFAC Annual Review of 2001 or 2002. These
data have been reclassified in certain respects for purposes of presentation. The sales volumes
for Maruti included in the following discussion refer to sales by Maruti to dealers, while
computations of Maruti’s market share are based on sales to the customer set forth in the CRIS
INFAC Annual Review of 2001 or 2002. For more information, see “Certain Conventions; Use of
Market Data” on page 11 of this Draft Red Herring Prospectus.
INTERNAL RISK FACTORS
We operate in a highly competitive environment and competitive pressure on our
business is likely to continue.
Since the delicensing of the passenger car industry by the GoI in 1993, a number of international
and domestic automobile manufacturers have begun manufacturing passenger cars in India and
have entered the Indian passenger car market. As a result, the Indian passenger car market has
become highly competitive. In a growing market, our overall market share in terms of number of
passenger cars sold in the Indian market had declined from 83.1% in fiscal 1998 to 57.6% in
fiscal 2001 and increased in fiscal 2002 to 58.6%. We are primarily focused on the A and B
segments (priced below Rs.500,000) which are particularly price-sensitive and together
constituted more than 86% of sales volumes in the Indian passenger car market in fiscal 2002.
Our market share for passenger cars in the B segment (priced between Rs. 300,000 and Rs.
500,000), declined to 36.9% in fiscal 2001 from 67.3% in fiscal 1998. In fiscal 2002, our market
share in the B segment was 40.3%. Our sales volumes in the combined A and B segments
comprised 95.4% of our domestic sales volumes in fiscal 2002.
We are currently the only manufacturer that sells passenger cars in the A segment. In segment
B, we compete primarily with three other manufacturers. In the future, we may also face
competition from other domestic and international manufacturers that enter the A and B
segments, including international manufacturers that have been successful in foreign markets for
cars of a similar size but are yet to enter these segments in India. Some of the international
manufacturers that have entered the Indian market in recent years have significantly greater
financial resources than us, which may enhance their ability to compete with us. The C segment
(priced between Rs. 500,000 and Rs. 1,000,000), which comprised 4.2% of our domestic sales
volumes in fiscal 2002, is significantly more fragmented than the A and B segments and we face
competition from several manufacturers in this segment.
We exported passenger cars comprising 3.9%, 3.1%, 2.6% and 6.9%, of our total sales in fiscal
2000, 2001, 2002, and the nine months ended December 31, 2002, respectively, to many
countries including countries in Western Europe. We expect to continue to face competition in
the export markets, which may reduce demand for our products in those markets.
Since most of our cars run on petrol, we also compete with manufacturers of cars with diesel
engines. We may also face competition from public transportation systems in India as they
improve.
- 14 -
We compete primarily based on price, product performance, brand image, new model launches,
distribution network and the availability of value-added after sales services and after sales
support. If we are unable to compete effectively based on these factors, competition may
reduce our market share in individual segments of the passenger car market as well as our
overall market share in the future. We expect competitive pressure on our business to continue.
Our net profits have fluctuated during the last three fiscal years, including a net loss in fiscal
2001. While we achieved profitable operations in fiscal 2002, we may face a decline in our
profits or a reduction in sales volumes in the future due to intense competition.
We are substantially dependent on the Maruti 800, which comprised 42.5% of our
domestic sales volumes in fiscal 2002.
At present, we are the only manufacturer in India to produce passenger cars in the A segment
(priced below Rs.300,000), which contributed approximately 60% of our domestic sales volumes
in fiscal 2002. A substantial portion of our sales volumes is derived from the sales of the Maruti
800 model, which is an A segment car. In fiscal 2002, Maruti 800 accounted for 42.5% of our
domestic sales volumes. We anticipate that the Maruti 800 will continue to dominate the small
car segment and account for a substantial portion of our sales. Consequently, our future success
will, to a large extent, depend on continued demand for and market acceptance of the Maruti
800, our ability to enhance and develop the Maruti 800 to meet the evolving needs of the
customers, and our ability, following the end of the product life cycle of the Maruti 800, to find
another model that will generate similar sales volumes in a similar price range. A change in
consumer preferences, technological change or other factors could reduce demand for the Maruti
800, which could lead to a material adverse affect on our business and results of operations. In
addition, a competitor could start manufacturing cars in the A segment to compete with the
Maruti 800.
We could face competition from imports of new or pre-owned cars of various
categories, and from cars manufactured or assembled in India using imported
components.
In April 2001, all quantitative restrictions on the import of automobiles into India were removed.
The GoI has, since March 2002, allowed automatic approvals for foreign equity ownership of up
to 100% in entities manufacturing automobiles and components in India.
There remain
relatively high tariffs on imports of automobiles and components and other restrictions such as
quantity restrictions. We expect that tariffs on the import of components, CKDs or CBUs will be
reduced in the near future in order to comply with India’s obligations under the World Trade
Organisation agreement. If tariffs on the import of new or pre-owned cars or components are
reduced, or other restrictions on such imports are removed, we could face increased competition
from automobile manufacturers that import new or pre-owned passenger cars to India or
manufacture passenger cars in India using imported components.
Our ability to reduce our cost of production and thereby increase our operational
efficiency is an essential part of our business strategy and we cannot assure you that
our cost reduction measures will continue to achieve the operational efficiencies they
have done in the past.
Reducing our cost of production is essential to our business strategy in a highly competitive
market environment. We have significantly reduced costs through a combination of measures
such as increasing the use of locally manufactured components for our products, reducing the
cost of manufacturing and increasing productivity. In the past, these measures have allowed us
greater flexibility in reducing the prices of our products in an increasingly competitive market
environment. Our measures to increase our operational efficiency may not yield similar results in
the future, which may adversely affect our sales volumes or profit margins.
- 15 -
Suzuki has the ability to exercise significant control over us and its interests may
conflict with your interests as a shareholder.
Suzuki owns 54.2% of our outstanding equity shares and is our controlling shareholder. As a
result, Suzuki has the ability to exercise significant control over most matters requiring approval
by shareholders, including the election and removal of directors and other significant corporate
transactions. In addition, Suzuki could, by exercising its powers of control, delay or defer a
change in control of our Company or a change in our Company’s capital structure, delay or defer
a merger, consolidation, takeover or other business combinations involving our Company, or
discourage a potential acquirer from making a tender offer or otherwise attempting to obtain
control of our Company. Following Suzuki’s acquisition of a controlling interest in us, the success
of our business also depends on our continued ability to integrate Suzuki personnel into our
management structure.
Suzuki is a major manufacturer and exporter of passenger cars and motorcycles. Approximately
20% of Suzuki’s outstanding equity shares are owned by General Motors of Canada Ltd., which is
part of the General Motors group. The General Motors group also has an Indian venture
competing with us in segment C of the automobile industry. We have entered into several nonexclusive agreements with Suzuki and its affiliates for the supply of technical know-how,
assistance and information related to our products and after-sales service, and for the supply of
raw materials, components, and other inputs. These agreements place restrictions on our ability
to export and to manufacture and sell products that compete with the products covered by the
agreements. Suzuki’s global interests and our interests as a company may not always be
aligned in the future.
Suzuki has the ability to change our business strategy. In addition, if there is a change of
control of Suzuki, Suzuki’s relationship with us and our business strategy may change in the
future.
For details of the terms governing our relationship with Suzuki and restrictions imposed on us by
our agreements with Suzuki and details of the nature of our transactions with its affiliates, please
see “Related Party Transactions” on page 158 of this Draft Red Herring Prospectus and “Our
Promoter” on page 126 of this Draft Red Herring Prospectus.
We are substantially dependent on Suzuki.
Suzuki, which became our controlling shareholder in 2002, has several license agreements with
us under which it has, since our inception:
• provided us with technical know-how, assistance and information for the manufacture,
sale and after-sales service of our products and parts;
• supplied components for our passenger cars;
• deputed technical personnel
• helped us develop manufacturing processes and integrate certain Japanese management
practices such as kaizen, which is Japanese for continuous improvement, in our plants;
• trained our personnel; and
• helped us develop and manage the supply chain for our products.
Suzuki has agreed to no longer charge royalty for the Maruti 800, Omni, Gypsy, Esteem and Zen
models, which arrangement is subject to revision in the event of the introduction of new
technology or upgradation in specifications due to changes in market conditions or requirements
of new laws or norms. In addition, Suzuki will provide a 10% discount on knocked down
components imported by us, except those imported for the Alto model built for exports, for the
period April 2003 to March 2005. Suzuki is entitled to terminate any of its existing licence
agreements with us by giving notice six months before the end of the original term and each
renewal period. In addition, we have commercial relationships with some of Suzuki’s affiliates
relating to the supply of materials, services, spares and accessories, vendor assistance, including
guarantees and co-lease arrangements, and the purchase of dies and moulds and capital
equipment. If Suzuki terminates any license agreement or any of its affiliates terminate their
- 16 -
agreements with us, we may be unable to obtain necessary inputs, information or services for
our business from alternative sources or at a reasonable cost. Since we are substantially
dependent on Suzuki and Suzuki’s technical personnel, if a material adverse change occurs in
Suzuki’s business, or if Suzuki ceases to provide technical know-how and assistance,
components, training and other aid, our business may be adversely affected.
We are dependent on a limited number of vendors for the supply of critical
components, consumables and raw materials used in the manufacture of our products.
We depend on external suppliers, whom we refer to as vendors, for the supply of raw materials,
components and spare parts for our products. As of March 31, 2003, we had an aggregate of
299 vendors of components in India. We had strategic equity interests through joint venture
agreements in 13 of these vendors. We collaborate closely with many of our vendors in order to
secure a reliable supply of components that meet our requirements and to generate economies
of scale. As a result of this approach, for several inputs in our manufacturing process such as
glass, seats and axles, we rely on a sole vendor or only a limited number of vendors. The failure
by a vendor to adhere to our technical specifications, quality requirements and production and
delivery schedules could disrupt our manufacturing process. If a vendor fails to meet quality
standards, it could be exposed to warranty and other product liability costs, and expose us to the
risk of product liability claims. In addition, a vendor on whom we are dependent may raise its
prices or a dispute may arise between us and the vendor. If we are dependent on a sole vendor
or a limited number of vendors for a critical input, we may find it difficult to replace a vendor on
a timely basis and at reasonable cost, and our business and results of operations may be
adversely affected. For example, labour unrest in February 2003 at one of our vendor’s facilities
disrupted the supply of engine cylinder blocks to us, which had an adverse impact on our
production volumes in March 2003.
Further, the unauthorised market for our spares and accessories will become stronger should
vendors decide to supply such spares and accessories directly to the market.
Disputes between our major shareholders may have an adverse impact on our
business.
After this offering, Suzuki and the GoI will hold 54.2% and approximately 20.8%, respectively, of
our outstanding equity shares. Subject to certain restrictions in the RJVA between Suzuki and
the GoI, Suzuki has the right to nominate a majority of the directors on our Board and the right
to nominate our chairman and our managing director. However, after this offering, the GoI will
retain certain rights under the RJVA, including the right to nominate one of our directors so long
as it owns in excess of 10% of our outstanding equity shares. In addition, until the earlier of
December 31, 2003 or the termination of the RJVA, we are not permitted to sell, transfer, lease
or dispose our fixed assets in excess of 10% in any fiscal year, other than in the ordinary course
of business, increase our paid up capital, commence winding up proceedings or enter into any
arrangements with creditors, without the affirmative vote of the director nominated by the GoI.
The RJVA will terminate if the GoI ceases to own more than 10% of our outstanding equity
shares. In the past, our shareholders had disputes relating to the management of our Company
that resulted in delays in the investment decisions, upgradation and launch of new models of
cars, and this adversely affected our business and results of operations. If a dispute arises
between Suzuki and the GoI with respect to their respective rights under the RJVA or otherwise
in connection with us, or a dispute arises among any other major shareholders in the future in
connection with us, our business could be adversely affected.
We are subject to risks of assuming product warranty, recall and product liability costs
due to defects in our products or related after-sales services, which could generate
adverse publicity and adversely affect our business, results of operations and financial
condition.
Defects, if any, in our products could require us to publicly undertake service actions or recall
campaigns. Such actions could require us to expend considerable resources in correcting these
- 17 -
problems and could adversely affect demand for our products. Defects in our products that arise
from defective components or spare parts supplied by our vendors may be covered under
warranties provided by our vendors. We are not covered by insurance for product warranty
claims for cars sold in India. Our product warranty insurance only covers claims that are asserted
during the third and fourth year in the life of a car and are covered by extended warranties
purchased by customers. An unusual number or amount of warranty claims against a vendor
could affect us adversely because we depend on a limited number of vendors for the supply of
raw materials and components. Repeated warranty claims may result in a rise in our insurance
premium.
In addition, such claims could have an impact on our consolidated results of operations and
financial condition as some of our vendors are our affiliates and for some of our vendors we are
guarantors on outstanding loans or lease payment obligations. Further, any defect in our
products or after-sales services provided by authorized dealers or third parties could also result
in customer claims for damages. In defending such a claim, we could incur substantial costs and
receive adverse publicity. Management resources could be diverted away from our business
towards defending such claim. As a result, our business, results of operations and financial
condition could suffer. We cannot assure you that the limitations of liability set forth in our
contracts with vendors will be enforceable in all instances or will otherwise protect us from
liability for damages.
Further, we are not fully insured against all potential hazards incidental to our business. For
example, our insurance does not cover replacement cost of plant and machinery, product liability
costs for cars sold in India and losses related to recall of cars for design defects or replacement
of components or spare parts.
Potential delays in the launch of new models in the market and lower-than-anticipated
market acceptance of new or existing models can cause us to lose market share and
adversely affect our results of operations.
In a highly competitive environment where the passenger car industry has excess capacity,
competitors can gain a significant advantage by bringing a new model to market in a particular
segment before we do. For example, a delay in the launch of one of our models has, in the past
allowed a competitor’s model to precede it in the market and develop a competitive advantage.
In addition, the launch of a new model usually requires substantial capital investment and costs
of production of new models are higher since, at least initially, new models have high import
content. The capital investments in plant and machinery associated with the launch of a new
model may result in higher levels of depreciation. Our loss in fiscal 2001 was partially
attributable to these factors. Similar investments by us in the future may have an adverse
impact on our profitability. Therefore, if market acceptance of any of our new models is lower
than anticipated, we may be unable to gain the intended economic benefits of our investments
and higher cost of production, and our results of operations may be adversely affected.
We had negative cash flows in fiscal 2001 and issued an aggregate amount of Rs.3,000 million
secured non-convertible redeemable debentures to help fund our capital expenditure
requirements. As of December 31, 2002, we had cash and bank balances and current
investments amounting to Rs. 9,992 million. If we are unable to fund our working capital or
capital expenditure required for the launch of new models and other purposes using cash from
our operations, we may need to incur indebtedness. In addition, our major capital projects may
not be completed, completed in the timeframe or at the cost levels originally anticipated.
Our employees are represented by a trade union and any labour unrest at our
manufacturing facility or our vendors’ facilities could adversely affect our operations
and profitability.
On March 31, 2003, we had 4,590 employees, of which 2,999 are represented by a trade union.
Our manufacturing operations were affected by a strike from October 12, 2000 to January 8,
2001 arising from a dispute between the management and the union regarding the specifics of a
- 18 -
new incentive scheme proposed by the management. The strike was resolved with the signing of
a good conduct agreement between the workers and the management. While our production
volumes were not significantly affected during the strike, future labour unrest at our facility or at
the facilities of our vendors could adversely affect our manufacturing operations and our
operating results.
We are involved in negotiations with the union for the renewal of a wage settlement agreement,
which expired in March 2000, the terms of which may adversely affect our results of operations
and financial condition. At March 31, 2003, 2,999 of our employees were represented by the
Maruti Udyog Kamgar Union, or the MUKU. We are involved in negotiations with the MUKU for
the renewal of a wage settlement agreement, which expired in March 2000. In the previous
wage settlement agreement, entered into in February 1998, we had agreed to provide
retrospective wages from April 1996 until the date of the agreement for certain categories of
employees, and other benefits such as transport subsidies and increases in the amounts of
permissible advances. We had also agreed to set up a pension scheme with more favourable
terms for employees than the statutorily required employee provident fund.
Breakdowns in our information technology based communication systems may disrupt
our operations.
We rely on an information technology based communications infrastructure which links our
offices, vendors, dealers and Suzuki, and is essential to the management of our supply chain,
inventory, manufacturing and new businesses. It also forms an integral part of our internal
communications and management information systems. In the case of a breakdown, the
ordering and follow-up system with vendors and dealers will be affected, which could lead to
production stoppages, significant increases in levels of inventory and lead times. It may also
disrupt our internal decision-making process by causing loss of data and making it difficult for
members of our management team to communicate with each other in a timely manner.
We have launched several new businesses and we cannot assure you that we will
remain successful in these businesses or that they will yield the intended economic
benefit.
To complement our core business of manufacture and sale of passenger cars, we have recently
entered into alliances with third parties for the sale of pre-owned Maruti passenger cars,
providing financing for purchases of our products, providing automobile insurance for our
products, and providing leasing and fleet management services in relation to our products, in
each case using the “Maruti” brand name. These businesses form an integral part of our
business strategy to offer a “one-stop shop” for the needs of the Indian consumer in order to
foster brand loyalty and benefit from our extensive dealership network for distribution of the
services. We have launched these businesses during and after fiscal 2002, and they are in their
early stages. Some of the business models we are using are relatively new to the Indian
passenger car industry and we cannot assure you that these business models will gain
widespread acceptance. Governmental regulation may also have an adverse impact on the
economic viability of these business models. We have limited experience in these businesses
and are substantially dependent on our alliance partners in the case of each of our new
businesses. We cannot assure you that we will succeed in developing the management skills
required to be successful in these businesses. In addition, since our brand is associated with
these businesses, their failure may weaken our brand. Although we have limited our liability
towards our alliance partners and their customers, we anticipate that customers will require us to
fulfil expectations related to the services provided by our alliance partners since our brand is
associated with these businesses.
On January 14, 2002, we incorporated three wholly owned subsidiaries and made capital
investments of Rs. 0.5 million in each of these companies: True Value Solutions Limited, or
TVSL, to facilitate the business of selling pre-owned Maruti passenger cars through our
dealership network, and Maruti Insurance Distribution Services Limited, or MIDSL, and Maruti
Insurance Brokers Limited, or MIBL, as insurance intermediaries to facilitate the distribution of
- 19 -
automobile insurance in alliance with certain insurance companies. In the nine months ended
December 31, 2002, TVSL, MIDSL and MIBL generated a profit after tax of Rs. 596,000, Rs.
184,000 and Rs. 1,597,000, respectively. We conduct our automobile finance business in
alliance with finance companies, and our leasing and fleet management business in alliance with
providers of automobile financing and insurance, dealers and car rental agencies. These
investments may not yield the intended economic benefits.
We have several group companies, some of which have yielded low returns on
investment.
Some of these group companies are also loss making, which may
adversely affect our result of operations.
We have equity stakes in 19 group companies. Some of these have yielded low returns on
investment or incurred losses in the last three years, as set out in the table below:
Profit/(Loss), in Rs. million for financial year ended March 31:
Joint Venture Name
MUL
2002
Shareholding
J. J. Impex (Delhi) Pvt Limited
49.0%
5.05
Mark Auto Industries Limited
33.9%
3.02
Maruti Countrywide Auto Financial
26.0%
(44.67)
Services Limited
2001
2000
1.76
(25.11)
(4.73)
(1.82)
6.90
24.52
These investments may continue to adversely affect our consolidated results of operations and
financial condition.
Our strategic investments in, and capital commitments for the benefit of, vendors may
adversely affect our consolidated results of operations and financial condition.
Close collaboration with vendors is an important part of our business strategy. We have made
strategic equity investments in 13 vendors that supply critical raw materials and components for
the manufacture of our products, some of which have yielded low or negative returns on
investment or have been generating losses in the course of the last three fiscal years. In the
case of some of our vendors, we have made capital commitments as their guarantors for their
obligations under leases or loan agreements. The future performance of these vendors may
therefore adversely affect our results of operations and financial condition. For more information
on the recent financial performance of vendors in whom we have strategic investments, see “Our
Group Companies – Our Joint Ventures” on page 134 of this Draft Red Herring Prospectus.
Our contingent liabilities as per Indian Accounting Standards are as follows:
As of December 31, 2002, our contingent liabilities not accounted for were as follows:
• Claims against us not acknowledged as debts in the aggregate amount of Rs.12,692
million due to sales tax, excise, customs, income tax and disputed claims us.
• Guarantees given by us to HDFC in the aggregate amount of Rs. 350 million against a
term loan of Rs.350 million given by HDFC Limited to Maruti Employees Co-operative
House Building Society Limited, Bhondsi. The aggregate amount outstanding under the
loan as of December 31, 2002 was Rs.190 million.
• Guarantees given to finance companies in the aggregate amount of Rs. 497 million for
term loans and lease finance provided to various vendors for the purchase of dies and
moulds of certain models.
• Leasing commitments in the aggregate amount of Rs. 2,645 million as co-lessee under
certain agreements between various vendors, as lessees, and finance companies or
banks, as lessors, for the leasing of dies and moulds for certain models.
To the extent that any of these contingent liabilities become actual liabilities, they will adversely
affect our results of operations and financial condition in the future.
- 20 -
We are dependent on our dealership network for the sales and distribution of our
products.
We believe that our extensive network of 178 authorised dealers as of March 31, 2003 is one of
our most important competitive advantages in the passenger car industry. We maintain close
contact with our dealers and monitor their performance, but we do not have control over them.
Since the dealers have direct contact with the retail customers at the time they purchase the
product and during after-sales services and support, their conduct has a significant impact on the
consumer’s perception of our products and our brand. We are therefore subject to the risk that
dealers fail to adhere to the quality standards we set for them in respect of providing sales and
after-sales service and support, and thereby negatively affect market perception of our products.
In addition, in the recent past, intense competition among our dealers or with dealers of
competitors’ products and other factors beyond our control have negatively affected the financial
condition of some of our dealers. If this happens on a large scale, a significant portion of our
dealers’ businesses would be affected and therefore they may be unable to provide after-sales
service and support to customers. Further, our dealers could engage in other businesses that
could hinder them from providing quality services. Finally, we bear the risk of dealer default to
customers and consequent customer recourse to Maruti. Although we are not contractually liable
to the customer in these instances, we have to expend considerable resources defending such
claims and ensuring that defaulting dealerships are terminated.
In addition, sales and
distribution of our vehicles may be affected if we are unable to deliver them to dealers in a
timely manner due to disruptions in railway or road transportation networks due to weather
related events, labour strikes or otherwise. For example, in April 2003, a nation-wide strike by
truck drivers in India adversely affected our distribution channels. All these factors could erode
one of our major competitive advantages and could adversely affect our business and results of
operations.
We are dependent on our key management personnel and our ability to attract and
retain talented professionals.
We rely on the expertise and services of key members of our senior management such as our
Managing Director and our Marketing Director. If we lose any of these key personnel, we may
find it difficult to find replacements with similar knowledge and experience, especially in relation
to our business and our Company, and integrate them into our organization. As a result, our
business, results of operations and financial condition could be adversely affected. In addition,
we compete with other companies in and outside our industry to recruit and retain highly skilled
professionals trained in automobile engineering, product development and marketing. If we are
unable to attract highly skilled professionals, fail to integrate them into our organization, or fail
to retain them after we have invested resources in their training, our ability to compete and our
results of operations may be adversely affected. In addition, we do not have any noncompetition agreements with any of our senior management or other members of our
management team.
We are yet to receive certain statutory approvals required in the ordinary course of
business.
We are yet to receive the following renewals and approval:
•
•
The Haryana State Pollution Control Board (HSPCB) consent relating to the discharge of
effluents by us, was valid till March 31, 2003. We filed an application for the extension of
this consent for FY2004 and FY2005 on December 20, 2002.
The HSPCB consent setting permissible emission levels was valid till March 31, 2003. We
filed an application for the extension of this consent for FY2004 and FY2005 on December
20, 2002.
Failure to obtain these renewals, which have been regularly obtained in the past, would
adversely affect our business.
- 21 -
In addition, we have not received building completion certificates and approvals under the
Punjab Schedule and Controlled Areas (Restriction of Unregulated Developments) Act, 1963 for
any of our buildings in our manufacturing facility. We have applied for the approval of the
building plans and submitted the required plans, drawings and other relevant documents.
We are defendants in a number of legal proceedings that if determined against us,
could have a material adverse impact on our results of operations and financial
condition.
We are defendants in a number of legal proceedings incidental to our business and operations.
We were also subject to claims against us arising from excise, sales tax, customs, income tax,
consumer disputes and other disputed demands for an aggregate amount of Rs. 12,692 million
as of December 31, 2002.
We are currently disputing claims made against us by the excise department, including one claim
of Rs. 2,003.58 million pending before the Commissioner of Excise arising from the MODVAT
credit on capital goods.
Also, there are a number of civil and criminal cases filed against us and our directors.
Based on legal advice, we believe that we have strong defenses to these claims and have not,
therefore, established any reserves in our financial statements for the amounts of potential
liability. Should any new developments arise, such as a change in Indian law or a ruling against
us by appellate courts or tribunals, we may need to establish reserves in our financial
statements, which could increase our expenses and our current liabilities. Furthermore, if a
claim is determined against us and we are required to pay all or a portion of the disputed
amount, it could have a material adverse affect on our results of operations.
All of the above legal proceedings are pending at different levels of adjudication before various
courts, tribunals, enquiry officers, and appellate tribunals. For more information regarding
litigation, see “Outstanding Litigation and Material Developments” on page 172 of this Draft Red
Herring Prospectus.
Any future equity offerings by us or our existing shareholders, or the issue of options
under an employee stock option plan, may lead to dilution of your shareholding in us
or affect the market price of our equity shares.
As a purchaser of equity shares in this offering, you may experience dilution to your shareholding
to the extent that we make future equity offerings or issue stock options under any employee
stock option plan. In addition, under the RJVA, the GoI has an option to offer its remaining
stake of 2,968,009 equity shares of Rs.100 each that is 59,360,180 equity shares of Rs.5 each,
representing 20.8% of the equity share capital of Maruti, either by way of additional offers to the
public or by exercising an option to put the equity shares to Suzuki. For additional details on the
rights of the GoI under the RJVA, see “Our Promoter” on page 126 of this Draft Red Herring
Prospectus.
EXTERNAL RISK FACTORS
Our performance is linked to the performance of the Indian economy and the
passenger car industry in India.
Demand for passenger cars can be adversely affected by factors such as an increase in fuel
prices, macro-economic performance, and competition from alternative modes of transport. In
fiscal 2001 and fiscal 2002, demand for passenger cars in India has been depressed, the industry
has experienced excess capacity, and competition has intensified as a result. We are dependent
on the Indian passenger car market as exports contributed only 3.9%, 3.1%, 2.6% and 6.9%, of
- 22 -
our total sales in fiscal 2000, 2001, 2002, and the nine months ended December 31, 2002,
respectively. We have therefore been subject to increasing competitive pricing pressure. Excess
capacity in the industry is likely to further intensify competitive pricing pressure in the event of
continued economic downturn, which may have a material adverse impact on our results of
operations. Should consumer demand soften or interest rates increase, our profitability may be
affected. In addition, these conditions may have an adverse impact on the performance of the
financial markets in India and may cause the market price of our equity shares on the Indian
stock exchanges to decline in the future.
After this offering, the price of our equity shares may be highly volatile, or an active
trading market for our equity shares may not develop.
The prices of our equity shares on the Indian stock exchanges may fluctuate after this offering as
a result of several factors, including:
•
•
•
•
•
•
•
volatility in the Indian and global securities market;
our results of operations and performance, in terms of market share;
performance of our competitors, the Indian passenger car industry and the perception in
the market about investments in the automobile sector;
media reports about the GoI’s process of selling its stake in us and other companies in
which the GoI has an equity participation;
changes in the estimates of our performance or recommendations by financial analysts;
significant developments in India’s economic liberalization and deregulation policies; and
significant developments in India’s fiscal and environmental regulations.
There has been no public market for our equity shares and the prices of our equity shares may
fluctuate after this offering. There can be no assurance that an active trading market for our
equity shares will develop or be sustained after this offering or that the prices at which our
equity shares are initially traded will correspond to the prices at which our equity shares will
trade in the market subsequent to this offering.
Increases in the cost of raw materials and automobile components may have a
material adverse impact on our results of operations.
In fiscal 2002, consumption of raw materials and components formed 73% of our total
expenditure net of excise duty. We enter into contracts with suppliers of these inputs in order to
fix our input costs over a defined period. We also have joint venture agreements with 13
vendors that supply these inputs. If costs of raw materials and components rise, our results of
operations will be adversely affected.
If the supply of power or the fuel needed to generate power is interrupted, it could
disrupt our production process or subject us to additional costs.
The state of Haryana, where we are located, has a power shortage and is unable to meet our
needs for power for our operations. We have a captive power plant for the production of 60MW
of power. Any interruption in the supply of power from our captive power plant would disrupt
our manufacturing operations. Due to a decision of the Supreme Court of India applicable to the
industrial use of natural gas, we are no longer able to use natural gas as fuel for generating
power in our captive power plant. Instead, we have been using naphtha as fuel since July 2002.
Naphtha is a more expensive fuel than natural gas. In addition, in case of a shortage in our
supply of naphtha or other fuels we rely on in the future, we may have to resort to generating
power from other more expensive sources of fuel to ensure that our production is not affected.
We continue to look for less expensive sources of fuel.
- 23 -
Compliance with increasingly stringent safety or emissions standards relating to our
products or our manufacturing facility, or other environmental regulation, may
adversely affect our business and results of operations.
In the last few years, the GoI has introduced several regulations regarding emission levels, fuel
efficiency, noise and safety of cars, as well as levels of pollutants generated by the plants that
produce cars. These regulations are likely to become more stringent and the cost of complying
with these regulations may be significant. We are committed to improving and maintaining our
environmental and safety standards with respect to our products and our manufacturing facility,
and have received the ISO 14001 certification for environmental management. In fiscal 2001,
we incurred substantial additional costs to upgrade our vehicles to comply with Bharat Stage II
emission norms. To comply with the requirements of environmental regulation, we may have to
incur substantial capital expenditure and research and development costs to upgrade our
products and our manufacturing facility, which may increase our cost of production and thereby
adversely affect our results of operations. If we are unable to comply with these standards
within the timeframe provided to us, our production and sales may be adversely affected.
For details on the environmental regulation to which we are currently subject, see “Regulations
and Policies” on page 169 of this Draft Red Herring Prospectus.
Taxes and other levies imposed by the GoI on the acquisition and ownership of
passenger cars, or GoI regulation relating to us may have a material adverse effect on
demand for our products.
Taxes and other levies imposed by the central or state governments in India that affect our
industry include:
• customs duties on imports of raw materials and components;
• excise duty on the manufacture of cars;
• central and state sales tax;
• value added tax;
• road and registration tax; and
• income disclosure requirements applicable to customers who want to purchase cars.
These taxes and levies affect the cost of production and prices of our products and therefore the
demand for our products. In addition, restrictions or levies imposed by the government on the
use of vehicles, such as a congestion charge or other traffic control measures, could affect the
demand for our cars in the future. An increase in any of these taxes or levies, or the imposition
of new taxes or levies in the future, may have a material adverse impact on our business, results
of operations and financial condition. For details on the taxes and levies relating to our industry,
see “Regulations and Policies” on page 169 of this Draft Red Herring Prospectus.
Our failure to anticipate, or adapt our business to, consumer preferences in the
automobile industry may adversely affect our business and our leadership position in
the small car segment.
Evolving industry standards, changing consumer preferences, technological changes and new
product introductions characterize the automobile industry. Our success depends on our ability to
keep pace with these changes and introduce products with contemporary features. We may not
be successful in addressing these developments on a timely basis or if we address these
developments, our new products may not be successful in the marketplace. In addition,
products developed by others may make our products less competitive.
Although we produce some cars that run on diesel, liquefied petroleum gas and compressed
natural gas, most of the cars we produce run on petrol. If the price of diesel falls significantly
below that of petrol, demand for cars running on diesel is likely to rise at the expense of demand
for our products.
In addition, with petroleum being a limited natural resource, several
companies are in the process of developing cars running on alternative sources of fuel. Cars
using energy sources other than petrol or diesel, such as electricity, may become more popular
- 24 -
in the future. We may not be able to introduce successful and popular cars that use such
alternative sources of energy.
While we expect to continue to manufacture products in most segments of the Indian passenger
car market, our business strategy is to focus primarily on producing a wide range of models in
the A and B segments, which together comprised over 86% of the sales volumes in the Indian
passenger car market in fiscal 2002. As consumer income levels rise in India, our lack of
concentration on, and competitiveness in, the segments for cars priced above Rs. 500,000 (the
C, D and E segments) has promoted, and may continue to promote, attrition of our customers
upgrading from the A and B segments towards our competitors.
We are subject to risks arising from exchange rate fluctuations.
We import a substantial amount of our imported components, especially for newer models, from
Suzuki. Since the cost of these components is denominated in Yen, any adverse fluctuations with
respect to the exchange rate of Yen for Indian Rupees is likely to affect our input costs. We
continue to bear this risk despite the increasing use of locally manufactured components in each
of our models over time. In addition, we are subject to exchange rate fluctuations in relation to
the export of our products. We enter into foreign exchange forward and derivative contracts to
hedge these risks, but these contracts may not protect us fully from losses due to fluctuations in
foreign exchange rates.
Our manufacturing operations and substantially all of our assets and those of most of
our vendor affiliates are located in or in close proximity to one high volume facility in
Gurgaon, Haryana, which exposes us to the risk of significant disruptions in production
should a catastrophe occur at or in the vicinity of such facility.
Our operations are dependent on our ability to protect our infrastructure including plant and
machinery against damage from fire, earthquakes, floods, power losses and similar events. The
occurrence of a natural disaster or other unanticipated problems at our facility or the facilities of
our vendors could cause interruptions in our operations. This risk is particularly relevant because
our manufacturing operations are located in one facility, many of our vendors are located within
100 kilometres of that facility and some of our vendors are located in the facility. Conversely,
some of our vendors are not located in close proximity to our facility and are therefore heavily
reliant on transportation networks that connect their facilities to ours. If they are unable to
deliver raw materials or components to us in a timely manner due to disruptions in railway or
road transportation networks due to weather-related events, labour strikes or otherwise, we may
be forced to stop production. For example, the nation-wide strike by truck drivers in India in
April 2003 adversely affected our production volumes. Any damage or failure that causes
interruptions in our operations could have a material adverse effect on our business, financial
condition and results of operations.
Terrorist attacks and other acts of violence or war involving India, the United States,
and other countries could adversely affect the financial markets, result in loss of
customer confidence, and adversely affect our business, results of operations and
financial condition.
Terrorist attacks, such as the ones that occurred in New York and Washington, D.C. on
September 11, 2001 and New Delhi on December 13, 2001 and Bali on October 12, 2002, and
other acts of violence or war, including those involving India, the United States or other
countries, may adversely affect Indian and worldwide financial markets. These acts may also
result in a loss of business confidence and have other consequences that could adversely affect
our business, results of operations and financial condition.
More generally, any of these events could adversely affect fuel prices, cause consumer spending
to decrease, cause increased volatility in the financial markets and have an adverse impact on
the economies of India and other countries, including economic recession.
- 25 -
NOTES TO RISK FACTORS
1. The average cost of acquisition of equity shares of Rs. 5 each held by the Selling Shareholder
is Rs. 4.98*.
2. The average cost of acquisition of equity shares of Rs.5 each held by Suzuki is Rs. 32.08.
3. The Company had made a rights issue of 1,219,512 equity shares of Rs.100/- each
amounting to about Rs. 4,000 million on May 30, 2002 at a price per share of Rs. 3280/-. In
addition, Suzuki paid a control premium of Rs. 10 billion to GoI.
4. The book value per equity share of Rs. 5 each as on December 31, 2002 is Rs. 106.
5. The net worth of our Company as on December 31, 2002 is Rs. 30,018 million.
6. The present offer is an Offer of sale of 72,243,300 equity shares of Rs. 5/- each at a price of
Rs. • for cash aggregating Rs. • million.
7. The size of the Offer will be enhanced to the extent of upto 10% of the Offer i.e. upto
7,224,300 equity shares of Rs.5/- each in case the Selling Shareholder decides to retain any
over-subscription. In such a case, the size of the Offer may increase upto 79,467,600 equity
shares of Rs.5/- each.
8. For related party transactions refer to the section entitled “Related Party Transactions” on
page 158 of this Draft Red Herring Prospectus.
9. Investors may note that in case of over-subscription in the Offer, allotment to wholesale
bidders and retail bidders shall be on proportionate basis. For more information, see “Basis of
Allotment” on page 296 of this Draft Red Herring Prospectus.
10. Investors are free to contact the BRLM or the Co-BRLMs for any clarification or information on
the Offer who will be obliged to provide the same.
11. The investors may contact the BRLM or the Co-BRLMs for any complaints pertaining to the
Offer.
12. Investors are advised to refer to the paragraph entitled “Basis for Issue Price” on page 191 of
this Draft Red Herring Prospectus.
*
The cost of acquisition of equity shares held by the Selling Shareholder is calculated without considering the cost of
equity shares purchased from MUL-EMBF. These equity shares will be purchased at the Offer Price.
- 26 -
THE OFFER
Equity shares offered:
Offer for Sale by Selling Shareholder
Of which:
Qualified Institutional Buyers portion
72,243,300* equity shares of Rs.5/- each
43,345,900 equity shares of Rs.5/- each
(Allocation on a discretionary basis)
10,836,500 equity shares of Rs.5/- each
(Allocation on a proportionate basis)
18,060,900 equity shares of Rs.5/- each
(Allocation on a proportionate basis)
Wholesale Portion
Retail portion
Equity shares outstanding prior to
the Offer
288,910,060 equity shares of Rs.5/- each
Equity shares outstanding after the
Offer**
288,910,060 equity shares of Rs.5/- each
Use of proceeds
Our Company will not receive any proceeds from the
Offer
For more information, see “Objects of the Offer” on
page 57 of this Draft Red Herring Prospectus for
additional information.
* SEBI, vide its letter RM/21334/2003 dated October 29, 2002, has granted its approval for
retention of over-subscription over and above the limit of 10% allowed for the purposes of
rounding off only, under clause 6.4.2 (f) of SEBI Guidelines.
**As this is an offer for sale, there will be no change in the number of equity shares outstanding
subsequent to the Offer.
- 27 -
SUMMARY
We should read the following summary together with the risk factors and the more detailed
information about us, and our financial data included elsewhere in this Draft Red Herring
Prospectus.
Unless otherwise indicated, all financial and statistical data relating to the automobile industry in
the following discussion are derived from the CRIS INFAC Annual Review of 2001 or 2002. These
data have been reclassified in certain respects for purposes of presentation. The sales volumes
for Maruti included in the following discussion refer to sales by Maruti to dealers, while
computations of Maruti’s market share are based on sales to the customer set forth in the CRIS
INFAC Annual Review of 2001 or 2002. For more information, see “Certain Conventions; Use of
Market Data” on page11 of this Draft Red Herring Prospectus.
OUR BUSINESS
We are the largest passenger car manufacturer in India. We sold 339,964 cars in India in fiscal
2002 with an overall market share of 58.6% in fiscal 2002. Our product range includes ten basic
models with more than 50 variants. We are the leading manufacturer of cars in the A and B
segments, which together constituted over 86% of sales in the Indian passenger car market in
fiscal 2002. In fiscal 2002, we had a combined market share in the A and B segments of 64.9%.
We also export certain models to various countries, which contributed 3.9%, 3.1%, 2.6% and
6.9%, respectively, of our total sales in fiscal 2000, 2001 and 2002 and the nine months ended
December 31, 2002.
We are a subsidiary of Suzuki Motor Corporation, the largest manufacturer of mini passenger
vehicles in Japan since fiscal 1974, in terms of sales volumes, with a market share of 31.6% in
2002, according to the Japan Mini Vehicles Association. Suzuki was also the eleventh largest
vehicle manufacturer in the world and the fourth largest manufacturer in Japan in terms of
worldwide sales volumes in 2000, according to Automotive Intelligence.
OUR COMPETITIVE STRENGTHS
We believe we are well positioned to maintain and enhance our leadership position in the small
car segment in India, while continuing to offer products in most segments of the Indian market,
on account of our competitive strengths, which include the following:
We believe we are well positioned to maintain and enhance our leadership position in the small
car segment in India, while continuing to offer products in most segments of the Indian market,
on account of our competitive strengths, which include the following:
• Expertise in small car technology
• Skilled labour and experienced management
• Integrated manufacturing facility
• Extensive product portfolio.
• Brand strength.
• Extensive sales and service network.
• Strong vendor base and higher rates of localisation
• Quality products
• Capital resources
OUR PRINCIPAL OBJECTIVES
As the leading player in the small car segment of the Indian market, we have the following
principal objectives:
• To continue to expand the size of the Indian market for small cars by strengthening and
expanding our dealer network and making automobile financing available at competitive
rates;
• To strengthen our leadership position in the small car segment of the Indian market; and
- 28 -
•
To continue to benchmark ourselves against improving global manufacturing, marketing and
other practices and standards, strive to increase customer satisfaction through quality
products and new initiatives, and promote the financial strength of our sale network.
OUR BUSINESS STRATEGY
We intend to continue to focus on the small car segment, while offering products in most
segments of the Indian passenger car market. We aim to achieve our principal objectives by
pursuing the following business strategies:
Maintain and enhance our product range. We intend to utilize Suzuki’s expertise in small car
technology to produce new variants of our existing models and to upgrade our products with
contemporary technology and features.
Increase reach and penetration. We plan to continue to utilize our extensive sales and
service network to increase the reach, in terms of geographical spread, and penetration, in terms
of sales volumes, of our products across India.
Increased availability of automobile finance. We continue to seek opportunities to expand
the size of the Indian passenger car market, especially in the small car segment, through
facilitating easy availability of automobile finance. To that end, we have recently entered into an
agreement with the State Bank of India.
Secure repeat purchases by offering a “360 degree customer experience”. On the basis
of our belief that securing repeat purchases from an existing customer requires less expenditure
than acquiring a new customer, we aim to provide customers with a “one-stop shop” for
automobiles and automobile-related products and services.
Continue to benchmark our manufacturing capabilities. We plan to continue to benchmark
our manufacturing capabilities with the most efficient car manufacturing facilities of Suzuki and
its subsidiaries.
Continue to reduce costs to offer more competitive products. Cost competitiveness has
been, and continues to be, central to our strategy as the leading manufacturer in the small car
segment to expand the size of the market by offering competitively priced, high quality products.
The components of this strategy are:
• Higher levels of localisation
• Vendor participation in cost reduction
• Cost reduction on warranties
• Reduction in initial investment cost
• Reduction in number of vehicle platforms
• Achieve further cost reduction through higher productivity
Lower cost of ownership. Through our business strategies, we seek to reduce the consumer’s
cost of ownership of our cars, which comprises the cost of purchase, the cost of fuel and
maintenance, including spare parts and repairs, during the life of the vehicle, insurance, and
resale value.
- 29 -
SUMMARY UNCONSOLIDATED FINANCIAL DATA
You should read the following summary unconsolidated data, which have been prepared in
accordance with Indian GAAP, in conjunction with our audited unconsolidated financial
statements for each of fiscal 2000, 2001 and 2002, and the nine months ended December 31,
2002, including the notes thereto and the reports thereon, which appear elsewhere in this Red
Herring Prospectus and “Management’s Discussion and analysis of financial condition and results
of operations”. These financial statements are prepared in accordance with Indian GAAP, which
differs in certain significant respects from US GAAP. For more information on these differences,
see “Summary of Significant Differences Between Indian GAAP, IAS and US GAAP” included
elsewhere in this prospectus.
Our audited consolidated financial statements consolidating (1) the results of operations and
financial condition of our subsidiaries for the fiscal year ended March 31, 2002 and the nine
months ended December 31, 2002, and (2) the results of operations and financial condition of
our subsidiaries, our joint ventures and our associates for the nine months ended December 31,
2002, are included elsewhere in this prospectus under “Consolidated Financial Statements as per
AS 21” and “Consolidated Financial Statements as per AS 21, AS 23 and AS 27”, respectively.
- 30 -
SUMMARY OF FINANCIAL DATA
Summary Of Profit And Loss Account, As Restated
(Rs. In Millions)
For the period Financial
Financial
Financial
Financial
Financial
April 1, 2002 Year ended Year ended Year ended Year ended Year ended
to December March 31,
March 31,
March 31,
March 31,
March 31,
2000
1999
1998 *
31, 2002
2002
2001
Total sales
Other Income/
Revenue
Total Income/
Revenue
Total Expenditure
Profit/(Loss)
before tax
Net Profit/(Loss)
after tax as per
audited statement
of accounts (A)
Total Adjustments
(B)
Adjusted Profit/
(Loss) (A+B)
63,667
2,543
90,809
3,294
89,287
3,246
93,151
3,574
77,814
3,992
82,066
2,714
66,210
94,103
92,533
96,725
81,806
84,780
64,568
92,917
95,196
92,875
73,963
75,095
1,627
1,183
(2,692)
3,851
7,841
9,773
929
1,045
(2,694)
3,301
5,230
6,519
(324)
(160)
1,121
(864)
216
1,029
605
885
(1,573)
2,437
5,446
7,548
Summary Of Assets And Liabilities, As Restated
(Rs. In Millions)
March 31,
March 31,
1999
1998
December
31, 2002
March 31,
2002
March 31,
2001
March 31,
2000
A. Total Fixed Assets
23,389
25,025
26,155
24,099
14,123
10,290
B. Investments:
10,632
968
955
3,974
4,845
9,695
C. Current Assets,
Loans & Advance:
Inventories
5,344
6,811
8,655
9,902
5,784
5,758
Sundry Debtors
5,960
8,393
6,755
4,663
2,766
2,614
229
719
876
317
8,169
1,335
Cash & Bank balances
Other Current Assets
Loans & Advances
Total
D. Total Liabilities and
provisions
E. Net Worth
(A+B+C-D)
F. Share Capital
G. Total reserves and
surplus
H. Miscellaneous
Expenditure to the
extent not written
off
I. Net Worth (F+G-H)
605
479
716
1,039
1,079
994
3,544
4,604
5,508
4,225
5,364
5,146
15,682
21,006
22,510
20,146
23,162
15,847
19,685
21,824
24,328
21,288
16,972
15,623
30,018
25,175
25,292
26,931
25,158
20,209
1,445
1,323
1,323
1,323
1,323
1,323
29,517
25,044
24,556
26,131
24,098
19,092
944
1,192
587
523
263
206
30,018
25,175
25,292
26,931
25,158
20,209
- 31 -
GENERAL INFORMATION
AUTHORITY FOR THE OFFER
In terms of the RJVA, the Selling Shareholder has the option to sell approximately 72,243,380
equity shares of Rs.5/- each (approximately 3,612,169 equity shares of Rs.100/- each) or more,
by way of an initial public offer. For details on the RJVA, please see the section titled “Our
Promoters” on page 126 of this Draft Red Herring Prospectus.
As per the letter no. 2[16]/2000–PE-VI, dated February 7, 2003, from the Ministry of Heavy
Industries and Public Enterprises, Department of Heavy Industry, GoI, the Cabinet Committee of
Disinvestment has approved the disinvestment in Maruti by GoI by way of Offer for sale of its
shareholding in the domestic market. Pursuant to the decision taken by the Cabinet Committee,
the Ministry of Heavy Industry and Public Enterprises, acting for and on behalf of the President of
India, has been authorized to offer 72,243,380 equity shares of Rs.5/- each (3,612,169 equity
shares of Rs.100/- each as per the said letter) and such additional number of equity shares as
may be permitted to be offered for allotment towards over-subscription.
SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for
retention of over-subscription over and above the limit of 10% allowed for the purposes of
rounding off under clause 6.4.2(f) of SEBI Guidelines.
Our Company has also consented to the Offer through their Board Resolution dated March 25,
2003.
PROHIBITION BY SEBI
Our Company, our Directors/ Promoters and persons in control, its subsidiaries, its associates, its
directors, its promoters, other companies/ entities promoted by Suzuki and companies/entities
with which our Company’s directors are associated as directors have not been prohibited from
accessing/operating in the capital markets or restrained from buying/selling/dealing in securities
under any order or direction passed by SEBI.
ELIGIBILITY FOR THE OFFER
Our Company is eligible for the Offer as per Clause 2.2.1 of the SEBI Guidelines as explained
under:
• A track record of distributable profits as per Section 205 of Companies Act, for at least three
out of immediately preceding five years;
• A pre-issue net worth of not less than Rs. 10 million in three out of preceding five years, with
the minimum net worth met during the immediately preceding two years; and
• The proposed Offer size is not expected to exceed five times the pre-Offer net worth
The net profit, dividend and net worth from the Auditor’s Report included under the head
“Unconsolidated Financial Statements”, for the last 5 years and the nine-month period ending
December 31, 2002, is reproduced below:
(Rs. million)
FY2002
FY2001
FY2000
FY1999
FY1998
9 month
period
ending
December
31, 2002
Adjusted
605
885
(1,573)
2,437
5,446
7,548
profit/
(loss)
Dividend
397
331
397
397
Net Worth
30,018
25,175
25,292
26,931
25,158
20,209
- 32 -
DISCLAIMER CLAUSE
AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN
SUBMITTED TO SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF
THE DRAFT RED HERRING PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE
DEEMED OR CONSTRUED TO MEAN THAT THE SAME HAS BEEN CLEARED OR APPROVED
BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE FINANCIAL
SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE OFFER IS PROPOSED
TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS
EXPRESSED IN THE DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD
MANAGER, KOTAK MAHINDRA CAPITAL COMPANY LIMITED AND THE CO-BOOK
RUNNING LEAD MANAGERS, ICICI SECURITIES LIMITED AND J M MORGAN STANLEY
PRIVATE LIMITED AND HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PRIVATE
LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED HERRING
PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI
GUIDELINES FOR DISCLOSURES AND INVESTOR PROTECTION AS FOR THE TIME BEING
IN FORCE. THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED
DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED OFFER. IT SHOULD ALSO
BE CLEARLY UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE
FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT
INFORMATION IN THE DRAFT RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD
MANAGER AND CO-BOOK RUNNING LEAD MANAGERS ARE EXPECTED TO EXERCISE DUE
DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES ITS RESPONSIBILITY
ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK RUNNING
LEAD MANAGER, KOTAK MAHINDRA CAPIAL COMPANY LIMITED AND THE CO-BOOK
RUNNING LEAD MANAGERS, ICICI SECURITIES LIMITED, AND J M MORGAN STANLEY
PRIVATE LIMITED AND HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PRIVATE
LIMITED HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE DATED APRIL 25,
2003 IN ACCORDANCE WITH THE SEBI GUIDELINES WHICH READS AS FOLLOWS:
“WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO
LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH
COLLABORATORS, ETC. AND OTHER MATERIALS IN CONNECTION WITH THE
FINALISATION OF THE DRAFT RED HERRING PROSPECTUS PERTAINING TO THE SAID
OFFER.
ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE COMPANY,
ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, INDEPENDENT
VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS OF THE OFFER,
PROJECTED PROFITABILITY, PRICE JUSTIFICATION AND THE CONTENTS OF THE
DOCUMENTS MENTIONED IN THE ANNEXURE AND OTHER PAPERS FURNISHED BY THE
COMPANY,
WE CONFIRM THAT:
• THE DRAFT RED HERRING PROSPECTUS FORWARDED TO SEBI IS IN CONFORMITY
WITH THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE OFFER;
• ALL THE LEGAL REQUIREMENTS CONNECTED WITH THE SAID OFFER AS ALSO THE
GUIDELINES, INSTRUCTIONS, ETC. ISSUED BY SEBI, THE GOVERNMENT AND ANY
OTHER COMPETENT AUTHORITY IN THIS BEHALF HAVE BEEN DULY COMPLIED
WITH; AND
• THE DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE TRUE,
FAIR AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL-INFORMED
DECISION AS TO THE INVESTMENT IN THE PROPOSED OFFER.
WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN THE
DRAFT RED HERRING PROSPECTUS ARE REGISTERED WITH SEBI AND THAT TILL DATE
SUCH REGISTRATIONS ARE VALID.
- 33 -
WHEN UNDERWRITTEN, WE SHALL SATISFY OURSELVES ABOUT THE NET WORTH OF
THE UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS.”
ALL LEGAL REQUIREMENTS PERTAINING TO THE OFFER WILL BE COMPLIED WITH AT
THE TIME OF FILING OF THE DRAFT RED HERRING PROSPECTUS WITH THE ROC IN
TERMS OF SECTION 60B OF THE ACT. ALL LEGAL REQUIREMENTS PERTAINING TO THE
OFFER WILL BE COMPLIED WITH AT THE TIME OF REGISTRATION OF THE PROSPECTUS
WITH THE ROC IN TERMS OF SECTION 56, SECTION 60 AND SECTION 60B OF THE
COMPANIES ACT.
THE FILING OF THE DRAFT RED HERRING PROSPECTUS DOES NOT, HOWEVER,
ABSOLVE THE COMPANY AND SELLING SHAREHOLDER FROM ANY LIABILITIES UNDER
SECTION 63 AND SECTION 68 OF THE ACT OR FROM THE REQUIREMENT OF OBTAINING
SUCH STATUTORY AND OTHER CLEARANCES AS MAY BE REQUIRED FOR THE PURPOSE
OF THE PROPOSED OFFER. SEBI FURTHER RESERVES THE RIGHT TO TAKE UP AT ANY
POINT OF TIME, WITH THE BOOK RUNNING LEAD MANAGER AND THE CO-BOOK
RUNNING LEAD MANAGERS, ANY IRREGULARITIES OR LAPSES IN THE DRAFT RED
HERRING PROSPECTUS.
CAUTION
The Selling Shareholder, our Company, the BRLM and the Co-BRLMs accept no responsibility for
statements made otherwise than in the Draft Red Herring Prospectus or in the advertisements or
any other material issued by or at our instance and anyone placing reliance on any other source
of information would be doing so at his or her own risk.
The BRLM and Co-BRLMs accept no responsibility, save to the limited extent as provided in the
Underwriting Agreement to be entered into between the Underwriters and us and the
Memorandum of Understanding.
All information shall be made available by the Selling Shareholder, our Company, the BRLM and
the Co-BRLMs to the public and investors at large and no selective or additional information
would be available for a section of the investors in any manner whatsoever including at road
show presentations, in research or sales reports or at bidding centres etc.
DISCLAIMER IN RESPECT OF JURISDICTION
This Offer is being made in India to persons resident in India including Indian nationals resident
in India who are majors, HUFs, companies, corporate bodies and societies registered under the
applicable laws in India and authorized to invest in shares, Indian mutual funds registered with
SEBI, Indian financial institutions, commercial banks, regional rural banks, co-operative banks
(subject to RBI permission), Trusts registered under the Societies Registration Act, 1860, as
amended from time to time, or any other Trust law and who are authorized under their
constitution to hold and invest in shares) and to non-residents including NRIs and FIIs. This Draft
Red Herring Prospectus does not, however, constitute an offer to sell or an invitation to subscribe
to shares offered hereby in any other jurisdiction to any person to whom it is unlawful to make
an offer or invitation in such jurisdiction. Any person into whose possession this Draft Red
Herring Prospectus comes is required to inform himself or herself about, and to observe, any
such restrictions. Any dispute arising out of this Offer will be subject to the jurisdiction of
appropriate court(s) in New Delhi only.
No action has been or will be taken to permit a public offering in any jurisdiction where action
would be required for that purpose, except that this Draft Red Herring Prospectus has been
submitted to the SEBI. Accordingly, the equity shares represented thereby may not be offered or
sold, directly or indirectly, and this Draft Red Herring Prospectus may not be distributed, in any
jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction.
Neither the delivery of this Draft Red Herring Prospectus nor any sale hereunder shall, under any
circumstances, create any implication that there has been no change in the affairs of Maruti since
- 34 -
the date hereof or that the information contained herein is correct as of any time subsequent to
this date.
DISCLAIMER CLAUSE OF THE NSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to NSE. NSE has
given vide its letter dated ______, permission to the Company to use the NSE’s name in this
Draft Red Herring Prospectus as one of the stock exchanges on which this Company’s securities
are proposed to be listed subject to the Company fulfilling the various criteria for listing including
the one related to paid up capital and market capitalisation (i.e. the paid up capital shall not be
less than Rs.100 million and market capitalisation shall not be less that Rs. 250 million at the
time of listing). The NSE has scrutinized this Draft Red Herring Prospectus for its limited internal
purpose of deciding on the matter of granting the aforesaid permission to this Company. It is to
be distinctly understood that the aforesaid permission given by NSE should not in any way be
deemed or construed to mean that the Draft Red Herring Prospectus has been cleared or
approved by NSE; nor does it in any manner warrant, certify or endorse the correctness or
completeness of any of the contents of this Draft Red Herring Prospectus; nor does it warrant
that this Company’s securities will be listed or will continue to be listed on the NSE; nor does it
take any responsibility for the financial or other soundness of this Company, its promoters, its
management or any scheme or project of this Company.
Every person who desires to apply for or otherwise acquires any securities of the Company may
do so pursuant to independent inquiry, investigation and analysis and shall not have any claim
against the NSE whatsoever by reason of any loss which may be suffered by such person
consequent to or in connection with such subscription/acquisition whether by reason of anything
stated or omitted to be stated herein or any other reason whatsoever.
DISCLAIMER CLAUSE OF BSE
As required, a copy of this Draft Red Herring Prospectus has been submitted to BSE. The BSE
has given vide its letter dated ________, permission to this Company to use the BSE’s name in
this Draft Red Herring Prospectus as one of the stock exchanges on which this Company’s
securities are proposed to be listed. The BSE has scrutinised this Draft Red Herring Prospectus
for its limited internal purpose of deciding on the matter of granting the aforesaid permission to
this Company.
- 35 -
The BSE does not in any manner:
• warrant, certify or endorse the correctness or completeness of any of the contents of this
Draft Red Herring Prospectus; or
• warrant that this Company’s securities will be listed or will continue to be listed on the
BSE; or
• take any responsibility for the financial or other soundness of this Company, its
promoters, its management or any scheme or project of this Company;
• and it should not for any reason be deemed or construed to mean that this Draft Red
Herring Prospectus has been cleared or approved by the BSE. Every person who desires
to apply for or otherwise acquires any securities of this Company may do so pursuant to
independent inquiry, investigation and analysis and shall not have any claim against the
BSE whatsoever by reason of any loss which may be suffered by such person consequent
to or in connection with such subscription/acquisition whether by reason of anything
stated or omitted to be stated herein or for any other reason whatsoever.
FILING
A copy of the Draft Red Herring Prospectus, along with the documents required to be filed under
60B of the Companies Act, would be delivered for registration to the RoC and a copy of the
Prospectus to be filed under Section 60 of the Companies Act would be delivered for registration
with RoC. A copy of the Draft Red Herring Prospectus has been filed with SEBI at Ground Floor,
Mittal Court, “A” Wing, Nariman Point, Mumbai 400 021.
LISTING
Applications have been made to the NSE and the BSE for permission to deal in and for an official
quotation of our equity shares.
If the permissions to deal in and for an official quotation of our equity shares are not granted by
any of the Stock Exchanges mentioned above, the Selling Shareholder will forthwith repay,
without interest, all moneys received from the applicants in pursuance of this Draft Red Herring
Prospectus. If such money is not repaid within eight days after the Selling Shareholder becomes
liable to repay it (i.e. from the date of refusal or within 70 days from the date of Offer Closing
Date, whichever is earlier), then the Selling Shareholder shall, on and from expiry of eight days,
be liable to repay the money, with interest at the rate of 15% per annum on application money,
as prescribed under Section 73 of the Companies Act.
Our Company shall ensure that all steps for the completion of the necessary formalities for listing
and commencement of trading at all the Stock Exchanges mentioned above are taken within
seven working days of finalisation and adoption of the basis of allotment for the Offer.
MINIMUM SUBSCRIPTION
This being an offer for sale, the requirement of minimum subscription is not a pre-condition for
completion of the Offer and obtaining listing permissions.
IMPERSONATION
Attention of the applicants is specifically drawn to the provisions of sub-section (1) of
Section 68 A of the Companies Act, which is reproduced below:
“Any person who:
(a) makes in a fictitious name, an application to a company for acquiring or
subscribing for, any shares therein, or
(b) otherwise induces a company to allot, or register any transfer of shares therein to
him, or any other person in a fictitious name,
shall be punishable with imprisonment for a term which may extend to five years.”
- 36 -
WITHDRAWAL OF THE OFFER
The Selling Shareholder, in consultation with our Company, the BRLM and the Co-BRLMs,
reserves the right not to proceed with the Offer anytime after the Bid/Offer Closing Date without
assigning any reason thereof.
LETTERS OF ALLOTMENT OR REFUND ORDERS
The Selling Shareholder and our Company shall give credit to the Beneficiary Account with
Depository Participants within two working days of finalisation of the basis of transfer of equity
shares. The Selling Shareholder and we shall ensure dispatch refund orders, if any, of value up
to Rs.1,500, by “Under Certificate of Posting”, and will dispatch refund orders above Rs.1,500, if
any, by registered post or speed post at the sole or first bidder's sole risk, within 15 days of the
Offer Closing Date.
In accordance with the Companies Act, the requirements of the Stock Exchanges and SEBI
Guidelines, the Selling Shareholder and we further undertake that:
•
•
•
Allocation and transfer of equity shares will be made only in dematerialized form within
15 days from the Offer Closing Date;
Dispatch of refund orders/ cancelled Stockinvests will be done within 15 days from the
Offer Closing Date; and
The Selling Shareholder shall pay interest at 15% per annum (for any delay beyond the
15 day time period as mentioned above), if transfer is not made, refund orders/cancelled
Stockinvests are not dispatched and/or demat credits are not made to investors within
the 15 day time prescribed above.
The Selling Shareholder will provide adequate funds required for dispatch of refund orders or
allotment advice to the Registrar to the Offer.
Refunds will be made by cheques, pay-orders or demand drafts drawn on a bank appointed by us
and the Selling Shareholder, as a refund banker and payable at par at places where bids are
received. Bank charges, if any, for encashing such cheques, pay orders or demand drafts at
other centers will be payable by the bidders.
OFFER PROGRAM
BID/ OFFER OPENS ON
BID/ OFFER CLOSES ON
:
:
Bids and any revision in bids shall be accepted only between 10 a.m. and 3 p.m. (India Time)
during the Bidding Period as mentioned above at the bidding centres mentioned on the Bid cum
Application Form except that on the Bid Closing Date, the Bids shall be accepted only between
10 a.m. and 1 p.m. (Indian Standard Time) or uploaded till such time as may be permitted by
the BSE and NSE on the Offer Closing Date.
Book Running Lead Manager
Kotak Mahindra Capital Company Ltd.
Bakhtawar, 3rd Floor
229 Nariman Point
Mumbai 400 021
Tel no.: +91-22-5634 1100
Fax no.: +91-22-2284 0492
e-mail: maruti.ipo@kotak.com
- 37 -
Co-Book Running Lead Manager
ICICI Securities Ltd.
41/ 44 Minoo Desai Marg, Colaba
Mumbai, India 400 005
Tel no.: +91-22-2288 2460
Fax no.: +91-22-2283 7045
e-mail: mul_ipo@isecltd.com
Co-Book Running Lead Manager
JM Morgan Stanley Pvt. Ltd.
141, Maker Chambers III
229, Nariman Point
Mumbai – 400021
Tel no.: 91-22-5630 3030
Fax no.: 91-22-5630 1694
e-Mail: marutiipo@jmmorganstanley.com
Co-Book Running Lead Manager
HSBC Securities and Capital Markets (India) Pvt. Ltd.
52/ 60, Mahatma Gandhi Road, Fort
Mumbai – 400001
Tel no.: 91-22-2267 4921
Fax no.: 91-22-2263 1984
e-Mail: mul_ipo@hsbc.co.in
Syndicate Members
- 38 -
STATEMENT OF INTER-SE ALLOCATION OF RESPONSIBILITIES
The responsibilities and co-ordination for various activities in this Offer have been distributed
between the BRLM and the Co-BRLMs as under:
S.No.
1.
Activities
Capital
structuring
with
the
relative
components and formalities such as type of
instruments etc.
2.
Due
diligence
of
our
Company’s
operations/management/business plans/legal
etc. Drafting and Design of Red Herring
Prospectus and of statutory advertisement
including memorandum containing salient
features of the Prospectus. The BRLM shall
ensure
compliance
with
stipulated
requirements and completion of prescribed
formalities with the Stock Exchanges, RoC and
SEBI.
Drafting and approval of all publicity material
other than statutory advertisement as
mentioned in (2) above including corporate
advertisement, brochure, etc.
Appointment of other intermediaries viz.
Registrar, Printers, Advertising Agency and
Bankers to the Offer.
3.
4.
5.
Marketing of the Offer, which will cover inter
alia
• Formulating
marketing
strategies,
preparation of publicity budget
• Finalise Media & PR strategy
• Finalise centers for holding conferences
for brokers etc.
• Finalise collection centers
• Follow-up on distribution of publicity
and issue material including form,
prospectus and deciding on the
quantum of the Offer material.
6.
Finalize the list and division of investors for
one to one meetings, deciding pricing and
institutional allocation in consultation with the
Selling Shareholders/ Company, finalization of
Prospectus and RoC filing.
The
post
bidding
activities
including
management of escrow accounts, coordinate
non institutional allocation, intimation of
allocation and dispatch of refunds to bidders
etc.
The post issue activities for the issue will
involve essential follow up steps, which
include the finalisation of listing of instruments
and dispatch of certificates and demat delivery
7.
8.
- 39 -
Responsibility
KMCC
I-Sec
JMMS
HSBC
KMCC
I-Sec
JMMS
HSBC
Co-ordinator
KMCC
KMCC
I-Sec
JMMS
HSBC
KMCC
I-Sec
JMMS
HSBC
KMCC
I-Sec
JMMS
HSBC
I-Sec
KMCC
I-Sec
JMMS
HSBC
KMCC
KMCC
I-Sec
JMMS
HSBC
I-Sec
KMCC
I-Sec
JMMS
HSBC
I-Sec
KMCC
KMCC
I-Sec
of shares, with the various agencies connected
with the work such as the Registrar to the
Offer and Bankers to the Offer and the bank
handling refund business.
The merchant
banker shall be responsible for ensuring that
these agencies fulfill their functions and
enable it to discharge this responsibility
through
suitable
agreements
with
our
Company.
The selection of various agencies like the Registrar to the Offer, Bankers to the Offer, Escrow
Collection Bank(s), Syndicate Members, Legal Advisors to the Offer, Brokers, Advertising
Agencies, Public Relations agencies etc. will be finalised by the Selling Shareholder.
Registered Office
11th floor, Jeevan Prakash Building
New Delhi – 110 001
Tel no.: +91-11-2331 6831
Fax no.: +91-11-2371 3575, 23318754
Factory
Palam-Gurgaon Road
Gurgaon – 122015
Haryana
Tel no.: +91-124-234 6721
Fax no.: +91-124-501 5701
General Manager (Legal), Company Secretary and Compliance Officer
Mr. S. Ravi Aiyar
Maruti Udyog Ltd
11th floor, Jeevan Prakash Building
New Delhi – 110 001
Tel no.: + 91-11-23712854, +91-11-2331 6831
Fax no.: +91-11-2371 3575, 23318754
e-mail: raviaiyar@maruti.co.in
Investors can contact the Compliance Officer in case of any pre-Offer or post-Offer
related problems such as non-receipt of letters of allotment, share certificates, refund
orders or cancelled Stockinvests, etc.
Registrar to the Offer
MCS Limited
Sri Venkatesh Bhavan
212-A, Shahpurjat
New Delhi – 110 049
Tel no.: 91-11-2649 4830
Fax no.: 91-11-2649 4152
Domestic Legal Counsel for the Offer
Crawford Bayley & Co.
State Bank Buildings, 4th floor
N. G. N. Vaidya Marg
Fort
Mumbai - 400023
Tel no.: +91-22-2266 3713
Fax no.: +91-22-2266 0355
- 40 -
International Legal Counsel for the Offer
Davis Polk & Wardwell
The Hong Kong Club Building,
3A Chater Road
Hong Kong
Tel. No.: +852-2533 3300
Fax no.: +852-2533 3333
Legal Counsel to the Underwriters
Amarchand & Mangaldas & Suresh A. Shroff & Co.
Peninsula Chambers
Peninsula Corporate Park
Ganpatrao Kadam Marg
Lower Parel
Mumbai – 400013
Tel no.: +91-22-2496 4455
Fax no.: +91-22-2496 3666
Legal Counsel to the Company
Associated Law Advisers
615, Antriksh Bhavan
22, Kasturba Gandhi Marg
New Delhi – 110001
Tel no.: +91-11-2375 5511, 2335 1921
Fax no.: +91-11-2335 2226, 2335 2331
Financial Advisors to the Company for this Offer
Asit Mehta & Co.
Chartered Accountants
410, New Delhi House
27, Barakhamba Road,
New Delhi - 110001
Tel no.: +91-11-2331 3510
Fax no.: +91-11-2331 3413
Auditors to the Company
Price Waterhouse
Chartered Accountants
PW Centre, Saidulajab
Mehrauli Badarpur Road
Opposite D-Block, Saket
New Delhi – 110 030
Tel no.: +91-11-2652 3760, +91-11-2686 4390
Fax no.: +91-11-2686 4391, +91-11-2696 7249
Banker to the Offer and Escrow Collection Bankers
Bankers to the Company
State Bank of Travancore
SBT House
18/4, Arya Samaj Road
New Delhi – 110 005
Tel no.: +91-11-2576 1044
Fax no.: +91-11-2581 2044
- 41 -
ICICI Bank Ltd.
9A, Connaught Place
New Delhi – 110 001
Tel no.: +91-11-2372 0510
Fax no.: +91-11-2372 0509
Citibank N.A.
Jeevan Vihar Building
3, Sansad Marg
New Delhi – 110 001
Tel no.: +91-11-2373 6873
Fax no.: +91-11-2373 6960
The HongKong and Shanghai Banking Corporation Ltd
Corporate Banking Division
ECE House
First Floor
28, Kasturba Gandhi Marg
New Delhi – 110 001
Tel no.: +91-11-2371 6000
Fax no.: +91-11-2372 5329
Punjab National Bank
ECE House
28A, Kasturba Gandhi Marg
New Delhi - 110 001
Tel no.: +91-11-2332 3357
Fax no.: +91-11-2332 4788
BNP Paribas
New Delhi Branch
Hansalaya, 2nd floor
15, Barakhamba Road
New Delhi – 110 001
Tel no.: +91-11-2332 3164
Fax no.: +91-11-2332 4188
UFJ Bank Ltd.
Upper Ground Floor
Mercantile House
15, Kasturba Gandhi Marg
New Delhi - 110 001
Tel no.: +91-11-2331 8421
Fax no.: +91-11-2331 5162
Standard Chartered Bank
H-2, Connaught Circus
New Delhi – 110 001
Tel no.: +91-11-2340 6404
Fax no.: +91-11-2372 2175
UTI Bank Ltd.
Statesman House
148, Barakhamba Road
New Delhi – 110 001
Tel no.: +91-11-2331 1043
Fax no.: +91-11-2331 1054
- 42 -
Corporation Bank
IFB Branch, 10th floor
HT House
New Delhi – 110 001
Tel no.: +91-11-2371 0918
Fax no.: +91-11-2371 0936
ABN Amro Bank NV
DLF Center
Sansad Marg
New Delhi – 110 001
Tel no.: +91-11-2373 0696
Fax no.: +91-11-2375 5401
Bank of Tokyo – Mitsubishi
New Delhi Branch
3, Parliament Street
New Delhi 110 001
Tel no.: +91-11-2374 3922
Fax no.: +91-11-2374 6329
American Express Bank
1-A, Hamilton House
Connaught Place
New Delhi – 110 001
Tel no.: +91-11-2330 8053
Fax no.: +91-11- 2331 1437
State Bank of India
Corporate Accounts Group
10th floor, Vijaya Building
17, Barakhamba Road
New Delhi – 110 001
Tel no.: +91-11-2335 2602
Fax no.: +91-11-2335 3101
Union Bank of India
Industrial Finance Branch
G-39, Connaught Circus
New Delhi – 110 001
Tel no.: +91-11-2373 8861
Fax no.: +91-11-2332 5940
Credit Llyonais Bank
Mercantile House, 6th floor
15, Kasturba Gandhi Marg
New Delhi – 110 001
Tel no.: +91-11-2375 5213
Fax no.: +91-11-2375 5231
HDFC Bank Ltd.
Hindustan Times House, 6th floor
18-20, Kasturba Gandhi Marg
New Delhi – 110 001
Tel no.: +91-11-2332 9055
Fax no.: +91-11-2335 9601
- 43 -
CREDIT RATING
As this is an Offer for equity shares there is no credit rating for this Offer. The credit ratings for
the various borrowing programs by our Company in the last three years have been listed below:
Borrowing Program
Rs.2,000
million
nonconvertible debenture
Rs. 1,000 million commercial
paper
Rs.2,000
million
nonconvertible debenture
Rs.1,000 million commercial
paper
Rating
Agency
ICRA
Rating
Date of letter from the
rating agency
March 5, 2002
ICRA
LAAA
(reaffirmation)
A1+
ICRA
LAAA
July 7, 2000
ICRA
A1+
July 7, 2000
March 5, 2002
TRUSTEES
As the Offer is of equity shares, the appointment of trustees is not required.
BOOK BUILDING PROCESS
Book building refers to the collection of Bids from investors, which is based on the Floor Price,
the Offer Price being fixed after the Bid Closing Date. The principal parties involved in the Book
Building Process are:
1. The Company; Suzuki; GoI
2. Book Running Lead Manager;
3. Co-Book Running Lead Managers; and
4. Syndicate Members who are intermediaries registered with SEBI and eligible to act as
underwriters. The BRLM/ Co-BRLMS appoints syndicate Members.
SEBI, through its guidelines, has permitted an offer of securities to the public through the 100%
Book Building Process, wherein not more than 60% of the Offer shall be allocated on a
discretionary basis to QIBs. Further, not less than 15% of the Offer shall be available for
allocation on a proportionate basis to Wholesale Bidders and not less than 25% of the Offer shall
be available for allocation on a proportionate basis to Retail Bidders, subject to valid Bids being
received at or above the Offer Price. We will comply with these guidelines for this Offer. In this
regard, we have appointed the Book Running Lead Manager and the Co-Book Running Lead
Managers to procure subscription to the Offer.
The process of book building, under SEBI guidelines, is relatively new and the investors are
advised to make their own judgement about investment through this process prior to making a
Bid in the Offer.
Steps
•
•
•
to be taken by the Bidders for bidding:
Check whether he/ she is eligible for bidding;
Bidder necessarily needs to have a demat account; and
Ensure that the Bid cum Application Form is duly completed as per instructions given in
this Draft Red Herring Prospectus and in the Bid cum Application Form.
UNDERWRITING AGREEMENT
After the determination of the Offer Price and prior to filing of the Prospectus with RoC, the
Selling Shareholder and our Company will enter into an Underwriting Agreement with the
Underwriters for the equity shares proposed to be offered through the Offer. It is proposed that
pursuant to the terms of the Underwriting Agreement, the BRLM and the Co-BRLMs shall be
responsible for bringing in the amount devolved in the event that the Syndicate Members do not
fulfill their underwriting obligations.
- 44 -
The Underwriters have indicated their intention to underwrite the following number of equity
shares:
(This portion has been intentionally left blank and will be filled in before filing of the
Prospectus with RoC)
Name and Address of the Underwriters
Indicated
Number of equity
shares to be
Underwritten
Amount
Underwritten
(Rs. million)
Kotak Mahindra Capital Company Limited
Bakhtawar, 3rd Floor
229, Nariman Point
Mumbai 400021
[•]
ICICI Securities Ltd.
41/44 Minoo Desai Marg
Colaba
Mumbai – 400005
[•]
JM Morgan Stanley Pvt. Ltd.
141, Maker Chambers III
229, Nariman Point,
Mumbai – 400021
[•]
HSBC Securities and Capital Markets (India) Pvt.
Ltd.
52/60, Mahatma Gandhi Road, Fort
Mumbai – 400001
[•]
Kotak Securities Ltd.
Bakhtawar, 1st Floor
229, Nariman Point
Mumbai - 400021
[•]
ICICI Brokerage Services Limited
41/44 Minoo Desai Marg, Colaba
Mumbai, India 400 005
The above underwriting agreement is dated [•].
In the opinion of the Selling Shareholder and our Board of Directors (based on a certificate given
by the Underwriters), the resources of all the above mentioned Underwriters are sufficient to
enable them to discharge their respective underwriting obligations in full. All the abovementioned Underwriters are registered with SEBI under Section 12(1) of the SEBI Act. The
Selling Shareholder and our Board of Directors have accepted the Underwriting Agreement
mentioned above at its meeting held on [•], 2003 and the Selling Shareholder and our Company
have issued letters of acceptance to the Underwriters.
Allocation among Underwriters may not necessarily be in proportion to their underwriting
commitments. Notwithstanding the above table, the BRLM, Co-BRLMs and the Syndicate
Members shall be responsible for ensuring payment with respect to equity shares allocated to
investors procured by them. In the event of any default in payment, the respective underwriter,
in addition to other obligations defined in the underwriting agreement, will also be required to
procure/subscribe to the extent of the defaulted amount. Allocation to QIBs is discretionary as
per the terms of the Draft Red Herring Prospectus and may not be proportionate in any way and
the patterns of allocation to the QIBs could be different for the various Underwriters.
- 45 -
GOVERNMENT APPROVALS
In view of the approvals listed below, we can undertake this Offer and our current business
activities and no further major approvals from any Government authority / RBI are required to
continue those activities.
We have received the following major Government approvals pertaining to the Offer:
We have received a letter no. 2[16]/2000–PE-VI, dated February 7, 2003, from the Ministry of
Heavy Industries and Public Enterprises, Department of Heavy Industries, GoI, the Cabinet
Committee of Disinvestment has approved the disinvestment in Maruti by GoI by way of Offer for
sale of its shareholding in the domestic market. Pursuant to the decision taken by the Cabinet
Committee, the Ministry of Heavy Industry and Public Enterprises, acting for and on behalf of the
President of India, has been authorized to offer 72,243,380 equity shares of Rs.5/- each
(3,612,169 equity shares of Rs.100/- each as per the said letter) and such additional number of
equity shares as may be permitted to be offered for allotment against over-subscription.
SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for
retention of over-subscription over and above the limit of 10% allowed for the purposes of
rounding off only, under clause 6.4.2(f) of SEBI Guidelines.
We have received approval from GoI, Ministry of Finance and Company Affairs (Department of
Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated April 16, 2003 for the
transfer of equity shares in this Offer to eligible non-resident investors, NRIs and FIIs. In terms
of the approval of GoI, OCBs have not been permitted to participate in the Offer. Our Company
has received approval from the RBI for transfer of equity shares in the Offer for Sale to NRIs and
FIIs pursuant to its letter no. ________________ dated ________________;
We have received the following major Government approvals pertaining to our business:
1. All the land and property of our factory had been acquired by the Central Government
under the Maruti Ltd (Acquisition and Transfer of Undertakings) Act, 1980. Under the
Acquisition Act, the Central Government has directed vide notification date April 24, 1981,
that the undertakings of Maruti Ltd, having its registered office at Palam, Gurgaon Road,
Gurgaon, Haryana, and the right, title and interest shall vest in the company known as
Maruti Udyog Ltd. on and from April 24, 1981.
2. Central Excise Registration Certificate issued under Rule 9 of the Central Excise Rules,
2002 stating that our Company is registered to manufacture excisable goods vide Form
RC dated December 23, 2002.
3. Central Excise Registration Certificate No. 46/92/R-I/GGN dated October 5, 1992 in
respect of the production and manufacture motor vehicles, parts of motor vehicles, waste
and scrap, motor vehicles for transport of goods and dies by our Company.
4. Sales Tax Registration Certificate No. GRG-IV-12368 in respect of trading and
manufacturing of passenger and light commercial vehicles and generation of power and
electricity, by our Company, dated October 4, 1982. This certificate was valid from
February 16, 1982 to March 31, 1987. The said certificate was subsequently renewed
from April 1, 1987 to March 31, 1992, from April 1, 1992 to March 31, 1997, from April 1,
1997 to March 31, 2002 and again from April 1, 2002 to March 31, 2007.
5. Sales Tax Registration Certificate No. GRG/HGST – 18132 in respect of trading and
manufacturing of passenger and light commercial vehicles and generation of power and
electricity, by our Company dated November 11, 1994. This certificate was valid from
January 25, 1993 to March 31, 1997. The said certificate was subsequently renewed from
April 1, 1997 to March 31, 2002 and again from April 1, 2002 to March 31, 2007.
- 46 -
6. Certificate of Importer – Exporter Code (IEC), issued by the Joint Directorate General of
Foreign Trade, Ministry of Commerce from File No. 05/04/130/00059/AM89, dated July
12, 2000 stating that our Company has been issued the certificate as on February 24,
1988 IEC No. 0588000591.
7. No Objection Certificate No. J.13011/30/96 – IA, dated March 21,2002 from the Ministry
of Environment and Forests (“MoEF”), granting permission to our Company to use HSD as
an alternate fuel for its three captive power plants of 20 MW each.
8. No Objection Certificate No. J – 13011/30/96 – IA.II(T) dated July 26, 2001 from MoEF
allowing our Company the use of naptha along with HSD as an alternate fuel for the
captive power plants.
9. No Objection Certificate No. J – 13011/12/91 – IA, dated March 31, 1992 from the MoEF
granting clearance to our Company for setting up the captive power plant – phase 1 (20
MW)
10. No Objection Certificate No. J – 13011/30/96 – IA – II (T) – IA, dated March 20, 1997
from the MoEF granting clearance to our Company for setting up the third captive power
plant (20 MW)
11. Application dated July 11, 2001 from the Company to Haryana Electricity Regulatory
Commission, seeking approval for the three captive power plants set up within the
Company premises
12. Environmental Clearance No. J-11011/14/91-IA.II, dated November 30, 1992 from the
MoEF to our Company for the expansion project undertaken by our Company which
involves setting up of additional plants on the premises.
13. Consent Letter No. HSPCB 2002/859 dated May 8, 2002 from the Haryana State Pollution
Control Board (“HSPCB”) directing our Company to comply with the directions issued by
the MoEF vide NOC dated March 21, 2002 and stating that the HSPCB prefers the use of
compressed natural gas by our Company.
14. Consent Letter No. HSPCB 2002/4419 dated November 26, 2002 from HSPCB directing
our Company to comply with the directions issued by the MoEF vide NOC No.
J.130111/30/96-IA dated March 21, 2002 and stating that the HSPCB prefers the use of
liquified natural gas by our Company.
15. HSPCB provisional NOC No. HSPCB/NOC/5749, dated August 21, 1998 regarding pollution
of water and air by the expansion project of 100,000 vehicles per year by our Company.
16. HSPCB grant of consent No. 2002/1163 dated May 27, 2002 relating to the discharge of
effluents under S. 25/26 of the Water (Prevention and Control of Pollution) Act, 1974, by
our Company. Daily quantity of domestic effluent released shall not exceed 120;0 KL a
day and industrial effluent shall not exceed 1779 KL a day. This consent is valid till March
31, 2003. Application for extension of the consent for FY2004 and FY2005 has been filed
with HSPCB vide letter dated December 20, 2002.
17. HSPCB Authorisation No. HSPCB/HWM/Authorisation/3212 dated August 8, 2002 allowing
our Company to operate a facility for collection, reception, treatment, storage,
transportation and disposal of hazardous wastes. The authorisation is valid for 1 year
from date of issue.
18. HSPCB Air Consent/2002/1165 dated May 27, 2002 for emission of Air under Section
21/22 of the Air (Prevention and Control of Pollution) Act, 1981, to our Company and
- 47 -
consent to remain valid from April 1, 2002 to March 31, 2003. Application for extension of
the consent for FY2004 and FY2005 has been filed with HSPCB vide letter dated
December 20, 2002.
19. Central Ground Water Authority Approval No. 2-1/CGWA/MUL/99-742 dated March 14,
2000 allowing withdrawal of ground water by our Company for its use.
20. Licence No. P-12(11) 733/HN – 1000 granted by the Chief Controller of Explosives to
import and store 990 KL petroleum on premises, dated July 1, 1992 and valid upto
December 1, 2001 to our Company. This has been subsequently renewed upto December
31, 2004.
21. Licence No. P- 12(11) 440 granted by the Chief Controller of Explosives to import and
store 220 KL petroleum on premises, dated December 19, 1985 and valid upto December
31, 1986 to our Company. This has been subsequently renewed upto December 31, 2004.
22. Licence No. PV(NC) S-11 HN 201/PVS granted by the Chief Controller of Explosives to
store 60 MT KGS compressed gas on premises, dated March 12, 1984 and valid upto
March 10, 1988 to our Company. This has been subsequently renewed upto March 31,
2004.
23. Licence No. PV(NC) S-185/ALDS/HN granted by the Chief Controller of Explosives to store
7000 KG of liquefied petroleum gas on premises, to our Company, dated October 4, 2002
and valid upto March 31, 2005.
24. Certificate No. SC/SY 106-108, to our Company, dated March 4, 2002 of annual test of
safety valves by authority appointed by and operating under the Chief Controller of
Explosives.
25. Certificates of Approval from the Haryana Boiler Inspection Department to our Company
for the use of seven boilers.
a. No. 386, dated August 14, 2002, validity from June 21, 2002 to June 20, 2003.
b. No. 387, dated August 14, 2002, validity from June 21, 2002 to June 20, 2003.
c. No. 430, dated August 28, 2002, validity from June 7, 2002 to June 6, 2003.
d. No. 477, dated October 28, 2002, validity from September 12, 2002 to September
11, 2003.
e. No. 000041, dated December 12, 2002, validity upto six months from date of
certificate.
f. No. 523. dated December 18, 2002, validity from September 12, 2002 to
September 11, 2003.
g. No. 602, dated August 20, 2002, validity from July 22, 2002 to July 21, 2003.
26. Factory License dated June 7, 2001 issued by the Chief Inspector of Factories on
Registration No. GGM/M-165/6967 to our Company to employ over 1000 persons on any
day and to remain valid until December 31,2005.
27. Letter to Chief Inspector of Factories, dated December 19, 2002 declaring Mr. Shinichi
Takeuchi as the occupier of the factory premises of our Company.
28. Approval No. CIT-II/A Approval Super Fund/ 2001-02/1251 from the Commissioner of
Income Tax with respect to our Company’s superannuation fund. The said approval has
been in effect from April 1, 2001.
29. Approval No. 3/GF/D/94-95/533 from the Commissioner of Income Tax with respect to
our Company’s Gratuity Fund. The said approval has been in effect from April 1, 1993.
- 48 -
30. Approval No.229(2)/82-83/J from the Commissioner of Income Tax with respect to our
Company’s Staff Provident Fund. The said approval has been in effect from June 1, 1983.
31. Department of Industrial Policy and Promotion, Ministry of Commerce and Industry letter
to Suzuki dated May 31, 2002 approving the disinvestment proposal of our Company
including an exemption to Suzuki from obtaining a separate approval from FIPB to
increase Suzuki’s shareholding in our Company, pursuant to acquisition of equity shares
renounced by GoI to Suzuki in the rights issue by our Company as per the RJVA. The
letter advised Suzuki to indicate the percentage of equity shares acquired and amount of
consideration including control premium paid, on completion of the transaction.
32. RBI permissions on investment by foreign collaborator into our Company:
(a)
March 17, 1983: Permission to our Company (No. DEL CI/2111/24(Spl. 465)-83)
to issue equity shares worth Rs 17.3 million to Suzuki, under S. 19(1)(d) of FERA.
Our Company has been granted permission under S. 29(1)(b) of FERA.
(b)
February 25, 1984: Permission to our Company (No. EC DEL CI/BM/24(Spl.
465)83-84)to issue equity shares worth Rs 39.2 million to Suzuki under S.
19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of
FERA.
(c)
February 20, 1985: Permission to our Company (No. EC DEL CI/1383 (Spl.
465)84-85)to issue equity shares worth Rs 32.1 million to Suzuki under S.
19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of
FERA.
(d)
June 13, 1985: Permission to our Company (No. EC DEL CI/BH-152/24(Spl. 465)85) to issue equity shares worth USD 422,400 Suzuki under S. 19(1)(d) of FERA.
Our Company has been granted permission under S. 29(1)(b) of FERA.
(e)
February 13, 1986: Permission to our Company (No. EC DEL CI/BH-403/24(Spl.
465)-85)to issue 503,000 equity shares (face value Rs 100 each) to Suzuki under
S. 19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b)
of FERA.
(f)
May 14, 1986 : Permission to our Company (No. EC DEL CI/3070/24(Spl. 465)86)to issue equity shares worth 47,000 share (face value Rs 100 each) to Suzuki
under S. 19(1)(d) of FERA. Our Company has been granted permission under S.
29(1)(b) of FERA.
(g)
August 25, 1986: Permission to our Company (No. EC DEL CI/63/24(Spl.
465)86)to issue 243,000 equity shares worth Rs 24.3 million to Suzuki under S.
19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of
FERA.
(h)
January 24, 1987: Permission to our Company (No. EC DEL CI/323/24(Spl.
465)86-87)to issue 243,000 equity shares worth Rs 24.3 million to Suzuki under S.
19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of
FERA.
(i)
October 7, 1987: Permission to our Company (No. EC DEL CI/121/24(Spl. 465)8687)to issue 244,000 equity shares worth Rs. 24.4 million to Suzuki under S.
19(1)(d) of FERA.
(j)
May 21, 1988: Permission to our Company (No. EC DEL CI/565 /24(Spl. 465)88)to
issue 106,200 equity shares worth Rs 10.62 million to Suzuki under S. 19(1)(d) of
- 49 -
FERA. Our Company has been granted permission under S. 29(1)(b) of FERA.
Suzuki holding should not increase beyond 40% of the total paid up capital of the
company.
(k)
January 13, 1989: Permission to our Company (No. EC DEL CI/BH/24(Spl. 465)89)
to issue 2,085,664 equity shares worth Rs 208.6 million to Suzuki under S.
19(1)(d) of FERA. Our Company has been granted permission under S. 29(1)(b) of
FERA. Suzuki holding should not increase beyond 40% of the total paid up capital
of the company.
(l)
June 5, 1992: Permission to our Company (No. EC COF ID(I) 3334/252 (ND)/9192)to issue 2,204,860 equity shares ( face value Rs 100 each) at a premium of Rs
169 per equity share worth Rs. 372.6 million to Suzuki under S. 19(1)(d) of FERA.
Our Company has been granted permission under S. 29(1)(b) of FERA. Maximum
shareholding of Suzuki not to exceed 50%.
(m) May
8,
2002:
No
Objection
letter
to
our
Company
no.
D.O.No.EC.CO.FIF(I).6423/10.1.07.02.200 (47)-30 to the rights issue by our
Company to increase Suzuki’s shareholding in our Company. The No Objection has
been granted subject to approval of GoI relating to increase in percentage of nonresident holding (which was obtained on May 31, 2002)
We have not received the following approval:
1. The Company has not received building completion certificates and approvals under the
Punjab Schedule and Controlled Areas (Restriction of Unregulated Developments) Act,
1963 for any of its buildings in its manufacturing facilities. The Company has applied for
the same and submitted the required plans, drawings and other relevant documents as
applicable.
We have made applications for renewal of the following approvals:
1. HSPCB grant of consent No. 2002/1163 dated May 27, 2002 relating to the discharge of
effluents under S. 25/26 of the Water (Prevention and Control of Pollution) Act, 1974, by
our Company. Daily quantity of domestic effluent released shall not exceed 120;0 KL a
day and industrial effluent shall not exceed 1779 KL a day. This consent is valid till March
31, 2003. Application for extension of the consent for FY2004 and FY2005 has been filed
with HSPCB vide letter dated December 20, 2002.
2. HSPCB Air Consent/2002/1165 dated May 27, 2002 for emission of Air under Section
21/22 of the Air (Prevention and Control of Pollution) Act, 1981, to our Company and
consent to remain valid from April 1, 2002 to March 31, 2003. Application for extension of
the consent for FY2004 and FY2005 has been filed with HSPCB vide letter dated
December 20, 2002.
- 50 -
CAPITAL STRUCTURE
Share Capital as on SEBI filing date
A. Authorised Capital1
310,000,000
(Rs. million)
Aggregate
Aggregate
nominal value
value at Offer
Price
Equity shares of Rs. 5/- each2
B. Issued, Subscribed And Paid-Up Capital
288,910,060
Equity shares of Rs. 5/-each
C. Present net offer to the public in terms of this
Draft RHP3
Offer for Sale
72,243,3004
Equity shares of Rs. 5/-each
D. Equity Capital after the Offer
288,910,060
Equity shares of Rs. 5/-each
E. Share Premium Account
Before the Offer
After the Offer
1,550.00
1,444.55
361.22
[•]
1,444.55
4,240.59
4,240.59
1
The authorized share capital of our Company was increased from Rs. 1,350 million divided into
13.5 million equity shares of Rs. 100 each to Rs. 1,550 million divided into 15.5 million equity
shares of Rs. 100 each through special resolution passed at its extra ordinary general meeting
held on May 15, 2002.
2
Subsequently, a stock split was approved at an extraordinary general meeting of our
shareholders held on March 25, 2003, resulting in each equity share of Rs. 100 being sub-divided
into 20 equity shares of Rs. 5 each and consequently the equity shares were sub-divided with
effect from March 25, 2003.
3
The net Offer to the public is by an offer for sale by the GoI of 72,243,300 equity shares of
Rs.5/- each.
4
SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for
retention of over-subscription over and above the limit of 10% allowed for the purposes of
rounding off only, under clause 6.4.2 (f) of SEBI Guidelines. Hence the size of the Offer may be
enhanced to the extent of upto 10% of the Offer i.e. by upto 7,224,300 equity shares of Rs.5/each, in case the selling shareholder decides to retain any over-subscription. In such a case, the
size of the Offer may increase upto 79,467,600 equity shares of Rs.5/- each
- 51 -
NOTES TO THE CAPITAL STRUCTURE
1. Share Capital History of our Company:
Date of
Allotment
February
1981
Number of Face Issue Consideration
Equity
Value Price
Shares
(Rs.) (Rs.)
Reasons for
Allotment
24,
3
100
100
Cash
December 24,
1981
September
23, 1982
50,000
100
100
Cash
442,000
100
100
Other than
cash
173,000
100
100
Cash
Allotment to Suzuki
Nil
1,776,000
100
100
Cash
Nil
392,000
100
100
Cash
Allotment to the
President of India
Allotment to Suzuki
320,870
100
100
Cash
Allotment to Suzuki
Nil
346,127
100
100
Cash
Nil
51,987
55,451
100
100
100
100
Cash
Cash
503,000
100
100
Cash
Allotment to the
President of India
Allotment to Suzuki
Allotment to the
President of India
Allotment to Suzuki
1,563,000
100
100
Cash
Nil
47,000
500,000
100
100
100
100
Cash
Cash
September
30, 1986
September
30, 1986
December 22,
1986
March
3,
1987
March
3,
1987
June 26, 1987
243,000
100
100
Cash
Allotment to the
President of India
Allotment to Suzuki
Allotment to the
President of India
Allotment to Suzuki
200,000
100
100
Cash
Nil
300,000
100
100
Cash
243,000
100
100
Cash
Allotment to the
President of India
Allotment to the
President of India
Allotment to Suzuki
200,000
100
100
Cash
Nil
180,000
100
100
Cash
December 21,
1987
December 21,
244,000
100
100
Cash
Allotment to the
President of India
Allotment to the
President of India
Allotment to Suzuki
700,000
100
100
Cash
Allotment to the
Nil
January
24,
1983
October
25,
1983
March
1,
1984
March
29,
1985
June 3, 1985
July 31, 1985
July 31, 1985
February 18,
1986
February 18,
1986
May 19, 1986
May 19, 1986
- 52 -
Subscription to
equity shares on
signing of
Memorandum
Allotment to the
President of India
Allotment to the
President of India
for vesting assets
under the
Acquisition Act
Cumulative
Share
Premium
(Rs. Million)
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1987
March
1,
1988
May 20, 1988
302,000
100
100
Cash
106,200
100
100
Cash
President of India
Allotment to the
President of India
Allotment to Suzuki
January
10,
2,085,664
1989
June 20, 1992
2,204,860
May 30, 2002
1,216,341
Total
14,445,503
Total
288,910,060
100
100
Cash
Allotment to Suzuki
Nil
100
100
269
3,280
Cash
Cash
Allotment to Suzuki
Rights issue
373
4,241
5Rs.100/- paid-up equity shares sub-divided
into 20 equity shares
Nil
Nil
4,241
2. Promoters Contribution and Lock-in
Suzuki has locked in 57,782,012 equity shares of Rs.5/- each towards promoter’s contribution
for a period of 3 years from the date of Transfer of equity shares in this Offer. The details of the
equity shares locked in by Suzuki have been tabulated below:
Date of
Allotment
June 20, 1992
May 30, 2002
Total
Percentage of
Issue Price
Equivalent
Number of
pre-Offer and
for
equity shares number of
equity shares consideration post-offer paid(of face
value of Rs. (of face value as cash for up capital (%)
100 each) of Rs. 5 each) equity shares
of face value
Rs.100/each (Rs.)
1,672,764
33,455,272
269
11.58
1,216,337
24,326,740
3,280
8.42
2,889,101
57,782,012
20.00
Lock-in
period
3 years
3 years
Subsequent to this Offer, GoI, under the RJVA has the right to exercise its put option and sell its
portion of our equity shares to Suzuki. Such put option will commence from four months after
the date of listing of our equity shares and expire twenty-four months after the date of listing of
our equity shares.
Other than the above and the equity shares being offered for sale in this Offer, the entire preOffer share capital of our Company shall be locked in for the period of 1 year from the date of
transfer in this Offer. The Promoters may pledge their equity shares with banks or financial
institutions as additional security for loans whenever availed by them from banks/ financial
institutions.
3. Shareholding pattern of our Company before and after the Offer:
Pre-split
Shareholders
Promoter
Suzuki
President of India*
Promoter group
Public
Total
Pre-Offer
Number of
equity
shares
Percentage
7,830,918
6,614,579
6
0
14,445,503
54.2
45.8
0.0
0.0
100.0
*Acting through the Ministry of Heavy Industries and Public Enterprise, GoI
- 53 -
Post-Offer
Number of
equity
shares
Percentage
7,830,918
3,002,414
6
3,612,165
14,445,503
54.2
20.8
0.0
25.0
100.0
Post-split
Shareholders
Promoter
Suzuki
President of India*
Promoter group
Public
Total
Pre-issue
Number of
equity
shares
Percentage
156,618,360
132,291,580
120
0
288,910,060
Post-issue
Number of
equity
shares
Percentage
54.2 156,618,360
45.8
60,048,280
0.0
120
0.0
72,243,300
100.0 288,910,060
54.2
20.8
0.0
25.0
100.0
* Acting through the Ministry of Heavy Industries and Public Enterprise, GoI
Besides the Promoters, none of the promoter group companies have any shareholding in us.
4. The list of top 10 shareholders of our Company and the number of equity shares held by
them is as under:
Top ten shareholders on the date of filing the Draft Red Herring Prospectus with SEBI are as
follows:
Serial
Number
1
2
3
4
5
6
7
8
Name of Shareholders
Number of
equity
shares of Rs.
5/- each
Suzuki
156,618,360
President of India*
132,291,580
Mr. Sunil Kumar Chaturvedi (Nominee of President of India)
20
Mr. M. R. Bali (Nominee of President of India)
20
Mr. Shinzo Nakanishi (Chairman)(nominee of Suzuki)
20
Mr. Kinji Saito (Director) (nominee of Suzuki)
20
Mr. Shinichi Takeuchi (Director) (nominee of Suzuki)
20
Mr. Motohiro Atsumi (Director) (nominee of Suzuki)
20
288,910,060
* Acting through the Ministry of Heavy Industries and Public Enterprise, GoI
Top ten shareholders ten days prior to the date of filing Draft Red Herring Prospectus with SEBI
are as follows:
Serial
Number
1
2
3
4
5
6
7
8
9
Name of Shareholders
Number of
equity
shares of Rs.
5/- each
Suzuki
156,618,360
President of India*
131,603,580
MUL-EMBF
688,000
Mr. Sunil Kumar Chaturvedi (Nominee of President of India)
20
Mr. M. R. Bali (Nominee of President of India)
20
Mr. Shinzo Nakanishi (Chairman) (nominee of Suzuki)
20
Mr. Kinji Saito (Director) (nominee of Suzuki)
20
Mr. Shinichi Takeuchi (Director) (nominee of Suzuki)
20
Mr. Motohiro Atsumi (Director) (nominee of Suzuki)
20
288,910,060
* Acting through the Ministry of Heavy Industries and Public Enterprise, GoI
- 54 -
Top ten shareholders two years prior to the date of filing the Draft Red Herring Prospectus with
SEBI are as follows:
Serial
Number
1
2
3
4
5
Name of Shareholders
Suzuki
President of India*
MUL-EMBF
Mr. Pradeep Kumar (Nominee of President of India)
Mr. B. S. Negi (Nominee of President of India)
Number of equity
shares of Rs.
100/6,614,581
6,580,179
34,400
1
1
13,229,162
*Acting through the Ministry of Heavy Industries and Public Enterprise, GoI
5. There are no outstanding warrants, options or rights to convert debentures, loans or other
instruments into our equity shares, as on date.
6. None of our Promoters, members of the promoter group or directors of Suzuki have
purchased or sold any equity shares during a period of six months preceding the date on
which the Draft Red Herring Prospectus is filed with SEBI except as stated below:
a. As per the terms of the trust deed for the MUL – EMBF, the equity shares held by the
MUL-EMBF could only be transferred to GoI. GoI and the Trustees of the MUL-EMBF
have vide letter dated April 16, 2003 agreed to the terms of the acquisition and
transfer of the 688,000 equity shares of Rs. 5 each held by the MUL-EMBF to GoI.
The transfer of the shares in favor of GoI was completed on April 17, 2003. GoI has
agreed to pay the MUL-EMBF, consideration in two tranches. The first tranche is
payable no later than May 31, 2003, at a price per share of Rs. 115. The second
tranche is to be paid within a reasonable period of the completion of the listing of the
equity shares of MUL. The second tranche payment is the difference between the
Offer Price and Rs. 115.
b. As per the circular resolution dated February 12, 2003, under Section 289 of The Act,
4 equity shares of Rs.100/- each were transferred from Suzuki in favour of following
individual nominees to be held in trust for Suzuki:
S.
no.
1
2
3
4
Name of Director
Mr.
Mr.
Mr.
Mr.
Shinzo Nakanishi (Chairman)
Kinji Saito
Shinichi Takeuchi
Motohiro Atsumi
Number of equity
shares of Rs.100/each
1
1
1
1
Number of equity
shares of Rs.5/each
20
20
20
20
7. The Selling Shareholder, our Company, our Directors, BRLM or Co-BRLMs have not entered
into any buy-back and/or standby arrangements for purchase of equity shares of our
Company from any person except as stated in the RJVA and disclosed in the section “Terms
of the Offer”.
8. There are no outstanding employee stock option plans or employee share purchase schemes
outstanding.
9. We have received approval from GoI, Ministry of Finance and Company Affairs (Department
of Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated April 16, 2003 for
the transfer of equity shares in this Offer to eligible non-resident investors, NRIs and FIIs. In
terms of the approval of GoI, OCBs have not been permitted to participate in the Offer. Our
Company has received approval from the RBI for (a) transfer of equity shares in the Offer for
- 55 -
Sale to NRIs and FIIs pursuant to its letter No. ________________ dated
________________; and (B) participation of FIIs in this Offer pursuant to its letter No.
_____________________ dated ___________.
10. In this Offer, in case of over-subscription in all categories, not more than 60% of the Offer
shall be available for allocation on a discretionary basis to Qualified Institutional Buyers, a
minimum of 15% of the Offer shall be available for allocation on a proportionate basis to
Wholesale Bidders and a minimum of 25% of the Offer shall be available for allocation on a
proportionate basis to Retail Bidders, subject to valid bids being received at or above the
Offer Price. Under-subscription, if any, in any category would be met with spill over from
other categories at the sole discretion of the Selling Shareholder, the BRLM and the CoBRLMs.
11. A Bidder cannot make a Bid for more than the number of equity shares offered through the
Offer, subject to the maximum limit of investment prescribed under relevant laws applicable
to each category of investor.
12. The size of the Offer may be increased to the extent of upto 10% of the Offer i.e. upto
7,224,300 equity shares of Rs.5/- each, in case the Selling Shareholder decides to retain any
over-subscription. In such a case, the size of the Offer may increase upto 79,467,600 equity
shares of Rs.5/- each.
13. An over-subscription to the extent of 10% of the Offer can be retained for the purposes of
rounding off to the nearest multiple of ____ equity shares while finalizing the basis of
allotment.
14. There would be no further issue of capital whether by way of issue of bonus shares,
preferential allotment, rights issue or in any other manner during the period commencing
from submission of the Draft Red Herring Prospectus with SEBI until the equity shares offered
have been listed.
15. We presently do not intend or propose to alter our capital structure for a period of six months
from the date of opening of the Offer, by way of split or consolidation of the denomination of
equity shares or further issue of equity shares (including issue of securities convertible into
exchangeable, directly or indirectly for equity shares) whether preferential or otherwise,
except that we may issue options to our employees pursuant to an employee stock option
plan or, if we enter into acquisitions or joint ventures, we may consider raising additional
capital to fund such activity or use equity shares as currency for acquisition or participation in
such joint ventures.
16. We have not issued any equity shares out of revaluation reserves or for consideration other
than cash, except for equity shares issued to President of India under the Acquisition Act. For
details please refer to note no.1 given above and the section entitled “Our History”.
17. At any given point of time, there shall be only one denomination for the equity shares of our
Company and we shall comply with such disclosure and accounting norms specified by SEBI
from time to time.
18. We have 8 shareholders as on date.
19. We have entered into agreements with GoI and Suzuki. These agreements are agreements
for licenses, agreements relating to the management of our Company and the rights and
obligations of GoI, Suzuki and our Company and the put options between the GoI and
Suzuki. For details of the various agreements referred to above, please refer to the section
entitled “Our Promoter”.
- 56 -
OBJECTS OF THE OFFER
This being an Offer for Sale, the objects of the Offer are to list the equity shares of our Company
and carry out the sale of 72,243,300 equity shares of Rs.5/- each by the Selling Shareholder.
- 57 -
INDUSTRY OVERVIEW
Unless otherwise indicated, all financial and statistical data relating to the automobile industry in
the following discussion are derived from the CRIS INFAC Annual Review 2001 or 2002. These
data have been reclassified in certain respects for purposes of presentation. For more
information, see “Summary – Our Business” on page 28 of this Draft Red Herring Prospectus.
THE GLOBAL PASSENGER CAR INDUSTRY
In 2000, approximately 40 million cars were sold globally. The passenger car markets of North
America, Western Europe and Asia accounted for nearly 85% of global new car registrations in
2000. Between 1998 and 2000, new car registrations in these markets grew at a CAGR of only
6.9%, whereas during the same period, new car registrations in India grew by over 17%, the
highest in any of the major passenger car markets.
(figures are in 000s)
North America
Western Europe
Asia - ex Japan
China
India
Japan
Total (North America, Western Europe &
Asia)
1998
8,183
14,369
3,062
507
518
4,092
29,706
1999
10,017
15,322
3,711
570
690
4,154
33,204
2000 CAGR(%)
10,453
13.0%
15,112
2.6%
4,111
15.9%
609
9.6%
709
17.0%
4,260
2.0%
33,936
6.9%
(Source: CRIS INFAC Annual Review 2001)
Market opportunities are primarily in the developing economies
The developed economies of the US, Western Europe and Japan have the highest levels of car
penetration and constitute over 70% of total new car registrations. Between 2000 and 2002, the
sales of cars were adversely affected due to economic downturn in the US, which, as a single
country, is the largest market in the world. The US market is expected to grow only marginally.
Between 1999 and 2002, the passenger car market in Western Europe was stagnating. In 2002,
sales volumes in Western Europe declined by approximately 2%. As a result of the recession in
Japan, the second largest car market in the world, the demand for cars in Japan has been
adversely affected. However, Japanese automobile companies with global manufacturing
capabilities have not been significantly affected due to strong demand for their products in
overseas markets.
Emerging Markets
Income level is one of the key factors affecting new car purchases. The relationship between
gross national income per capita measured in terms of Purchasing Power Parity, or PPP, which is
an indicator of the per capita income, and the number of new car registrations per 1000 persons
in various economies, has been shown below:
- 58 -
40000
PPP Gross National Income per capita
(US$)
USA
30000
Japan
Canada
France
20000
Other
W.Europe
10000
Mexico
Brazil
China
UK
Italy
Spain
South Korea
Argentina
Netherlands
Germany
Poland
India
0
0
5
10
15
20
25
30
35
40
45
New vehicle Registrations in 2000 per 1000 persons
Source: Population and Gross National Income measured in terms of Purchasing Power Parity has been sourced from
World Bank Data; the data on new vehicle registrations have been sourced from the CRIS INFAC Annual Review 2001
As shown in the chart, in 2000, developed economies, such as US, Japan and countries in
Western Europe, with higher income levels, had higher levels of new car registrations, while
emerging economies, such as India and China, with lower income levels, had lower levels of new
car registrations. With rising income levels in emerging markets it is likely that the number of
new car registrations will also increase.
After China joined the WTO, import duties fell substantially, leading to increased imports. In
addition, reduction in prices by domestic manufacturers in China, is expected to boost the
demand for cars significantly. Between 2001 and 2010, car sales are expected to grow at a CAGR
of between 14 and 15%. The Chinese government has permitted foreign companies to enter the
Chinese market through alliances with local partners. However, the Chinese passenger car
industry continues to have certain impediments such as high local duties and prohibition on car
manufacturers to offer car-financing.
For information about the Indian passenger car market, see “Indian Passenger Car Industry” on
page 61 of this Draft Red Herring Prospectus.
TRENDS IN GLOBAL PASSENGER CAR INDUSTRY
The automobile industry is capital intensive. Despite over 20 mergers and strategic investments
and alliances in recent years, the global automobile industry faces over-capacity. This has led car
manufacturers globally to increase the utilization of capacities and share a basic vehicle platform
across several models in order to achieve economies of scale. The sharing of the basic vehicle
platform spreads the development costs over a large volume base of various models. This
increases the utilization of the platform, allowing car manufacturers to price new models at
competitive prices. Typically, between 65 and 75% of the value of a vehicle comprises of
components that are outsourced. Hence, manufacturers make significant efforts to reduce the
cost of procurement from component suppliers through strategies such as joint procurement of
components with other car manufacturers, e-procurement and worldwide procurement. Car
manufacturers have also sought to reduce costs by sharing manufacturing facilities with other
car manufacturers, making improvements in technology and increasing their product portfolio
and by focusing on initiatives such as built-to-order and mass customization. Manufacturers
seek to enhance their customer base and their customer satisfaction by providing related
services and products such as automobile finance, pre-owned cars, fleet management and
insurance.
Implications of global trends for the Indian passenger car market
As a result of rising household income and decline in interest rates, along with current low
passenger car ownership density, many global manufacturers have entered the Indian market.
According to the Central Statistical Organisation, India had a GDP growth rate of 6.1%, 4.4%
- 59 -
and 5.6% in fiscal 2000, 2001 and 2002, respectively. India is generally believed to have a high
GDP growth potential aided by low cost of production and availability of skilled manpower. The
high rate of growth in the sales of passenger cars in India is driven primarily by growth in the
sales of passenger cars priced below Rs. 500,000, which constituted over 86% of total sales
volumes in fiscal 2002.
- 60 -
THE INDIAN PASSENGER CAR INDUSTRY
The Indian Economy
According to World Bank data for 2002, India is the second largest country in the world in terms
of population with one of the largest economies in the world in terms of purchasing power parity
measured in US Dollars.
The GoI has played a significant role in the development of the Indian economy. In 1991, a
series of comprehensive macroeconomic and structural transformations were initiated by the GoI
to promote greater market orientation and economic stability and growth. The key policy reforms
that have been implemented include:
• deregulation of industry;
• impetus for foreign direct investment for equity participation in Indian industry; and
• progressive reduction in the GoI’s role in production, by implementing a series of
disinvestments in public sector units or PSUs
Since fiscal 2000, the GoI has carried out several strategic disinvestments in key PSUs. The
notable disinvestments that have been successfully carried out include sale of GoI stakes in
Videsh Sanchar Nigam Ltd and CMC Ltd to the Tata Group, Indian Petrochemicals Corporation
Ltd to the Reliance Group, IBP to Indian Oil Corporation Ltd and Bharat Aluminium Company Ltd
and Hindustan Zinc Ltd to the Sterlite Group. In May 2002, Maruti completed a rights issue of its
equity shares at Rs.3280 per Rs.100 share, whereby GoI renounced its equity shares to Suzuki.
The price at which the equity shares were offered in the rights issue was determined by taking
the average of the valuations provided by three independent firms, KPMG, S. B. Billimoria and
Ernst & Young. In addition, Suzuki paid GoI a control premium of Rs. 10,000 million. As a part
of its ongoing disinvestment process, GoI has initiated disinvestments in several key sectors
such as petroleum and shipping.
Evolution of the Indian passenger car industry
Background
The passenger car industry in India grew at a nominal CAGR of approximately 3.6% during the
1960s and the 1970s. Sales of passenger cars were limited by supply. There were only two
manufacturers in the market, Hindustan Motors and Premier Automobiles, and they had limited
production capacities. The import of passenger cars was restricted to the State Trading
Corporation (STC) and foreign diplomats. There were quantitative restrictions on imports. The
rate of customs duty levied on cars was 225%.
Maruti’s entry into the Indian passenger car market
In 1982, the GoI entered into a collaboration with Suzuki and established Maruti, which
commenced operations in fiscal 1984. Maruti launched a small car, the Maruti 800, which had an
engine capacity of 796 cc, high fuel efficiency, contemporary design and was priced
competitively. Maruti introduced the Omni in 1984, the Maruti 1000 in 1990, the Zen in 1993
and the Esteem in 1994. Each of these models provided customers with choices that were not
available in the market. The entry of Maruti expanded the overall demand for passenger cars in
India, leading to the industry growing at a CAGR of approximately 25% between fiscal 1984 and
fiscal 1990. During 1986 to 1997, Maruti was a principal car manufacturer in India. During this
period, Maruti encouraged the development of the automobile component industry and
emphasized localisation of components and other input materials, through collaborative efforts
with vendors for the development of automobile components. In the 1980s, rates of import
duties varied from 150% to 200% based on the engine capacity of a car. In order to facilitate
development of the car industry, GoI has substantially lowered the rates of import duties levied
on cars and components.
Significant events in the 1990s
In 1992, Suzuki’s shareholding in Maruti increased to 50%. A year later in June 1993, GoI
delicensed the passenger car industry in India. Overseas entities were permitted to set up
- 61 -
automobile manufacturing facilities in India through joint ventures with Indian entities. The
overseas entities were permitted to own up to 51% of the equity of such joint ventures until
1995 and more than 51% after 1995. As a result, overseas manufacturers such as General
Motors, Ford, Daimler-Chrysler, Peugeot, Fiat and Daewoo Motors entered the passenger
car and utility vehicles market in India. Most of the new car manufacturers introduced cars in
the mid or large car segments. Premier Automobiles Limited and Maruti were the only
manufacturers in the entry-level small car segment, during this period.
Between fiscal 1993 and fiscal 1997, demand for passenger cars increased at a CAGR of 24%.
Demand increased largely due to the availability of new models, high demand from the corporate
sector, and increased availability of affordable consumer financing. Between 1997 and 1999, a
number of new models were launched in the compact and mid-sized car segments.
In fiscal 2000, the Indian passenger car market grew sharply by 59.7% over the previous year
primarily due to the entry of new car manufacturers such as Hyundai and Telco and introduction
of new models such as the Matiz, the Indica and the Accent and advance purchases in
anticipation of increase in sales tax rates. In the same year PAL discontinued its entry level small
car model with the result that Maruti became the sole manufacturer of small cars priced below
Rs. 300,000. In fiscal 2001, there was a correction in demand with a negative growth rate of
6.8%. In fiscal 2002, the passenger car market in India stabilized and grew by 0.9%.
Key global players in India
The principal global car manufacturers who actively compete in the Indian market are listed
below:
• Fiat India Automobiles Private Limited
• Ford India Limited
• General Motors India Limited
• Honda Siel Cars India Limited
• Hyundai Motors India Limited
• Toyota Kirloskar Motor Limited
• Daimler Chrysler India Private Limited
Current Segment Volumes and Market share
The sales volumes of different passenger car companies in various segments in the Indian
passenger car market for the last four years is as follows:
1999-00
271,570
271,488
82
100%
44%
280,621
87,905
69449
54499
68,768
31.3%
45.7%
61,281
18442
4567
6287
305
8300
9,698
Segment A:
Maruti
PAL
MUL market share in Segment A
Segment A share in overall market
Segment B:
Maruti
Fiat
Hyundai
Telco
Others
MUL market share in Segment B
Segment B share in overall market
Segment C:
Maruti
Fiat
Ford
GM
HM
Honda
- 62 -
2000-01
210,797
210,797
100%
37%
282,031
104,041
64877
43797
69,316
36.9%
49.3%
78,884
14897
2149
18024
5318
7635
10,009
2001-02
206,350
206,350
100%
36%
293,131
118,021
17067
67909
64037
26,097
40.3%
50.8%
72,610
14255
898
14650
5545
6545
9,600
2002-03*
85,719
85,719
100%
30%
158,291
57,623
16366
41639
35079
7,584
36.4%
55.7%
37,957
6377
1850
7489
3417
2908
5,731
Hyundai
Others
MUL market share in Segment C
Segment C share in overall market
Segments D&E:
Total
6215
7,467
30.1%
10.0%
521
613,993
16083
4,769
18.9%
13.8%
711
572,423
17700
3,417
19.6%
12.6%
5411
577,502
9055
1,130
16.8%
13.4%
2155
284,122
(Source: CRIS INFAC Annual Review 2002 and classification as per price-based segmentation)
* six months ended September 30, 2002
Fiat - Fiat India Automobiles Pvt. Ltd.; Ford - Ford India Ltd.; GM - General Motors India Ltd.; HM - Hindustan Motors;
Hyundai - Hyundai Motors India Ltd.; Honda - Honda SIEL Cars India Ltd.; Maruti - Maruti Udyog Ltd.; PAL – Premier
Automobile Ltd.; Telco - Tata Engineering and Locomotive Company.
As may be seen from the above, the A and the B segment have consistently constituted over
85% of the total passenger cars sold in the Indian passenger car market. In fiscal 2002, we had
a 100% market share in the A segment and a 40.3% market share in the B segment resulting in
64.9% overall market share in these two segments.
Overall Market share
The overall market share of the various manufacturers in the Indian car market is shown below:
1997-98
Maruti
Hyundai
Telco
Others
83.1%
0.0%
0.0%
16.9%
1998-99
1999-00
78.8%
4.6%
0.0%
16.6%
61.5%
12.3%
8.9%
17.3%
2000-01
2001-02
57.6%
14.1%
7.7%
20.6%
April 1, 2002
- Sep 30,
2002
58.6%
52.7%
15.2%
18.1%
11.1%
12.3%
15.1%
16.8%
(Based on CRIS INFAC Annual Review 2002)
Hyundai - Hyundai Motors India Ltd; Telco - Tata Engineering and Locomotive Company Ltd
Manufacturing capacities and utilisation
The total installed capacity, which is measured at the time of installation of a plant as the
number of vehicles a plant is expected to produce annually, is around 1,237,000 units in India.
Maruti, which is the largest manufacturer in India, has generally operated at more than 100%
capacity utilization. The capacity utilization is the ratio of the vehicles actually produced in a year
and the installed capacity. In fiscal 2002, Maruti operated at a capacity utilization of 102%, as
compared to the industry average of 57.8%.
The historical production volumes and capacity utilisation levels of various car manufacturers in
India in fiscal 2002 is shown below:
1999-00
2000-01
2001-02
Maruti
TELCO
Hyundai
Daewoo
Ford
Hindustan
Motors
Fiat
Honda
GM
3,98,669
56,802
75,709
n.a
n.a
26,673
3,42,248
45,688
81,740
n.a
n.a
25,774
3,51,949
64,712
93,670
n.a
10,287
19,398
(2001-02)
350,000
160,000*
120,000
110,000
100,000
64,000*
102.0%
57.6%*
78.1%
n.a.
10.3%
36.2%*
16,039
n.a.
3,108
n.a
2,652
8,324
n.a
10,310
8,135
50,000
30,000
25,000
n.a.
34.4%
32.5%
- 63 -
Installed
Capacity
Capacity Utilisation
(%)
(2001-02)
(units)
Daimler
Chrysler
PAL-Peugeot
PAL
TOTAL
436
880
1,415
10,000
14.2%
32
54
5,77,522
5,07,306
5,59,876
n.a.
n.a.
n.a.
n.a.
(Source: CRIS INFAC Annual Review 2002)
n.a: Not Available
* includes cars and utility vehicles
1) Sales Figures for Daewoo Motors India Ltd. (estimated) and Fiat India Ltd. have been taken as a proxy for production,
as the production numbers for these companies are not available.
2) Production figures include the exports of vehicles.
SECTOR OUTLOOK
Between fiscal 2002 and fiscal 2007, the entire Indian passenger car market is expected to grow
by approximately 9.5%, largely as a result of increasing demand for segment B cars.
Segment A
This is the entry-level and the most price sensitive segment constituting 35.7% of the total
Indian passenger car market in fiscal 2002. Maruti is the sole manufacturer in this segment since
fiscal 2000. In fiscal 2002, this segment accounted for sales volumes of 206,350 cars. Due to the
low per capita income levels in India, the price of ownership of cars significantly affects the
demand for cars. Between fiscal 2002 and fiscal 2007, this segment is expected to post a CAGR
of 2.7%.
Segment B
In fiscal 2002, this segment constituted 50.8% of the total Indian passenger car market and is
expected to grow to 57.6% of the Indian passenger car market by fiscal 2007 at a CAGR of
about 12.3%. In fiscal 2002, there were eight models in this segment. Due to the present low
per capita income in India, the price and cost of ownership of cars are significant factors that
affect demand for cars in this segment.
Segment C, D, and E
In fiscal 2002, segment C, D and E constituted about 13.5% of the total Indian passenger car
market. There are 11 manufacturers with approximately 20 models in these segments. These
segments typically have low sales volumes, therefore, high growth rates of 11%, 19% and 35%,
respectively, are expected between fiscal 2002 and fiscal 2007. New model launches, growth in
per capita income levels, high aspirations and status associated with larger cars, are the key
factors affecting demand for cars in these segments.
FACTORS AFFECTING DEMAND FOR INDIAN PASSENGER CARS
Demand for cars depends on a number of factors. The key factors affecting demand for
passenger cars in India are per capita income, introduction of new models, prices of cars,
availability and cost of consumer financing, incidence of duties and taxes, fuel costs and the
quality of road infrastructure.
Due to low per capita income in India, the price and cost of ownership of cars is a significant
factor in demand for cars. According to the Statistical Outline of India 2002-03 by Tata Services
Ltd, the per capita gross national product per capita which is an indicator of per capita income
levels has increased to Rs.20,320 in fiscal 2001 from Rs.14,325 in fiscal 1997, a CAGR of 9.13%.
According to the National Readership Survey 2002, the proportion of individuals with annual per
capita income exceeding Rs. 48,000 has increased from 14.2% in 1990 to 20.4% in 2002.
The fiscal policies of the government affect the prices of cars sold in India. The excise duty rate
of 24%, the central sales tax rate of 3%, the local sales tax rates and other municipal, road
taxes and registration taxes constitute approximately 45% of the ex-showroom price of a car. In
March 2001, excise duty rates for passenger cars in India were reduced from 40% to 32%. In
- 64 -
the finance bill presented in February 2003, GoI reduced such rates further to 24% and also
reduced rates of customs duty levied on imported components from 30% to 25%.
Recently, there has been progress in major highway and road construction projects, such as the
Golden Quadrilateral Project, a highway connecting the four metropolitan areas of Kolkata, New
Delhi, Mumbai and Chennai. Availability of better road infrastructure will also affect demand for
cars.
THE PRE-OWNED CAR MARKET
The size of the pre-owned car market in India in fiscal 2002, has been estimated to be 1.1 to 1.3
times the size of the new car market. The A and B segments account for between 70 and 80% of
the total sales volumes in the pre-owned passenger car market in India. The proportion of preowned cars from segment B is increasing and is expected to form the largest portion of the preowned passenger car market during the next two years. Mid-size and large cars are less popular
in the pre-owned passenger car market primarily due to faster depreciation in value, lower fuel
economy and higher maintenance costs.
The market share of the various segments in the pre-owned passenger car market in India for
fiscal 2002 is shown below:
Segment
Percentage Share
A
35-40
B
35-40
C
8-10
D, E
5
Utility Vehicles
5
Volumes (numbers) 756,000-860,000
(Source: CRIS INFAC Annual Review 2002)
It is estimated that approximately between 15 and 20% of the pre-owned passenger car market
is organized. Small brokers and pre-owned car dealers dominate majority of the market. Key
concerns for a customer in the pre-owned passenger car market have been the lack of
transparency in the purchase process, inaccurate valuation of the car, risk of poor quality and
incomplete or fraudulent documentation. Recently, manufacturers are addressing these concerns
by participating in the pre-owned passenger car market.
We believe the key factors affecting demand for pre-owned passenger car market in India are as
follows:
•
•
•
the entry of organized participants into the pre-owned passenger car market resulting in (1)
a more transparent process in valuation and assessment of quality, (2) a more convenient
means of selling or exchanging
pre-owned cars and (3) the availability of adequate
warranties;
the introduction of a large number of models in the new car market and a reduction in the
holding period resulting in wider availability of recently introduced models in the pre-owned
passenger car market; and
an increase in per capita income levels in urban and rural areas and wider availability of
consumer finance for the purchase of pre-owned cars.
- 65 -
OUR BUSINESS
Unless otherwise indicated, all financial and statistical data relating to the automobile industry in
the following discussion are derived from the CRIS INFAC Annual Review of 2001 or 2002. These
data have been reclassified in certain respects for purposes of presentation. The references to
prices of our products in this section are to the ex-showroom price in Delhi. The sales volumes
for Maruti included in the following discussion are in respect of sales by Maruti to dealers, while
computations of Maruti’s market share are based on retail sales volumes of Maruti vehicles set
forth in the CRIS INFAC Annual Review of 2001 or 2002. For more information, see “Certain
Conventions; Use of Market Data” on page 11 of this Draft Red Herring Prospectus.
OVERVIEW
We are a subsidiary of Suzuki Motor Corporation, the largest manufacturer of mini passenger
vehicles in Japan since fiscal 1974, in terms of sales volumes, with a market share of 31.6% in
2002, according to the Japan Mini Vehicles Association. Suzuki was also the eleventh largest
vehicle manufacturer in the world and the fourth largest manufacturer in Japan in terms of
worldwide sales volumes in 2000, according to Automotive Intelligence. In 2002, Suzuki had a
22% share of the market in Asia for vehicles exported from Japan, according to the Japan
Automobile Manufacturers Association.
Maruti was ranked twentieth by Automotive Intelligence in terms of worldwide sales volumes
amongst vehicle manufacturers. We have been the largest passenger car manufacturer in India
since 1986. In the Indian passenger car market in fiscal 2002, we had the highest sales volumes
of 339,964 cars and a market share of 58.6%. The remaining market share was divided among
approximately nine other manufacturers. Our market share was more than three times the
share of the manufacturer ranked second in terms of sales volumes for fiscal 2002, and
exceeded the combined market share of other manufacturers by more than 40%.
We have a diverse product range that includes ten basic models with over 50 variants, of which
nine models are manufactured by us and one is imported from Suzuki, with prices ranging from
approximately Rs.200,000 to approximately Rs.1.8 million. Our wide product range is supported
by an extensive sales and service network in India. We manufacture cars for most segments of
the Indian passenger car market, and are the leading manufacturer of cars priced below
Rs.500,000 comprising segments A and B, to which we refer as the small car segment. The
small car segment constituted more than 86% of the Indian passenger car market in fiscal 2002.
In fiscal 2002, we had sales volumes of 324,371 cars in the small car segment, which resulted in
a market share in that segment of 64.9%. We intend to continue to focus on the small car
segment, which we expect will continue to be the largest segment in the Indian passenger car
market in the foreseeable future.
OUR COMPETITIVE STRENGTHS
We believe we are well positioned to maintain and enhance our leadership position in the small
car segment in India, while continuing to offer products in most segments of the Indian market,
on account of our competitive strengths, which include the following:
•
Expertise in small car technology. As a subsidiary of Suzuki, we have access to
globally respected technology in the small car segment. We have the advantage of
Suzuki’s expertise in all aspects of small car technology and design, with respect to our
products, our manufacturing processes and business practices, the development of our
supply chain and the training of our personnel.
•
Extensive product portfolio. Our diverse product range includes cars in segments A, B
and C, and utility vehicles. We manufactured five out of the ten models that were sold in
the combined A and B segments in India in fiscal 2002. We are the only manufacturer of
cars in segment A (priced below Rs.300,000) where we have two models, the Maruti 800
and the Omni. The Maruti 800 has been the largest selling car in India for several years,
and continued to have the highest sales volumes of any model in fiscal 2002, with a
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market share of 25.3%. The Omni, a versatile vehicle that can seat more passengers
than the Maruti 800 or be used as an ambulance or cargo vehicle, had a market share of
10.5% in fiscal 2002. We are also the only manufacturer to sell three distinct models, the
Zen, the Alto and the WagonR, in segment B (priced between Rs.300,000 and
Rs.500,000). We believe that our dominance in segment A and extensive product range
in segment B enables us to offer the customer a wider choice in the small car segment
than any of our competitors. In addition, the absence of other manufacturers in segment
A gives our dealers greater flexibility in promoting models in segment B.
•
Quality products. In November 2001, we were one of the first automobile
manufacturers in the world to receive the ISO 9001:2000 certification. We began to
export products in 1988, primarily in order to benchmark our products against
international quality standards. We have exported products to approximately 70
countries, including countries in Western Europe. Our products for export are
manufactured using the same assembly line as our products for the domestic market.
•
Extensive sales and service network. We believe that we have the largest network of
dealers and service centers amongst car manufacturers in India. As of March 31, 2003,
we had 178 authorized dealers with 243 sales outlets in 161 cities. We estimate our car
parc to be in excess of 3.5 million vehicles. To service this car parc, at March 31, 2003,
we had 342 dealer workshops and 1,545 Maruti Authorized Service Stations, or MASSs,
which covered 898 cities in India backed by Express Service Centers on 30 highways
across the country. In addition to the distribution of our cars, our dealership network is a
critical resource in our efforts to provide customers with a “one-stop shop” for
automobiles and automobile related products and services such as automobile finance,
automobile insurance, Maruti-certified pre-owned cars available for purchase, and leasing
and fleet management, in order to promote customer loyalty.
•
Brand strength. We have been present in the Indian market for almost twenty years
and have built our brand on the basis of the values of trust and reliability. Most of our
principal competitors have been present in the Indian passenger car market for a
significantly shorter period. Certain manufacturers have ceased to manufacture certain
products shortly after introducing them, or have left the market altogether. In contrast,
we continue to support the maintenance of our products. This has contributed to the
strength of our brand. In 2000, 2001 and 2002, J.D.Power Asia Pacific, Inc. ranked us
No. 1 in the India Customer Satisfaction Index, which assesses customer satisfaction with
product quality and dealer service. We believe that this was the first time that a volume
leader in the automobile industry anywhere in the world was ranked first on the JD Power
Customer Satisfaction Index. NFO Automotive’s 2002 Total Customer Satisfaction Survey
ranked Maruti products as No. 1 in the “Economy”, “Premium Compact” and “Entry Midsize” segments respectively, for 2002.
•
Integrated manufacturing facility. Our manufacturing facility comprises three
integrated plants with flexible assembly lines located at Gurgaon in the northern state of
Haryana. Our facility has advanced engineering capability and each plant is upgraded on
an ongoing basis to improve productivity and quality. As a result, our first plant set up in
fiscal 1984 is technologically at par with our newer plants and is also used in the
production of our new models. We believe that we are one of the most efficient among
the vehicle manufacturing facilities of Suzuki’s subsidiaries outside Japan in terms of
productivity measured as the ratio of number of vehicles produced to number of
employees. We have an installed capacity of 350,000 vehicles per year, which is the
highest among passenger car manufacturers in India and among the passenger car
manufacturing facilities of Suzuki’s subsidiaries outside Japan. We have consistently
produced in excess of our installed capacity in the five fiscal years ended March 31, 2002.
We believe that we would be able to expand our production to 500,000 cars per year with
minimal additional capital expenditure. This would enable us to benefit from significant
economies of scale.
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•
Strong vendor base and higher rates of localisation. We work closely with our
vendor base for the supply of raw materials, components and spare parts of our products.
In order to improve quality and generate economies of scale, we have reduced the
number of our vendors of components in India from 370 as of March 31, 2000 to 299 as
of March 31, 2003, and intend to continue to reduce the number of our vendors. 113 of
our vendors at March 31, 2003 were in technical collaboration with foreign entities. As of
the same date, we had strategic equity interests through joint venture agreements in 13
of our vendors, who together supply a substantial portion of our purchases of
components. A number of our vendors are our dedicated suppliers in that we account for
a majority of their turnover. Vendors located within a radius of 100 kilometres from our
facility supply the majority of our components. The production systems of our vendors are
generally aligned to our need for a reliable and timely supply of components that meet
our quality requirements. This has enabled us to increase the proportion of locally
sourced, lower cost components in our models, a concept we refer to as localisation. We
have been able, in collaboration with our vendors, to increase the rate at which we are
able to localise production of our new models over time. This has helped us reduce the
cost of our components.
•
Skilled labour and experienced management. Our highly skilled labour force has
become increasingly productive in terms of vehicles produced per employee and receives
training on an ongoing basis, including training by Suzuki. As of March 31, 2003, 1,900
of our employees had been trained at Suzuki’s facilities in Japan. We have been present
in the Indian passenger car market for a significantly longer period than most of our
principal competitors. As a result, we have been able to build a highly experienced
management team that is familiar with conditions in the Indian passenger car market.
For instance, our managing director has almost ten years of experience with us, and most
of the heads of our divisions have more than 15 years of experience with us.
•
Capital resources. At December 31, 2002, we had cash and bank balances and current
investments amounting to Rs.9,992 million. As of the same date, we had relatively low
levels of outstanding indebtedness, in the amount of Rs.4,555 million. As a result, we
have relatively low interest expense and flexibility to raise funds, if necessary, for our
working capital and capital expenditure in the future.
OUR PRINCIPAL OBJECTIVES
As the leading manufacturer in the small car segment of the Indian market, we have the
following principal objectives:
• To strengthen our leadership position in the small car segment of the Indian market;
• To continue to expand the size of the Indian market for small cars by strengthening and
expanding our dealer network and making automobile financing available at competitive
rates; and
• To continue to benchmark ourselves against improving global manufacturing, marketing and
other practices and standards, strive to increase customer satisfaction through quality
products and new initiatives, and promote the financial strength of our dealer network.
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OUR BUSINESS STRATEGY
We intend to continue to focus on the small car segment, while offering products in most
segments of the Indian passenger car market. We aim to achieve our principal objectives by
pursuing the following business strategies:
Maintain and enhance our product range. We intend to utilize Suzuki’s expertise in small car
technology to produce new variants of our existing models and to upgrade our products with
contemporary technology and features. We plan to increase the number of variants we offer of
existing models at different prices in the A and B segments. We continue to explore
opportunities to launch new models in different segments across the Indian passenger car
market.
Increase reach and penetration. We plan to continue to utilize our extensive sales and
service network to increase the reach, in terms of geographical spread, and penetration, in terms
of sales volumes, of our products across India. We continue to assist our existing dealers in
enhancing their performance and profitability by suggesting improvements, such as increasing
the number of sales executives employed at dealerships. Currently, our wide network of MASSs
primarily provides after-sales service. We plan to use our MASSs that are located in some of the
more remote areas of India as sales outlets to increase our reach and penetration in those areas.
We also aim to expand our sales and service network by increasing the total number of our
authorized dealers and MASSs and achieving wider coverage in terms of geographical area. We
seek to strengthen our sales network in areas where we identify potential for improvement in our
sales volumes.
Increase availability of automobile finance. We continue to seek opportunities to expand the
size of the Indian passenger car market, especially in the small car segment. Since January
2002, we have made available, through our dealers, finance products of eight select finance
companies under the brand “Maruti Finance”. We aggregate the finance products provided by
these companies to offer uniform financing conditions to the customer at Maruti dealerships.
This increases the transparency of the financing transactions, which we believe contributes to
customer satisfaction and confidence in our brand. We have recently entered into an agreement
with the State Bank of India, or SBI, pursuant to which SBI will offer financing on competitive
terms for the purchase of our products using its network of more than 9,000 branches across
India. We expect that this will promote demand for our products among SBI’s vast customer
base and expand the size of the passenger car market in India.
Secure repeat purchases by offering a “360 degree customer experience”. On the basis
of our belief that securing repeat purchases from an existing customer requires less expenditure
than acquiring a new customer, we aim to provide customers with a “one-stop shop” for
automobiles and automobile-related products and services. We intend to use our extensive sales
and service network to make available to our customers a wide range of Maruti-branded services
at different stages of ownership, a concept we refer to as the “360 degree customer experience”.
We believe that this will help secure repeat purchases of our products by existing customers and
increase the revenue of our sales network. To this end, we have launched several new business
initiatives to make available, through third party service providers and dealers, under the
“Maruti” brand name, the following products and services:
- automobile insurance;
- automobile finance;
- Maruti-certified pre-owned cars available for purchase;
- leasing and fleet management;
- accessories; and
- extended warranties.
Continue to benchmark our manufacturing capabilities. We aim to further improve our
operating efficiencies by striving to align ourselves with Suzuki’s premier manufacturing facility,
its Kosai plant in Japan, by fiscal 2005. We have recently acquired the capability to conduct
minor and major facelifts to our models, and upgrade our products in terms of technology or
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features. As part of Suzuki’s plans to make Maruti its research and development center for cars
in Asia (outside Japan), we expect to have full model change capability by fiscal 2007. By
utilizing advanced manufacturing techniques and processes, we plan to continue to offer
technologically advanced, high quality products at competitive prices.
Continue to reduce costs to offer more competitive products. Cost competitiveness has
been, and continues to be, central to our strategy as the leading manufacturer in the small car
segment to expand the size of the market by offering competitively priced, high quality products.
The components of this strategy are:
Higher levels of localisation
Typically, the adoption of a new technology or the launch of a new model by us requires the
import of components. We increase the level of localisation over time by working closely with
our vendors in India to upgrade their capabilities, which enables us to reduce costs and increase
our flexibility in pricing our products. It is our strategy to introduce new models with a minimum
of 75% localisation level and increase the same to at least 90% within three years of
introduction of the model. We intend to continue to increase the rate of localisation of our new
models.
Vendor participation in cost reduction
We have begun working with some of our major vendors to implement the “Maruti Production
System” that focuses on the elimination of wasteful activities in their manufacturing processes.
We continue to work with our vendors in areas such as improving their productivity, reducing the
number of their components that are rejected, reducing materials handling, improving their yield
from materials, and reducing their inventories. This helps reduce their costs of production, which
also reduces the costs of our components. We set targets with vendors for cost reduction, and
for the initial period of the cost reduction, we share the benefits of the reduction with the vendor
to provide an additional incentive for the vendor to reduce costs. In addition, we plan to begin
to integrate our vendors into the worldwide purchase system, or WWP, whereby a vendor may
become the sole supplier for a Suzuki product in several countries including India. This would
generate economies of scale for the vendor that also result in reduction of our costs.
Cost reduction on warranties
The warranty costs of our vendors are computed as the cost of components incurred by our
vendors to service warranty claims arising from defects in components supplied by them. We
have been able to reduce the warranty costs of our vendors per vehicle by approximately 21%
between fiscal 2002 and fiscal 2003. We periodically set targets for warranty reduction for our
vendors and monitor the achieved reductions through reviews by management. In addition, we
have reduced our in-house warranty costs per vehicle by approximately 77% between fiscal
2002 and fiscal 2003.
Reduction in initial investment cost
We aim to reduce our initial investment cost for new models through in-house development and
localised sourcing of dies, welding jigs and other equipment, introduction of flexible welding lines
that can be used for multiple models, and in-house development of machine shop equipment.
We also plan to source dies for new models and upgraded versions of existing models from
sources outside India other than Japan, such as Taiwan, which are typically less expensive
sources than Japan.
Reduction in number of vehicle platforms
We currently use six basic vehicle platforms for production. We intend to reduce the number of
our basic vehicle platforms and increasingly share basic vehicle platforms among multiple models
in order to spread development costs and achieve economies of scale.
Achieve further cost reduction through higher productivity
We benchmark our production systems with those of Suzuki. We aim to improve our
productivity and the efficiency of our operations through increased in-house automation,
optimum utilization of production lines, outsourcing and reduction in materials handling.
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Lowering the cost of ownership. Through our business strategies, we seek to reduce the
consumer’s cost of ownership of our cars, which comprises the cost of purchase, fuel
consumption, maintenance, including spare parts and repairs, insurance, and resale value. In
order to achieve this, we will use our ability to:
• manufacture high quality, fuel-efficient, cars;
• price our cars, spare parts and accessories, and extended warranties, competitively;
• make automobile finance more easily available to the consumer on competitive terms;
• make maintenance services, including spare parts, accessories and repairs, widely
available through our extensive sales and service network;
• offer automobile insurance and other automobile-related services through our sales and
service network; and
• create a market for Maruti-certified pre-owned cars through our “Maruti True Value”
business.
MANUFACTURING
The core focus areas of our manufacturing division are:
• benchmarking ourselves against global standards to efficiently manufacture quality
products; and
• building a strong and motivated work force by emphasizing safety, education and
continuous improvement of our manufacturing capabilities and those of our vendors.
Our Manufacturing Facility and Process
Facility
Our manufacturing facility comprises three integrated plants with flexible assembly lines located
at Gurgaon in the northern state of Haryana. The first plant was set up in fiscal 1984 with an
initial installed capacity to produce 20,000 vehicles per annum, which was augmented to
130,000 by fiscal 1991. Installed capacity was further increased with the second plant becoming
operational in fiscal 1995 to 200,000 vehicles per year. In fiscal 1996, with capacity increases in
each plant, installed capacity increased to 250,000. With the third plant becoming operational in
March 1999, installed capacity increased to 350,000 vehicles per year, which is the highest
among passenger car manufacturers in India and among the passenger car manufacturing
facilities of Suzuki’s subsidiaries outside Japan.
Our facility has advanced engineering capability and is upgraded on an ongoing basis to improve
productivity and quality. We have 17 manufacturing shops and are capable of producing more
than 50 variants of the nine basic models manufactured, with different specifications, within the
same day. This is possible due to our information technology-enabled vehicle build sequence
system and vehicle tracking system. Under the vehicle build sequence system, at the production
planning stage, requirements are communicated via our intranet (internally) and our extranet (to
vendors) in advance as to the time and place for delivery of components and other production
inputs in order to fulfill production targets. Our vehicle tracking system monitors and records
the implementation of the planning during production.
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Capacity Utilization
As the table below shows, we have, in each of the five fiscal years ended March 31, 2002,
produced in excess of our installed capacity.
Installed Capacity (No. of Vehicles)
Actual Production (No. of Vehicles)
Capacity Utilization (%)
Fiscal
1998
250,000
354,336
141.7%
Fiscal
1999*
350,000
333,198
129.0%
Fiscal
2000
350,000
407,589
116.5%
Fiscal
2001
350,000
350,376
100.1%
Fiscal
2002
350,000
358,108
102.3%
Source: Maruti Annual Reports
* Since the additional capacity of 100,000 vehicles was installed in March 1999, the installed capacity for computing
capacity utilization in fiscal 1999 is taken at 258,333 vehicles, which is the weighted average for the earlier capacity for
11 months and the new capacity taken for one month.
We believe that, with minimal capital expenditure, we would be able to produce 500,000 vehicles
per year.
Utilities
We do not rely on outside sources of power as we have a 60-megawatt gas turbine captive
power plant, which has multi-fuel capability. We also have our own reverse osmosis water
treatment plant and effluent and sewage treatment plant.
In 1999, we received the ISO14001 certification in respect of our environment management
systems.
Our Manufacturing Paradigm
We adopt a target control and PDCA approach as the underlying theme of all our processes.
PDCA constitutes:
• Planning by setting a target and time-line, dividing into action plan with value to each
factor/element;
• Doing the standardized operation as decided;
• Checking through gap analysis to check whether the operation is really giving the desired
results; and
• Acting to freeze if effective or correct.
Productivity
Improving productivity is an ongoing effort in Maruti, through the Maruti production system, or
MPS, which is derived from the Suzuki production system, and focuses on elimination of wasteful
activities taking place during manufacturing processes. In addition to MPS activities, in-house
automation, increasing utilization of production lines, outsourcing of low value-addition jobs and
reduction in materials handling have contributed to improvements in the productivity of our
employees and the efficiency of our operations.
As shown in the table below, our employee productivity, measured as the ratio of production
volume in a fiscal year to the number of our permanent employees at the end of the fiscal year,
increased by approximately 79% from fiscal 1995 to fiscal 2002. In September and October
2001, 1,050 permanent employees participated in our voluntary retirement scheme, which
reduced the size of our workforce significantly without having a material impact on production
volumes.
Fiscal
Year
1995
2001
2002
Number of Permanent
Employees
4,840
5,770
4,627
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Production
Volume
206,330
350,376
358,108
Production Volume Per
Employee
43
61
77
Conservation of energy
We follow the three principles of “Reduce, Reuse and Recycle” for conserving energy.
Between fiscal 1997 and fiscal 2003, we have reduced the consumption of electricity measured
as the ratio of kilowatt hours of power consumed to the number of vehicles produced, by
approximately 29%. This was achieved by using energy-saving lights and natural light, and also
the efficient usage of other electrical appliances, thus reducing wastage. In the same period, we
reduced the consumption of water, measured as the ratio of the volume of water consumed to
the number of vehicles manufactured, by approximately 66%. This is achieved through the
recycling of waste water in our water treatment plant and effluent and sewage treatment plant.
Quality
We produce high quality products, some of which we also export to various countries including
the Netherlands, Italy, Germany, the United Kingdom and Switzerland. We were certified to ISO
systems in the year 1995. ISO set in place a renewed and revised quality management system
standard in the year 2000. The new ISO 9001:2000 standards are based on the eight quality
management principles of customer focus, leadership, involvement of people, process approach,
system approach to management, continual improvement, factual approach to decision making
and mutually beneficial supplier relationships. The standard encourages the use of the PDCA
approach extensively and requires continuous improvement. We were certified with ISO
9001:2000 in 2001 and aim to achieve the TS-16949 certification. In addition, we have made
the following improvements in terms of producing defect-free products:
•
•
•
DFC OK: Our Direct Final Check OK, or DFC OK percentage, which signifies the
percentage of vehicles that pass through the inspection stages as defect-free,
improved from approximately 77% in March 2002 to approximately 87% in March
2003.
Reduction in rejection: Our in-process rejection cost per vehicle, computed as the
ratio of (1) the cost of components rejected due to defects arising during our
production process, to (2) the number of vehicles sold, declined by approximately
55% from fiscal 2002 to fiscal 2003.
In house warranty: Our in-house warranty costs per vehicle, computed as the ratio of
(1) the aggregate cost of components incurred by us to service warranty claims
arising from operational defects in our manufacturing lines, to (2) the numbers of
vehicles sold in the fiscal year, declined by approximately 77% between fiscal 2002
and fiscal 2003.
Suzuki Quality Management System
Based on a method adopted by Suzuki at its manufacturing facilities, the quality of a vehicle
dispatched from our facility is measured through a quality index audit on a daily basis. The
quality index is a relative measure of quality based on evaluation of vehicles selected at random
on a daily basis. In addition, we have recently adopted Suzuki’s global customer audit index, in
order to provide a more customer-oriented focus to our entire organization, and channel
resources towards customer complaints for rapid response.
Quality improvement initiatives
We have recently introduced for quality control:
• Tracking surveys and direct customer contact in order to better understand customer
satisfaction levels and customers’ problems;
• Full-time task forces for improvement in initial quality study problems and departmental
cross-functional teams to work on defined problems with challenging targets;
• Quality gates at various stages in order to raise alarms for correction and immediate
action on defects;
• Fool-proofings, or Pokayoke in Japanese, which comprises checks conducted in order to
prevent defects arising from human error during the manufacturing process;
• A real-time feedback system, cross-linked with overall targets; and
• The “Pica Pica” system, which aligns the sequence of components and vehicles in order to
prevent incorrect fitting of components.
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Kaizen
We have adopted the Japanese management concept of Kaizen, or continuous improvement. Our
Kaizen activities have resulted in the improvement of our in-house capabilities. For example, we
manufactured 25 multi-axis robots and 16 multi-spot welders. Group discussions among
employees in different departments are conducted on a monthly basis in order to discuss and
resolve problems relating to their areas of operation, an activity we refer to as quality circle
activity. Based on our belief that individuals contribute to improvement in growth, we have a
suggestion scheme in which we promote participation of all employees at all levels. The average
number of suggestions made per employee has improved by approximately 24% in fiscal 2003,
when we received more than 72,000 suggestions, as compared to fiscal 2002. Some of the
other improvements as a result of the Kaizen process have been increased automation through
our automated material transport system. We have also won numerous awards including the
"Excellence in Suggestion Scheme" award instituted by the Indian National Saving Scheme
Association regularly for each of the last four years and 15 trophies in quality circle competitions
organized by the Confederation of Indian Industries.
Manufacturing Process
The manufacturing process at our facility is depicted below:
S te e l
C o ils
B lanki
ng
L ine
P re s s
S ho p
W e ld S ho p 1
P ai nt S ho p 1
A s s e mb ly S h o p 1
Final Ve hicle
Inspe c tio n 1
W e ld S ho p 2
P aint S ho p -2
A s s e mb ly S h o p 2
Final Ve hicle
Inspe c tio n 2
W e ld s ho p 3
P ai nt S ho p 3
A s s e mb ly S h o p 3
Final Ve hicle
Inspe c tio n 3
S ale s
&
D e s patc h
B um pe r
paint s ho p
E n g ine S upply to A s s y s ho ps 1 , 2 & 3
E ng i ne
Assy -1
Machine
Sho p 1
E ng i ne
A s s y . -2
M ac hine
S ho p 2
E ng ine
A ssy .-3
M ac hine
S ho p 3
The production of a car at our facility occurs in the following stages:
Press Shop: Our press shop has five transfer presses and two blanking lines. In the press shop,
steel coils are cut to the required size and panels are prepared by pressing them between
various die sets such as doors, roofs and bonnet. An anti-rust coat is applied at this stage. We
also have in-house capability and the necessary technical knowledge for the design and
manufacture of medium-size press dies.
Weld Shop: We have three welding shops with 122 six-axis robots and 25 in-house
manufactured two-to-four axis robots. In this shop, various press metal components
manufactured in the previous stage are spot-welded together to form the body shell. Various
parts such as the floor panel, side panel, doors and bonnet are sub-assembled in this shop.
Subsequently, the assembled parts undergo final welding. The welded body is sent to the paint
shop through a conveyor.
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Paint Shop: We have three paint shops, within one of which the final outer body is fully painted
by robots. In the paint shop, the body undergoes various pre-treatment and electro deposition
painting processes to provide a high corrosion resistance to the body. The car body is given an
intermediate or primer coat before applying the stoving topcoat paint. The intermediate and the
final coat are applied by using automatic electrostatic spray-painting machines (micro bells) and
robots, followed by a baking process.
Assembly Shop: We have highly flexible assembly lines, which can simultaneously handle a large
number of variants as well as adapt to sequence changes. The painted bodies proceed for final
assembly in three stages. The first stage is the trim line wherein various components such as
roof head lining, windshield glass and interior trim components are fitted. Thereafter, the car is
transferred to an overhead conveyor, the chassis line, wherein components such as the engine,
gearbox and front and rear axles are assembled on the underbody. The vehicle is then lowered
to the final line on its own wheels and here components and parts such as seats, the steering
wheel and the battery are fitted. The completely assembled vehicle finally rolls out of the
assembly lines to the final inspection stages.
Machine and engine shops: We assemble and test engines in our engine shops and carry out
precision machining of engine components in our machine shops.
Licence agreements with Suzuki
Suzuki has several license agreements with us under which it has, since our inception:
• provided us with technical know-how, assistance and information for the manufacture,
sale and after-sales service of our products and parts;
• supplied components for our passenger cars;
• deputed technical personnel to our facility;
• helped us develop manufacturing processes and integrate certain Japanese management
practices such as kaizen, which is Japanese for continuous improvement, in our plants;
• trained our personnel; and
• helped us develop and manage the supply chain for our products.
We have agreed with Suzuki that amongst other things:
• we will not manufacture in, or export products covered by agreements with Suzuki to,
any territory except those permitted by Suzuki;
• we will not enter into agreements with any other manufacturer to sell any product or part
that competes with any product or part covered by our license agreements with Suzuki;
and
• we will not otherwise sell, distribute or promote the sale of any product that competes
with products covered by our license agreements with Suzuki.
Suzuki will not be liable to us for damages arising from our use of the licensed information and
disclaims responsibility for all representations and warranties made by us with respect to the
licensed products.
OUR SUPPLY CHAIN
Our purchases of production inputs primarily comprise raw materials and purchased components.
In fiscal 2002, 28% of our raw materials and components consumed were imported and the
remaining 72% were purchased from sources within India.
Raw Material Suppliers
The raw materials used in our manufacturing process primarily comprise steel coils and paints.
We require our suppliers to comply with stringent quality specifications. We purchase steel coils
from manufacturers in Japan, Korea and, to some extent, India. In recent years, we have sought
increasingly to localise our purchases of steel coils with a view to reducing costs. We purchase
our paint requirements from Indian suppliers.
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We earlier followed the tender system for the purchase of steel. Under this system, we
advertised our specifications and had to accept the lowest price offered by a supplier who could
meet our specifications. Last year, we moved to the quotation system where we have the
flexibility to renegotiate prices once an offer is submitted. We issue standard purchase orders
covering a period of six months for purchase of steel from foreign suppliers. We generally enter
into one-year contracts for the purchase of steel from Indian suppliers and issue purchase orders
in line with our requirements.
We generally enter into one-year contracts for the supply of paints and issue purchase orders as
and when we require supplies.
Components
Local Vendors
Since our inception, we have helped establish an organized automobile component industry in
India through our vendor development program. We have developed our vendor base in India to
address our specific needs and we believe that the efficiency of our vendors’ production
processes, and the quality and competitiveness of their products, have generally improved in the
course of their association with us. A large number of our vendors depend on our purchases for
a substantial majority of their turnover. We play a collaborative role with our vendors by
assisting them in periodically improving their processes and through training and interaction,
regular audits and follow-ups in order to reduce line rejections and warranty cost. We seek to
align our vendors’ interests with our own and bring their manufacturing and service standards in
line with our requirements. The role of our vendors has gradually evolved from tactical to
strategic where the vendors work in close coordination with us to meet our long-term goals in
terms of:
• component development;
• quality;
• delivery; and
• cost control.
In order to improve quality and generate economies of scale, we have reduced the number of
our vendors of components in India from 370 as of March 31, 2000 to 299 as of March 31, 2003,
and intend to continue to reduce the number of our vendors. As of March 31, 2003, 13 of our
vendors were our joint venture companies. The details of the commercial arrangements and
other details of the joint ventures have been presented in the section entitled “Our Group
Companies”. As of the same date, 113 of our vendors had collaborations with foreign entities,
which help them to gain access to advanced facilities and systems, technical data and expertise.
Our top ten local vendors accounted for approximately 34% of our aggregate purchases of
components from vendors in India.
Agreements with vendors
Our vendors supply components in accordance with purchase orders and supply schedules
periodically provided to them and time of delivery is the essence of the agreement. Our
agreements with our vendors require that they sell components that are made in accordance
with designs, drawings and specifications provided by Maruti, exclusively to Maruti. These
agreements require that the vendor adopt Maruti’s established quality control procedures and
permit periodic inspections of components and audits of its premises by Maruti. Repair and
replacements costs of defective components supplied are borne by the vendor. Our agreements
with our vendors typically permit termination by the aggrieved party upon breach of the
agreement. In addition, these agreements provide for automatic termination upon the
occurrence of (1) a change in the ownership of the vendor, (2) merger or amalgamation of the
vendor with a third party, (3) transfer of a material portion of the assets of a vendor to a third
party so that components cannot be supplied to Maruti without the assistance of the third party,
and (4) insolvency of the vendor.
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Delivery by Vendors
Most of our vendors have developed flexible manufacturing systems, which enable them to align
their production to our changing requirements. We have a delivery instruction system that
provides details of our component requirements for every 15 days, across the different variants
of the various models, to our vendors. We are linked to our vendors through our Internet-based
information network, which maintains online information regarding order status and delivery
instructions. This capability has helped in reducing both inventory levels and lead times required
for the supply of various components and sub-assemblies, and has enabled our vendors to more
efficiently plan and dispatch their products.
Vendors located within a radius of 100 kilometers from our facility supply the majority of our
components. This has enabled our vendors to eliminate packaging and supply components
directly to the assembly line.
Reduction of Vendor Costs
We have begun working with some of our major vendors to implement the MPS, which focuses
on the elimination of wasteful activities in their manufacturing processes. We continue to work
with our vendors in areas such as improving their productivity, reducing the number of their
components that are rejected, reducing materials handling, improving their yield from materials,
and reducing their inventories. This helps reduce their costs of production, and also reduces the
costs of our components.
We set targets with vendors for cost reduction, and for the initial period of the cost reduction, we
share the benefits of the reduction with the vendor to provide an additional incentive for the
vendor to reduce costs. In addition, we plan to begin to integrate our vendors into the
worldwide purchase system, or WWP, whereby a vendor may become the sole supplier for a
Suzuki product in several countries including India. This would generate economies of scale for
the vendor that also result in reduction of our costs.
Through value analysis, or VA, we aim to minimize the cost of manufacturing a component
without changing its functional utility. Through value engineering, or VE, we aim to minimize
costs at the stage of designing the component, before commencing production. We have
adopted cost-efficient designs for certain components
from Suzuki to enhance our
competitiveness in terms of price and quality, with respect to the components. We have the
support of 250 engineers trained in VA and VE to help us conceive and implement our VA/VE
activities.
The warranty costs of our vendors are computed as the cost of components incurred by our
vendors to service warranty claims arising from defects in components supplied by them. We
have been able to reduce the warranty costs of our vendors per vehicle, which is computed as
the ratio of (1) the aggregate annual warranty costs of our vendors to replace defective
products, to (2) the numbers of vehicles sold in the fiscal year, by approximately 21% between
fiscal 2002 and fiscal 2003.
Vendor Quality Control
Quality management system such as ISO 9000/ QS 9000 forms the basis for producing a quality
product. To assist small and medium vendors in achieving ISO 9000 certification, in 1995 we
adopted a cluster approach wherein we grouped vendors together, trained them in quality
management and assisted them in obtaining ISO 9000 certification. This cluster approach was
extended to helping vendors attain QS 9000 certification. As of March 31, 2003 approximately
114 vendors had obtained ISO 9001/2 certification, 122 vendors had obtained QS 9000
certification and 11 vendors had obtained TS 16949 certification. We conduct periodic vendor
quality system audits in order to ensure that quality standards are sustained.
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Imported components
We purchase our imported components mainly from Suzuki. During fiscal 2002 and the nine
months ending December 31, 2002, we purchased components valued at Rs.7,804 million and
Rs.5,851 million, respectively, from Suzuki.
Discounts and Royalty Waivers from Suzuki
On March 5, 2003, Suzuki agreed to the following:
•
•
For fiscal 2004 and fiscal 2005, Suzuki will provide a 10% discount on knocked down
components imported by us, except for components imported for the Alto built for export.
Thereafter, the discounts will be determined subject to market conditions in India. With
respect to the Alto built for exports, discounts are already applicable from February 2003
until January 2004. The value of our purchases of components from Suzuki in fiscal 2002
and the nine months ended December 31, 2002 is Rs. 7,804 million and Rs. 5,851 million,
respectively.
Suzuki will no longer charge royalty for the Maruti 800, Omni, Gypsy, Esteem and Zen
models. This arrangement is subject to revision in the event of the introduction of new
technology or upgradation in specifications due to changes in market conditions or
requirements of new laws or norms. The total royalty expenses on these models paid to
Suzuki in fiscal 2002 were Rs. 779.5 million.
Localisation
We strive to increase the proportion of locally sourced components and raw materials in our
products, a concept we refer to as localisation. As a measure of the level of localisation, we
compute the local value as the difference between the total notional value of the imported set of
component for a model and the actual value of imports for that model in a period. Localisation is
then computed in terms of the local value expressed as a percentage of the total notional value
of the imported set of components for a model.
We increase the levels of localisation in our existing models and our new models over time by
working closely with our vendors in India to develop their capacity to manufacture and supply
components that match our quality and technical requirements at costs lower than the cost of
imported components. It is our strategy to introduce new models with a minimum of 75%
localisation level and increase the same to at least 90% within three years of introduction of the
model.
We aim to reduce our initial investment cost for new models through in-house development and
localised sourcing of dies, welding jigs and other equipment, introduction of flexible welding lines
that can be used for the production of multiple models, and in-house development of machine
shop equipment. We also plan to source dies for new models and upgraded versions of existing
models from sources outside India other than Japan, such as Taiwan, which are typically less
expensive sources than Japan.
In addition, we have recently entered into a joint venture with Suzuki to establish an aluminium
foundry. The foundry will manufacture components such as cylinder heads, cylinder blocks for
aluminium engines and transmission cases. We believe that this venture will help us to increase
our localisation levels and reduce costs.
MARKETING
Maruti’s marketing objective is to continually offer the customer new products and services that:
• reduce the customer’s cost of ownership of our cars; and
• anticipate and address the customer’s needs and preferences in all aspects and stages of car
ownership, to provide what we refer to as the “360 degree customer experience.”
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Our Products
We sell ten models with more than 50 variants in segments A, B, C, and utility vehicle segment
of the Indian passenger car market. Of these, we manufacture nine models and import the
Grand Vitara as a completely built unit from Suzuki in Japan.
Our models and variants are designed to address the changing demands of the market and are
periodically upgraded in technology, styling and features. To take advantage of the brand
recognition associated with our products, we retain the brand name of the product through
various stages of product upgrades over time. For example, the version of the Maruti 800 brand
currently sold in the market is a significantly upgraded version, in terms of technology, design
and styling, of the Maruti 800 launched in 1983. A segmentwise analysis of our brands is
presented below:
Segment
A
Brand
A
Maruti
800
Omni
B
Zen
B
B
Wagon
R
Alto
C
Esteem
C
Baleno
C
Utility
Vehicle
Versa
Gypsy
King
Utility
Vehicle
Grand
Vitara
Engine
capacity
(cc)
Ex-showroom
price in Delhi of
base model as of
March 31, 2003
Rs. 184,121 (M800,
Bharat Stage I)
Rs. 221, 040 (Omni
E)
Rs. 330,236 (LX
Bharat Stage II)
Rs. 323,065
(WagonR LX)
Rs. 287, 213
(Alto LX)
Rs. 465,865 (LX
Bharat Stage II)
Rs. 654,917
(Baleno Sedan)
Rs. 399,876 (DX)
Rs. 452,538
(Gypst King Soft
Top)
Rs. 15,96,000
(XL7/
Standard)
796
796
993
1061
796/1061
1298 (petrol)
1527 (diesel)
1590
1298
1298
2700
Launch date
December
1983
November
1984
May 1993
December
1999
September
2000
November
1994
December
1999
October 2001
December
1985
April 2003
Sales volumes of
the brand as a
percentage of
total sales
volumes in the
segment in the
six months ended
September 30,
2002
71.6%
28.4%
19.6%
8.9%
7.8%
13.3%
0.5%
3.0%
4.4%
N.A.
Exports. In fiscal 2000, 2001 and 2002, and the nine months ended December 31, 2002,
exports comprised 3.9%, 3.1%, 2.6% and 6.9%, respectively, of our total sales. We primarily
export our Alto and Maruti 800 models to countries in Western Europe such as the Netherlands,
Italy, Germany, the United Kingdom and Switzerland, and to Bangladesh, Nepal, Sri Lanka, Chile
and Egypt.
Sales network
Our dealers. As of March 31, 2003, we offered our products to the customer through a network
of 178 authorized dealers with 243 sales outlets across 161 cities. We believe that this is the
largest network of dealers amongst car manufacturers in India. As of March 31, 2003, our
dealers employed more than 3,500 sales executives. We are linked to our sales network through
our secure extranet-based information network. The sales of our spares, accessories and
automobile-related services such as insurance and finance serve as additional sources of revenue
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for our dealers. We believe that the availability of these related products and services at sales
outlets also helps to attract customers to the outlets and promotes sales of our cars.
Agreements with our dealers. We generally appoint a limited number of dealers for a certain
geographical territory. Our dealers provide services to customers such as pre-delivery inspection
of vehicles, sales of cars, after sales service, supply of spare parts and other services that
promote sales of cars within the territory for which they are appointed. We have the right to
sell our products and services through other dealers or intermediaries in any territory, whether
or not one of our dealers is already established in that territory. Our dealers are required to
maintain their outlets in accordance with our specifications and employ well-trained sales staff.
Our agreements with our dealers usually have terms of five years. These agreements are
generally renewable for successive terms of three years, by mutual agreement. The agreements
typically permit termination by either the dealer or us with six months’ prior notice.
Enhancing dealer performance. Our central office in Delhi, our regional offices and our area
offices monitor and assist our dealer network. As of March 31, 2003, we had nine regional
offices, five area offices and 187 sales and marketing personnel. We follow the performance of
our dealers and frequently suggest improvements. In order to assist our dealers in enhancing
their performance and capabilities, we have introduced a concept of “Balanced Scorecard”. Using
this tool, we seek to measure the performance of a dealership in several areas of operations,
including sales, service, spares and accessories, financial management and management
systems. We reward dealers who perform well on the “Balanced Scorecard” with a cash payment
at the end of the fiscal year. We believe that the “Balanced Scorecard” serves as an effective
incentive for dealers to enhance their performance.
Dealer training. We have established standard operating procedures, showroom ambience and
service quality standards for dealerships. We provide periodic training through our training
centres located at our manufacturing facility and at Chennai, Kolkata, Guwahati and Pune. We
trained more than 2,600 and 3,400 dealer sales personnel in fiscal 2002 and fiscal 2003,
respectively. Our subsidiary, True Value Solutions Ltd., provides value-added services, such as
manpower recruitment and training, to our dealers.
For fiscal 2002, our top dealer and our top 10 dealers accounted for 3.4% and 18.4%,
respectively, in terms of value of products sold to such dealer, of our domestic sales of vehicles.
After-sales Service
Network
As of March 31, 2003, there were 342 Maruti dealer workshops and 1,545 Maruti Authorised
Service Stations, or MASSs, covering 898 cities in India. In addition, 24-hour mobile service is
offered in 38 cities under the brand “Maruti On-road Service”. We intend to extend this service to
an additional 25 cities over the next three years. As a benchmark for dealers with respect to
service quality and infrastructure facilities, we have launched service stations under the brand
“Maruti Service Masters, or MSMs, in three locations in India. As of March 31, 2003, we had
service stations on 30 highways in India under the brand “Express Service Stations”.
To promote sales of our spare parts and the availability of high quality, reliable spare parts for
our products, we sell spares under the brand name “Maruti Genuine Parts”, or MGP. These are
distributed through our dealer network and through authorised sellers of our spare parts, to
whom we refer as stockists.
Many of our MASSs are at
the penetration, in terms
exploring opportunities to
increase sales of our cars
insurance and financing.
remote locations where we do not have dealers. In order to increase
of sales volumes, of our products in these remote areas, we are
integrate some of the MASSs into the sales process in order to
and related products and services such as spares and accessories,
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We have trained more than 6,700 and 9,600 service technicians in fiscal 2002 and fiscal 2003,
respectively.
Genuine Accessories
We have also entered the business of marketing car accessories under the brand name “Maruti
Genuine Accessories”, or MGA, through our dealership network. We seek to provide customers
with the opportunity to customize their vehicles with accessories such as music systems, security
systems, car-care products and utility products.
Warranty and Extended Warranty Program
We offer a two-year warranty on all our vehicles at the time of sale. Our dealers are required to
address any claim made by a customer, in accordance with practices and procedures prescribed
by us, under the provisions of the warranty in force at that time. The dealers subsequently claim
the warranty cost from us. We analyse warranty claims from dealers and either claim the cost
from vendors, in the case of defective components, or bear the cost ourselves, in the case of
manufacturing defects.
We offer an extended paid-warranty program marketed under the brand, “Forever Yours” for the
third and fourth year after purchase. We have entered into arrangements with insurance
companies to cover the costs of warranties offered under this program. The extended warranty
program is intended to maintain the dealer’s contact with the customer and increase the revenue
generated from sale of spares, accessories and automobile-related services. An effort is made
during the period of the extended warranty to encourage the customer to exchange his existing
Maruti car for a new Maruti car, or upgrade to a new Maruti car.
NEW BUSINESS INITIATIVES
As the largest manufacturer and leader in the small car segment, we continually seek new ways
to utilize our vast car parc, range of products and extensive sales and service network to expand
the size of the passenger car market in India. We have recently launched new initiatives to
develop the market for automobile insurance, automobile finance, leasing and fleet
management, and pre-owned cars. We aim to provide customers with a “one-stop shop” for
automobiles and automobile-related products and services, and build on our wide customer base
and extensive sales and service network to make available to our customers a wide range of
Maruti-branded services at different stages of ownership, which we refer to as the “360 degree
customer experience”.
In the nine months ended December 31, 2002, our new business initiatives generated net
revenue of Rs. 44 million.
Automobile finance
One of the key factors in the buying decision of a customer in the passenger car market in India
is the availability of finance. Automobile finance has in the past been made available through
direct selling agents of independent finance companies. Since January 2002, we have made
available, through our dealers, finance products of eight select finance companies, including
those of two of our group companies, Maruti Countrywide Auto Financial Services Ltd., a joint
venture among Maruti, Housing Development Finance Company Ltd. and GE Capital Services
India Ltd., and Citicorp Maruti Finance Ltd, a joint venture between Maruti and Citicorp Overseas
Investment Corporation Ltd, under the brand “Maruti Finance”. We aggregate the finance
products provided by these companies to offer uniform financing conditions to the customer at
Maruti dealerships. This increases the transparency of the financing transactions, which we
believe contributes to customer satisfaction and confidence in our brand. We earn a sourcing fee
from the finance company while the credit evaluation of the customer and the loan disbursement
to the customer is done by the finance companies.
Alliance with the State Bank of India (SBI)
In February 2003, we entered into an agreement with SBI, the largest bank in India with over
9,000 branches and a vast customer base across India. The arrangement is to be branded “SBI-
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MUL Finance”. Under our agreement with SBI, we have nominated SBI as our preferred financier
for customers who purchase our cars. SBI has agreed to provide automobile finance to Maruti’s
customers. In addition, SBI has agreed to work in close coordination with our dealers and us in
order to develop finance packages, conduct promotional activities and generate car loan
business. The credit evaluation of the customer and the loan disbursement to the customer is at
the discretion of SBI. We believe the competitive rates offered for the finance products under
this alliance and access to SBI’s extensive branch network will make our passenger cars
affordable to a greater number of customers and expand the size of the market.
Insurance intermediary
Automobile insurance is mandatory in India. It is purchased upon the purchase of a vehicle and
is subject to annual renewal. Two of our subsidiaries, Maruti Insurance Brokers Ltd and Maruti
Insurance Distribution Services Ltd, have entered into alliances with insurance companies. Since
May 2002, these companies have been acting as intermediaries offering products of these
alliance partners under the brand name “Maruti Insurance”. As dealers claim payments on
insurance claims directly from the alliance partners, the customer is provided with the benefit of
a cashless transaction in respect of the repairs or spares that are covered by the insurance
policy. Additionally, due to the availability of this benefit, the customer is encouraged to use our
dealers and purchase MGP, thus adding to our revenue from sale of spare parts and to revenues
of dealers. We earn sourcing revenues from insurance companies for each customer using
“Maruti Insurance”.
Leasing and Fleet Management
Our leasing and fleet management services offered to corporate clients are marketed under the
“Maruti N2N” brand. While the functions of brand management, business development,
maintenance, risk-underwriting and fleet management operations are managed by us, we use
the services of four key alliance partners in order to run this business: the financier, the dealer,
the insurer and the car rental agency. The financier conducts initial credit assessment of the
clients, provides funding, takes residual value risk, is responsible for collections and engages in
lease product development. Under standard agreements entered into by us, the primary
responsibility for maintenance and value-added services, valet services and car replacement lies
with us. We delegate this responsibility to our alliance partners. The dealer maintains the cars
and provides other value-added services such as valets and emergency assistance. The insurer
provides vehicle risk underwriting. The car rental agency provides replacement cars if and when
necessary. We earn fleet management rental fees from the client and a business development
fee from the financier.
Pre-owned cars business
Pre-owned cars, being less expensive, address demand among two-wheeler vehicle owners
aspiring to own a car and among existing car owners to upgrade their cars. The pre-owned car
market in India was estimated to be between 1.1 and 1.3 times the size of the market for new
cars and utility vehicles in fiscal 2002. Until recently, the business of selling pre-owned cars was
handled predominantly by the unorganized sector. This led to a lack of reliability and
transparency in transactions involving pre-owned cars. With our wide range of products, we are
well positioned to offer customers the opportunity to upgrade their cars. Our pre-owned cars
business, launched in October 2001 is conducted under the brand name “Maruti True Value”. We
believe that our pre-owned car business is a significant marketing tool to retain customers and
reduce their cost of ownership, and acquire new customers. This can be achieved by creating an
organized market for the resale of the pre-owned cars, where the value of the pre-owned car is
assessed in a more transparent manner and the car is certified by Maruti.
While the central intermediary to the transaction is a dealer, we play an advisory role in
conducting technical evaluation, estimating the refurbishment cost and providing certification
and warranty to the buyer of the pre-owned car. The warranty given to the buyer of the preowned car is covered by an arrangement with insurance companies. Prior to certification, every
car passes through a 120-point check, which includes verification of the seller’s credentials. The
refurbishment of pre-owned cars which are under “Maruti True Value” improves the utilization
rates of dealer workshops and other “Maruti True Value” outlets and also increase the sales of
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spares. We receive from dealers a proportion of their revenue, net of cost of refurbishment of the
pre-owned car.
As on March 31, 2003, “Maruti True Value” operated from 50 dealer-owned outlets spread over
34 cities. An additional 30 dealer-owned outlets are at various stages of launch.
AWARDS AND RECOGNITION
We have received several awards and recognition in various surveys and studies conducted on
the automobile industry, including the following:
Business World Survey of Most Respected Companies in India, 2003. We were ranked 12th
amongst the “Most Respected Companies” in India by Business World, one of India’s premier
business magazines. We were the only car manufacturer to be ranked among the top 15
companies.
J.D.Power India Customer Satisfaction Index Study. This annual study, which began in 1997,
assesses customer satisfaction with product quality and dealer service. The factors used for
measurement are problems experienced, quality of service advisor, service performance, service
timing and facility appearance. In 2000, 2001 and 2002, J.D.Power Asia Pacific, Inc. ranked us
No. 1 in the India Customer Satisfaction Index.
NFO Automotive Total Customer Satisfaction Survey, 2002. The 2002 India Total Customer
Satisfaction Study is the first syndicated study introduced by NFO Automotive in India, an
organization that specializes in automotive research. The study is based on responses from new
car purchasers during the first three years of ownership. The analysis focused on the
performance of over 30 new car models in the Indian passenger car market at the vehicle
segment level to provide comparison amongst similar groups of vehicles in the key areas of sales
satisfaction, product quality, vehicle performance and design, after-sales service, brand image
and cost-of-ownership. Based on these indicators, the Maruti 800 was ranked No. 1 in the
“Economy” segment, the Maruti Zen (petrol version) was ranked No. 1 in the “Premium
Compact” segment and the Maruti Esteem was ranked No. 1 in the “Entry Mid-size” segment.
Awards for Export Excellence, 2002. We received the regional trophy for the Top Exporter in the
category of large scale manufacturing units from the Engineering Export Council of India in 2002.
CII-EXIM Business Excellence Award, 1998. We received the CII-EXIM Business Excellence
Award for 1998 for excellence in manufacturing operations, sound management of supply chain,
high degree of employee involvement in continuous improvement activities, and strong visible
involvement of senior management in promoting total quality management across the
organization.
COMPETITION
We are primarily focused on the A and B segments, which are particularly price-sensitive. In
fiscal 2002, the A segment constituted 35.7% of the overall Indian passenger car market. In
this segment, we offer the Maruti 800 and the Omni. Since fiscal 2000, we have been the sole
manufacturer in the entry-level A segment.
In fiscal 2002, the B segment constituted 50.8% of the Indian car market. In this segment we
compete with Hyundai (Santro), Telco (Indica), Fiat (Palio and Uno), and Hindustan Motors
(Ambassador). There are approximately eight models offered in this segment, of which we offer
three, the Zen, the Alto and the WagonR.
The segments for cars priced above Rs.500,000, which together constituted approximately 14%
of the Indian passenger car market in fiscal 2002, are significantly more fragmented than the
small car segment, with several players competing for what has been a relatively small share of
the passenger car market in terms of sales volumes. In addition to Maruti, with the Esteem,
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Versa and Baleno models, the C segment includes Hyundai (Accent), Ford (Ikon), Honda (City),
General Motors (Astra and Corsa), Hindustan Motors (Contessa/Lancer) and Fiat (Siena).
In April 2003, we launched the Grand Vitara, a utility vehicle imported from Suzuki in Japan.
The Grand Vitara competes primarily with a variety of imported and domestically manufactured
utility vehicles such as the Mitsubishi (Pajero), the Chevrolet (Forrester), Daimler-Chrysler
(Mercedes M-Class), M&M (Scorpio) and Telco (Safari).
Since most of our cars run on petrol, we also compete with manufacturers of cars with diesel
engines.
We exported passenger cars comprising 3.9%, 3.1%, 2.6% and 6.9%, respectively, of our total
sales to various regions of the world, including Western Europe, in the fiscal 2000, 2001 and
2002, and the nine months ended December 31, 2002, respectively. The global passenger car
industry has been shaped by mergers and alliances that have led to a consolidation of resources
and market share. Globally, the passenger car industry has been affected by the economic
slowdown and depressed demand. The automobile industry in our export markets is witnessing
weak pricing, intensified competition and excess capacities. We continue to face competition in
our export markets.
Competition in the Indian passenger car industry is based primarily on price, product
performance, brand image, new model launches, distribution network and the availability of
value-added after sales services and after sales support. Our ability to compete effectively will
depend in part on our ability to respond to these competitive factors.
REGULATIONS AND POLICIES
Fiscal Regulation
Changes in excise duties, sales tax and customs duties, and other fiscal levies, affect the costs of
manufacturers including ourselves, are reflected in the price of the car to the customer and
therefore can stimulate or adversely affect demand for cars in the country.
The GoI levies customs duties at the basic rate of 60% on import of CBUs and 25% on the
import of CKDs. The high rates of customs duties imposed by the GoI on components imported
by us directly affects the prices of cars sold by us in India. Customs duties on components,
CKDs and SKDs are expected to fall as India aligns its tariff structure to its obligations as a
member of the World Trade Organization. The effective customs duty paid is higher.
We receive a duty drawback on exports, which enables us to recover import duties levied on
imports used to manufacture products for export.
The rate of excise duty levied by the GoI on the manufacture of passenger cars has been falling
since fiscal 2001. In March 2001, the rate of excise duty on passenger cars was reduced from
40% to 32%. The union budget of March 2003 further reduced the rate of excise duty to 24%
and levied a national calamity contingency duty at the rate of 1%. Reduction in the rate of
excise duty reduces the price of the car to the customer and thereby tends to stimulate demand
for passenger cars.
We are also subject to central and uniform state sales tax levies. We have been granted a sales
tax benefit under the Haryana Sales Tax law on account of the expansion of our plant for a
period of 14 years with effect from August 2001.
Environmental and Safety Regulation
In the last few years, the GoI has introduced several stringent regulations regarding emissions
levels, fuel efficiency, noise, safety of cars and levels of pollutants generated by the plants that
produce cars. In April 2000, the GoI, imposed the Bharat Stage II emission norms (equivalent
to Euro II). These norms currently apply to sales of passenger cars in Mumbai, New Delhi,
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Kolkata and Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra and are
expected to be applicable to the whole of India by April 1, 2005. Bharat Stage III emission
norms (equivalent to Euro III) are expected to be applicable to the cities of New Delhi, Mumbai,
Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Agra by April 1,
2005. Euro III equivalent norms are expected to be applicable nationwide by April 2010.
The GoI has also introduced noise control norms for passenger cars, which came into effect from
January 1, 2003. The GoI has also indicated that more safety and environmental norms will be
made applicable to passenger cars in the future, to align them with international requirements.
We have, from time to time, taken suitable steps to ensure that all our cars meet the
requirements of GoI regulations and policies relating to the automobile industry. We have also
commenced production of alternate fuel vehicles, such as, CNG and LPG. We supply Euro III
compliant cars to overseas markets and plan to introduce Bharat Stage III compliant cars in
India, well in time to meet the forthcoming emission norms. The GoI, however, may impose
stricter regulations or increase its enforcement activities, which could require us to spend
additional amounts on environmental compliance.
For more information on regulations and policies applicable to us, see “Regulations and Policies”
on page 169 of this Draft Red Herring Prospectus.
EMPLOYEES
As of March 31, 2003, we had 4,590 employees, including 614 engineers, 84 MBA graduates and
24 chartered accountants. In a survey conducted jointly by Business Today and Hewitt
Associates in 2002, we were ranked twentieth among the best employers in India.
Training
We seek to align the objectives of our employee training programs with our business objectives.
We provide ongoing training to our employees at our Company as well as at Suzuki’s facilities in
Japan. Training provided by Suzuki in Japan includes:
• training of managerial, executive and supervisory employees provided in collaboration with
the Japanese government to enhance managerial skills and technical skills;
• training of employees across divisions of Maruti to transfer Japanese best practices for their
functions;
• training in connection with the development of new products; and
• deputation of our engineers to Suzuki for a period of two years to gain experience in design
and development activities.
As of March 31, 2003, more than 1,900 of our employees had been trained at the facilities of
Suzuki in Japan.
Management Reviews
Our management committee, which comprises full-time directors and divisional heads, carries
out comprehensive reviews of our different divisions every month. They review the progress
made towards the goals for each division, analyse the deficiencies and take corrective action.
They receive inputs for these reviews from internal audits that are carried out by our quality
systems division. Our management committee also conducts weekly performance reviews that
focus on product performance, customer feedback, product conformity and status of corrective
and preventive actions undertaken.
Trade unions
The Maruti Udyog Employees Union, or MUEU, undertook a strike from October 12, 2000 to
January 8, 2001, arising from a dispute between management and MUEU regarding the terms of
a new performance-based incentive scheme proposed by management. During the period of the
strike, many workers signed a good conduct undertaking and resumed their duties. MUEU signed
the good conduct undertaking on January 8, 2001 and accepted the incentive scheme. Our
production volumes were not significantly affected during the strike in fiscal 2001. MUEU was
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derecognised in February 2002 by the Registrar of Trade Unions of Haryana, following a
complaint about mismanagement of funds. Subsequently, we derecognised the MUEU on
February 22, 2002. Our employees are currently represented by another trade union, the MUKU.
At March 31, 2003, 2,999 of our employees were represented by MUKU. We are involved in
negotiations with the MUKU for the renewal of a wage settlement agreement, which expired in
March 2000. In the previous wage settlement agreement, entered into in February 1998, we
had agreed to provide retrospective wages from April 1996 until the date of the agreement for
certain categories of employees, and other benefits such as transport subsidies and increases in
the amounts of permissible advances. We had also agreed to set up a pension scheme with
more favourable terms for employees than the statutorily required employee provident fund.
We believe that our relations with our employees are good. However, future labour unrest at our
facility or at the facilities of our vendors could adversely affect our manufacturing operations and
our operating results.
For further information, see “Outstanding Litigation and Material Developments” on page 172 of
this Draft Red Herring Prospectus.
The Voluntary Retirement Scheme
We offered a Voluntary Retirement Scheme, or the VRS, which was open to our regular
employees from September 24, 2001 to October 23, 2001. The eligibility parameters of the VRS
varied with the category of employee. 1,050 of our employees participated in the VRS. Some
claims related to the VRS were filed with the LCO, Gurgaon. For further information, see
“Outstanding Litigations and Material developments” on page 172 of this Draft Red Herring
Prospectus.
INFORMATION TECHNOLOGY
Current network
We are connected with our business associates, vendors and dealers through an extranet
network. This extranet network links our facility and our offices to our dealers, vendors and
Suzuki. For example, our network has online information regarding order status and delivery
instructions to vendors. This has helped in reducing both inventory levels and lead times
required for the supply of various components and sub-assemblies. Our extranet network
permits business partners to access critical business information and assists in demand and
factory planning, delivery instruction system and e-procurement. We also have an intranet-based
system in order to increase internal efficiencies. In addition, we are connected to our overseas
distributors through Suzuki’s extranet facility, which enables speedy invoicing, order collection
and other product related information exchange.
Customer Relationship Management
We have designed a comprehensive database of customers, the Customer Relationship
Management, which provides centralized access to dealers and MASSs and enables more efficient
and integrated management of sales and service network.
RESEARCH AND DEVELOPMENT
In fiscal 2002, our total capital expenditure on research and development was Rs.168 million. We
have allocated Rs.320 million for capital expenditure on research and development in fiscal 2003.
Some areas in which we carry out research and development are localisation and development of
components, cost reduction measures such as VA/VE, development of alternate fuel (CNG and
LPG) vehicles, performance-benchmarking to certain parameters such as noise, ride handling
and braking and development of power-steerings for certain models. We regularly upgrade our
models and also launch variants of our models by adding features developed through research
and development.
We have recently acquired the capability to conduct minor and major facelifts to our models, and
upgrade our products in terms of technology or features. As part of Suzuki’s plans to make
- 86 -
Maruti its research and development center for cars in Asia (outside Japan), we expect to have
full model change capability by fiscal 2007.
INFRASTRUCTURE
Factory land
The GoI acquired the entire assets of Maruti Limited through the Acquisition Act. According to the
Acquisition Act, with effect from October 13, 1980, the GoI became the owner of all the assets of
Maruti Limited. The GoI transferred all the assets of Maruti Limited, including the land on which
our manufacturing facilities are built, to us. For further information, see “ Our History” on page
89 of this Draft Red Herring Prospectus.
Office property
We have a corporate office and several regional offices in New Delhi (corporate and regionalNorth 1), Mumbai (regional–West 1), Lucknow (regional-Central), Guwahati (regional-North
East), Bangalore (regional-South 1), Chandigarh (regional-North 2), Kolkata (regional-East),
Chennai (regional-South 1), and Ahmedabad (regional – West 2). We have entered into either
lease agreements or agreements for purchase for these properties. These agreements for
purchase and lease agreements contain standard terms and conditions.
We have constructed buildings covering an area of 3,60,313 square meters at our manufacturing
facility. We have not taken any approval from the Director, Town and Country Planning,
Government of Haryana for constructing these buildings.
The District Town Planner, Enforcement, Gurgaon, or DTP, has vide Memo No. 3560 dated
September 1, 1998 issued a show cause notice under sub section (2) of Section 12 of the Punjab
Schedule and Controlled Areas (Restriction of Unregulated Developments) Act, 1963. The DTP
had sought the sanctioned building plans to be submitted to it by September 15, 1998. We filed
certain drawings and plans vide letter dated September 14, 1998. These were not in accordance
with the specifications required by the DTP. Another show cause notice dated September 24,
1998 was issued by the DTP seeking filing of the plans as per specifications. We sought an
extension of time from the DTP vide letter dated October 31, 1998 for filing the plans. The DTP
rejected the application and vide letter dated December 28, 1998, sought submission of the
plans and other relevant documents within 15 days of the date of the letter. We submitted these
plans as per the specification on December 29, 1999 to the office of the Estate Officer, Haryana
Urban Development Authority. We estimate that a compounding fee at Rs 10 per square feet
may be levied. We have not yet received any communication from the DTP or any other
authority on the issue.
The details of the properties are as set forth below:
S.
Location
Address
No.
Manufacturing Facility
1
Gurgaon
Palam-Gurgaon
Road, Gurgaon –
122015, Haryana
Area
Total area
12,02,256 square
metres (297 acres)
Built Up Area
360,313 square
metres
- 87 -
Lease/Freehold
Freehold
Regional Offices
1
Mumbai
2
Lucknow
3
Bangalore
4
Guwahati
5
602,
Madhava,
Bandra
Kurla
Complex, Bandra
(E)
JNPT,
Nhava Sheva,
4285 sq. ft.
Freehold
4650 sq. ft.
B1
Pickup
Bhawan,
Vibhutikhand.
204, 2nd Floor,
Embassy Classic,
11 Vittal Malaya
Road, Bangalore
Room No. 403
Orion Towers
4148.5 sq. ft.
Freehold
4341.8 sq. ft.
Freehold
1150 sq. ft.
Freehold
Chandigarh
39-40, S.C.O., 8C
11120 sq. ft.
(Lease hold – 99
years lease)
6
Chennai
8249 sq. ft.
Freehold
7
Kolkata
Basement floor +
Ground floor +
7th Floor, Capital
Tower,
180,
Nungambakkam
L&T
Chambers,
16 Camac Street
5585 sq. ft.
Freehold
Training Centers
1
Chennai
101 & 102, Mount
Road, Guindy
1300 Sq.ft. on 1st floor
418 Sq.ft. for shed
Parking space for 6
vehicles
Lease
2
Guwahati
Bimal
Adabari
230 Sq.ft on 1st floor
100 Sq.ft. for shed
Lease
3
Pune
F-11-69, Pimpri,
Chinchwad, Indl.
Area Pimpri
2045 Sq.ft on 2nd floor
702 Sq.ft. open space
Lease
4
Kolkata
138,
B,
Beliagatcha Road
C/o
Jallan
Distributor
1740 Sq.ft.
Parking space for 6
vehicles
Lease
Auto,
- 88 -
OUR HISTORY
Prior to our incorporation, GoI had under the Acquisition Act, acquired the entire undertaking of
Maruti Limited. We were incorporated on February 24, 1981 with the main object of acquiring
and taking over from GoI the undertakings of Maruti Limited. All the land and property of Maruti
Ltd’s factory had been acquired by the Central Government under the Maruti Ltd (Acquisition and
Transfer of Undertakings) Act, 1980 (The Acquisition Act). Under “The Acquisition Act”, the
Central Government has directed vide notification date April 24, 1981, that the undertakings of
Maruti Ltd and the right, title and interest shall vest in the company known as Maruti Udyog Ltd.
on and from April 23, 1981.
Our main objects as set forth in our Memorandum of Association are:
•
To acquire and take over from GoI the right, title, and interest in relation to the
undertakings of Maruti Ltd. as provided for in the appropriate enactment of GoI together
with the liabilities of GoI so far as they are related to the Undertakings of the said
Company.
•
To carry on the business of manufacturers of, and dealers in, automobiles, motorcars,
lorries, buses, vans, motorcycles, cycle-cars, motor, scooters, carriages, amphibious
vehicles, and vehicles suitable for propulsion on land, sea, or in the air or in any
combination thereof and vehicles of all descriptions (all hereinafter comprised in the term
“motor and other things”), whether propelled or assisted by means of petrol, diesel, spirit,
steam, gas, electrical, animal, or other power, and of internal combustion and other
engines, chassis-bodies and other components, parts and accessories and all machinery,
implements, utensils, appliances, apparatus, lubricants, cements, solutions enamels and
all things capable of being used for, in, or in connection with manufacture, maintenance,
and working of motors and other things or in the construction of any track or surface
adapted for the use thereof.
•
To carry on the business of garage keepers and suppliers of and dealers in petrol,
electricity and other motive power for motors and other things.
•
To carry on in the business of iron founders, mechanical engineers, and manufacturers of
machinery, tool makers, brass founders, metal workers, boiler makers, mill rights,
machinists, iron and steel converters, smiths, wood workers, builders, electroplaters,
chromium platers, lacquerers, enamellers, painters, metallurgists, electrical engineers,
and printers and to carry on any branch of manufacturing and engineering business.
Our activities are carried out and in the past have been carried out in accordance with the
objects as specified in our Memorandum of Association.
Changes in Memorandum of Association
Since our incorporation, the following changes have been made to our Memorandum of
Association:
Date of amendment
February 4, 1987
Resolution passed in EGM
Amendment in the Objects incidental or ancillary to the
attainment of the Main Objects
The following clause was added:
“To promote and undertake the formation of any institution or
company or companies for the purpose of acquiring all or any of the
property rights and liabilities of this company or for any other
purpose which may seem, directly or indirectly, calculated to
benefit this company or form any subsidiary company or
companies.”
- 89 -
May 15, 2002
Special Resolution passed
in EGM
The following clause was added:
“The authorised capital of the Company is Rs. 155,00,00,000
(RUPEES ONE HUNDRED FIFTY FIVE CRORES ONLY) divided into
155,00,000 (ONE HUNDRED FIFTY FIVE LAKHS ONLY) equity
shares of Rs.100 (ONE HUNDRED ONLY) each.”
March 25, 2003
Special Resolution
Sub division of face value of equity shares from Rs. 100/- per
equity share to Rs. 5/- per equity share.
The details of the capital raised are given in the section “Capital Structure” on page 51 of this
Draft Red Herring Prospectus.
Key events
Years
1981
1982
1983
1984
1984
1985
1986
1987
1988
1990
1991
1992
1993
1994
1994
1995
1995
1996
1996
1997
1998
1998
1999
1999
1999
1999
1999
2000
2000
2000
2001
2001
2001
2001-02
Key Events, Milestones, and Achievements
Incorporated as Maruti Udyog Limited
JVA and License Agreement executed between Suzuki and GoI, Suzuki acquired
26% stake in Maruti
Started production under JVA; Maruti launches 796 cc hatchback – Maruti 800
Installed capacity reached 40,000 units
Launched Omni
Launched Gypsy
Produced 100,000 vehicles since commencement of production
Exported first lot of 500 cars to Hungary
Reached an installed capacity of 100,000 units
Launched 3 box car – Maruti 1000
Reached cumulative indigenisation of 65% for all vehicles produced
Suzuki increased its stake in Maruti to 50%
Launched Zen
Launched Esteem
Produced the 1 millionth vehicle since the commencement of production
Plant 2 became operational, installed capacity increased to 200,000 units
Received ISO 9002 certification
Awarded star trading house status by Ministry of Commerce
Launched 24-hour emergency on-road vehicle service started in 21 cities across
India
Produced the 2 millionth vehicle since the commencement of production
CII-EXIM Business Excellence Award
Launched website as part of CRM initiatives
Plant 3 and new press, paint and assembly shops became operational and installed
capacity to 350,000 units
Launched Maruti Service Masters (MSM) as model workshop
Launched Baleno and WagonR
Awarded Export Excellence Award for our export performance; awarded Samman
Patras for excise contribution
Received ISO 14001 certification for environmental management
Rated No. 1 in J D Power Asia Pacific’s 2000 India Customer Satisfaction Index study
Launched Alto and Altura
Produced the 3 millionth vehicle since the commencement of production
Rated No. 1 in J D Power Asia Pacific’s 2001 India Customer Satisfaction Index study
Awarded ISO 9001:2000 certification for quality standards and procedures
Launched Versa
Launched new businesses for the resale of used cars (Maruti True Value), for car
financing (Maruti Finance) and for corporate lease & fleet management (N2N)
- 90 -
2002
2002
2002
2002
2003
2003
Revised JVA between GoI and Suzuki – GoI to divest stake in Maruti in two phases:
i) rights issue and ii) public offering
Maruti rights issue, GoI renounced its right to subscribe in favour of Suzuki; Suzuki
stake increased to 54.21%, GoI stake reduced to 45.55%
Launched insurance intermediary (Maruti Insurance)
Rated No. 1 in J. D. Power Asia Pacific’s 2002 India Customer Satisfaction Index
study; leads in multiple categories in NFO Automotive’s 2002 India Total Customer
Satisfaction survey
Launched Grand Vitara
Produced the 4 millionth vehicle since the commencement of production
- 91 -
SELECTED UNCONSOLIDATED FINANCIAL DATA
You should read the following selected unconsolidated data, which have been prepared in
accordance with Indian GAAP, in conjunction with our audited unconsolidated financial
statements for each of fiscal 2000, 2001 and 2002, and the nine months ended December 31,
2002, including the notes thereto and the reports thereon, which appear elsewhere in this Red
Herring Prospectus and “Management’s Discussion and analysis of financial condition and results
of operations”. These financial statements are prepared in accordance with Indian GAAP, which
differs in certain significant respects from US GAAP. For more information on these differences,
see “Summary of Significant Differences Between Indian GAAP, IAS and US GAAP” included
elsewhere in this prospectus.
Our audited consolidated financial statements consolidating (1) the results of operations and
financial condition of our subsidiaries for the fiscal year ended March 31, 2002 and the nine
months ended December 31, 2002, and (2) the results of operations and financial condition of
our subsidiaries, our joint ventures and our associates for the nine months ended December 31,
2002, are included elsewhere in this prospectus under “Consolidated Financial Statements as per
AS 21” and “Consolidated Financial Statements as per AS 21, AS 23 and AS 27”, respectively.
SUMMARY OF PROFIT AND LOSS ACCOUNT, AS RESTATED
Rs. million
Nine months
ended December
31, 2002
Income/ Revenue
Sales:
Of Products manufactured by the Company
Of Products traded in by the Company
Other Income/ revenue
Total
Expenditure
Consumption of Raw Materials & Components
Cost of Spares/ Dies & moulds sold
Consumption of Stores
Excise Duty
Employees Remuneration & Benefits
Manufacturing/
Administrative
and
expenses
Selling & Distribution expenses
Financial expenses
Provision for Contingencies
Depreciation
Deferred Revenue Expenditure charged off
other
Less: Vehicles for own use
(Accretion)/ Decretion to Work-in-progress and
Finished Goods
Total
- 92 -
Fiscal year ended March 31,
2002
2001
84,399
2000
60,892
85,153
88,414
2,775
63,667
2,543
66,210
5,656
90,809
3,294
94,103
37,299
53,882
54,734
52,225
2,038
280
13,044
1,536
2,409
4,568
458
20,132
2,289
3,420
4,084
622
22,118
2,003
3,222
3,936
651
23,256
1,873
3,272
4,071
449
82
2,413
287
4,821
764
318
3,429
324
4,021
746
141
3,223
197
4,252
668
549
2,631
163
42
63,866
702
69
94,336
(1,419)
118
94,993
203
88
93,388
(513)
64,568
92,917
95,196
92,875
4,888
4,737
89,287 93,151
3,246
3,574
92,533 96,725
Net profit before extraordinary items & prior
period adjustments.
Add: Net prior period adjustments
Profit/(Loss) before tax
Less: Taxation – Current
Less: Taxation – Deferred
Net Profit/(Loss) after tax as per audited
statement of accounts (A)
Adjustment on account of changes in accounting
policies [Refer IV(ii)(1)]
Impact of material adjustments and prior period
items [Refer IV(ii)(1)]
Total Adjustments (B)
Adjusted Profit/ (Loss) (A+B)
1,642
1,186
(2,663)
3,850
(15)
1,627
148
550
929
(3)
1,183
138
1,045
(29)
(2,692)
2
(2,694)
1
3,851
550
3,301
-
(362)
1,029
(753)
(324)
202
92
(111)
(324)
605
(160)
885
1,121
(1,573)
(864)
2,437
SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED
December 31,
2002
March 31,
2002
March 31,
2001
March 31,
2000
A. Fixed assets:
Gross Block
45,224
43,847
38,667
34,999
21,925
23,299
19,546
24,301
16,196
13,242
21,757
90
724
23,389
25,025
Less: Accumulated Depreciation
Net Block
Add: Capital Work in Progress
Total
22,471
3,684
2,342
24,099
26,155
B. Investments:
10,632
968
3,974
955
C. Current
Assets,
Advance:
Inventories
Loans
&
Sundry Debtors
5,344
6,811
8,655
9,902
5,960
8,393
6,755
4,663
Cash & Bank balances
229
719
876
317
Other Current Assets
605
479
716
1,039
3,544
4,604
5,508
4,225
15,682
21,006
Loans & Advances
Total
20,146
22,510
D. Liabilities & Provisions:
Current Liabilities & Provisions
Deferred Tax (Asset)/Liability
13,515
14,199
12,504
14,095
1,615
1,065
703
1,732
Secured Loans
3,115
3,951
5,615
864
Unsecured Loans
1,440
2,609
5,506
4,597
19,685
21,824
Total
21,288
24,328
E. Net Worth (A+B+C-D)
30,018
25,175
26,931
25,292
Net Worth Represented By
F. Share Capital
1,445
- 93 -
1,323
1,323
1,323
G. Reserves and Surplus
Capital Reserve
15
15
15
15
Share Premium
4,241
373
373
373
-
-
-
-
Investment Allowance Reserve
Debenture Redemption Reserve
General Reserve
Profit & Loss Account
Total
H. Miscellaneous Expenditure
the extent not written off
I. Net Worth (F+G-H)
to
176
176
-
-
1,422
1,422
1,679
650
23,663
23,058
22,489
25,093
29,517
944
25,044
1,192
24,556
26,131
523
30,018
25,175
- 94 -
587
25,292
26,931
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations
together with our audited unconsolidated financial statements for each of the fiscal years ended
March 31, 1998, 1999, 2000, 2001 and 2002, and the nine months ended December 31, 2002,
including the notes thereto and the reports thereon, which appear elsewhere in this Draft Red
Herring Prospectus. These financial statements are prepared in accordance with Indian GAAP,
which differs in certain significant respects from US GAAP. For more information on these
differences, see “Summary of Significant Differences Between Indian GAAP and US GAAP” on
page233 of this Draft Red Herring Prospectus.
The following discussion is based on our audited unconsolidated financial statements for fiscal
2000, 2001 and 2002, and the nine months ended December 31, 2002, which have been
prepared in accordance with Indian GAAP, and on information available from other sources. Our
fiscal year ends on March 31 of each year, so all references to a particular fiscal year are to the
twelve-month period ended March 31 of that year.
Unless otherwise indicated, all financial and statistical data relating to the automobile industry in
the following discussion are derived from the CRIS INFAC Annual Review of 2001 or 2002. These
data have been reclassified in certain respects for purposes of presentation. The sales volumes
for Maruti included in the following discussion refer to sales by Maruti to dealers, while
computations of Maruti’s market share are based on sales to the customer set forth in the CRIS
INFAC Annual Review of 2001 or 2002. For more information, see “Certain Conventions; Use of
Market Data” on page11 of this Draft Red Herring Prospectus.
OVERVIEW
We are the largest passenger car manufacturer in India. We sold 339,964 cars in India in fiscal
2002 with an overall market share of 58.6% in fiscal 2002. Our product range includes ten basic
models with more than 50 variants. We are the leading manufacturer of cars in the A and B
segments, which together constituted over 86% of sales in the Indian passenger car market in
fiscal 2002. In fiscal 2002, we had a combined market share in the A and B segments of 64.9%.
We also export certain models to various countries, which contributed 3.9%, 3.1%, 2.6% and
6.9%, respectively, of our total sales in fiscal 2000, 2001 and 2002 and the nine months ended
December 31, 2002.
Background
In fiscal 1984, we commenced operations and entered the Indian passenger car market with our
Maruti 800 model, a fuel-efficient car with modern styling and features relative to the other
passenger car models being sold in the Indian passenger car market at the time. In the following
decade, we periodically introduced new models to address different market segments and had
five passenger car models and one utility vehicle by November 1994. Competition during this
period was largely restricted to long-standing passenger car manufacturers in India such as
Premier Automobiles and Hindustan Motors. In a market that was primarily driven by supply, our
sales volumes grew at a CAGR of approximately 20% from fiscal 1985 to fiscal 1993. This was
significantly higher than the 7% CAGR of the Indian passenger vehicle industry in the same
period, according to Association of Indian Automobile Manufacturers. From fiscal 1986, we have
been the largest manufacturer in the Indian passenger car industry. By fiscal 1991, our installed
capacity was 130,000 vehicles per year.
The competitive environment changed in 1993 when the GoI delicensed the passenger car
industry and permitted foreign entities to set up automobile manufacturing facilities in India
through joint ventures with Indian entities. This led to the entry of several global and domestic
automobile manufacturers into the industry. Driven partly by the success of our Zen model
launched in fiscal 1994, we continued to maintain our leadership position in the domestic
market, and had a market share of approximately 74% in fiscal 1995.
- 95 -
Between fiscal 1993 and fiscal 1997, demand for passenger cars increased at a CAGR of
approximately 24%. The increase was primarily due to the availability of new models, high
demand from the corporate sector and increased availability of affordable consumer financing.
Given our leadership position in the market, we were well positioned to benefit from the
expansion of the passenger car market by introducing new models and pro-actively increasing
our manufacturing capacity to meet the growing demand. Our installed capacity increased with
our second plant becoming operational in fiscal 1995 to 200,000 vehicles per year, and further
increased to 250,000 in fiscal 1996 with capacity increases in each plant. However, during the
period from 1995 to 1998, primarily due to a dispute between our shareholders, we were not
able to introduce new models, expand our installed capacity, or prepare for the advent of new
emission norms.
During the period from November 1994 to December 1999, when we did not launch a new
model, competitors launched and gained market share for their own models in the rapidly
growing B segment. Immediately following the settlement of the dispute between our
shareholders in June 1998, we initiated our capital-intensive strategy of new model introduction
as well as capacity expansion to address the growing market in a highly competitive
environment. As a long-term strategy, we rapidly expanded our product portfolio, launching the
WagonR and Baleno in December 1999, the Alto in September 2000 and the Versa in October
2001. Thus, in the short span of 22 months from December 1999, we launched four new models,
in addition to certain variants. We expanded our installed capacity to 350,000 with our third
plant becoming operational in March 1999. The expansion of capacity and launch of these
models and variants required substantial capital investment over a relatively short period,
resulting in relatively higher depreciation. In addition, the cost of components for the new
models was relatively high due to low levels of localization early in the life of the models.
Further, we incurred substantial additional cost in developing engines for many of our models in
order to comply with the Bharat Stage I emission norms which first became applicable from June
1999 and Bharat Stage II emission norms which first became applicable in April 2000. In the
shorter term, these factors adversely affected our profitability and contributed to our loss before
tax in fiscal 2001.
Towards the end of fiscal 2001 and thereafter, the positive effects of our long-term business
strategy were visible through our improving financial performance. We believe that the major
factors that contributed towards our return to profitability in fiscal 2002 were an increase in the
localization levels in our new models, improvement in manufacturing and vendor productivity,
our cost reduction measures, and implementation of the new performance-based incentive
scheme for our employees in January 2001.
We believe that our market share of 83.1% in fiscal 1998 declined to 57.6% in fiscal 2001
primarily due to the gain of market share by three models launched by competitors in the rapidly
growing B segment prior to our launch of new models in December 1999 and thereafter.
However, with the introduction of our new models in the B segment, the Alto and Wagon R, our
market share increased to 58.6% in fiscal 2002. Since fiscal 2001, while our overall market
share has continued to fluctuate, our market share in segment B has grown from 31.3% in fiscal
2000 to 40.3% in fiscal 2002.
EVALUATION OF FACTORS AFFECTING OUR OPERATIONS
Several factors have affected our results of operations in the past and may continue to do so in
the future, including:
Competition
As the number of international and domestic automobile manufacturers in the Indian passenger
car market has increased in recent years with several new entrants, competition has been
intense in the Indian passenger car market. While our product range includes products in each
of segments A, B and C, we focus primarily on the A and B segments of the passenger car
market in India, which together constituted more than 86% of sales volumes in the Indian
- 96 -
passenger car market in fiscal 2002. The sales of the Maruti 800 and Omni, our A segment
models, contribute a substantial portion of our revenue. In fiscal 2000, 2001 and 2002, sales of
the Maruti 800 comprised 49.1%, 45.3% and 42.5%, respectively, of our domestic sales
volumes. We are currently the only manufacturer that sells passenger cars in the A segment. In
segment B, we compete primarily with Hyundai, Telco and Fiat.
Sales of the Zen, Alto and
WagonR, our models in the B segment, comprised 38.1% of our domestic sales volumes in the
nine months ended December 31, 2002. Our market share in segment B was 31.3%, 36.9% and
40.3% in fiscal 2000, 2001 and 2002, respectively. Our sales volumes in the combined A and B
segments comprised 95.4% of our domestic sales volumes in fiscal 2002.
The segments for cars priced above Rs.500,000, which together constituted approximately 14%
of the Indian passenger car market in fiscal 2002, are significantly more fragmented than the
small car segment, with several players competing for what has been a relatively small share of
the passenger car market in terms of sales volumes. Sales of the Esteem, Versa and Baleno, our
models in the C segment, comprised 4.2% of our domestic sales volumes in the nine months
ended December 31, 2002. Other players in segment C include Hyundai, Ford, Honda, General
Motors, Hindustan Motors and Fiat. Our market share in segment C was 29.3%, 18.9% and
19.6% in fiscal 2000, 2001 and 2002, respectively.
In the future, we may also face competition from other domestic and international manufacturers
that enter into the A and B segments, including international manufacturers that have been
successful in foreign markets for cars of a similar size but are yet to enter these segments in
India. Substantial investments are required in order to set up manufacturing facilities with the
scale required to compete effectively in the Indian passenger car market, especially in the small
car segment. We believe that this has contributed to the concentration of relatively few players
in the small car segment in comparison with greater fragmentation in the C and D segments.
Our manufacturing facility has an installed capacity of 350,000 vehicles per year. We have, in
each of the five fiscal years ended March 31, 2002, produced in excess of our installed capacity.
We believe that, with minimal capital expenditure, we would be able to produce more than
500,000 vehicles per year. While we had a capacity utilization of approximately 102% in fiscal
2002, the average capacity utilization among the major players in the Indian passenger car
industry was approximately 58%. We believe that our ability to expand our production volumes
without significant additional capital expenditure and our relatively high levels of capacity
utilization generate significant economies of scale and are a significant competitive strength in
the small car segment.
In addition, our access to Suzuki technology, the range of models and variants in our product
portfolio, our brand image and our extensive sales and service network are competitive strengths
in the A and B segments of the Indian passenger car market.
While our market share may fluctuate from year to year, we expect to maintain our leadership
position in the small car segment in India. In order to compete effectively, we have incurred,
and expect to continue to periodically incur, expenditure either in the development of new
models or their variants, or in the upgradation of existing models and their variants. In addition,
the cost of producing new models is initially high compared to existing models and generally
declines over the life of the model. We expect that these factors will continue to affect our results
of operations in the foreseeable future.
Although we produce some cars that run on diesel, liquefied petroleum gas and compressed
natural gas, most of the cars we produce run on petrol. Some of our competitors sell cars that
run on diesel, which is currently less expensive than petrol in India, although the price
differential between petrol and diesel in India has declined over time. The success of diesel-run
cars in the Indian market will depend on a number of factors, including the suitability of diesel
engines for cars in the small car segment, the costs incurred by manufacturers in developing the
capability to produce cars that run on diesel, the differential between diesel prices in relation to
the price of petrol in India, and the ability of diesel engine technology in India to comply with
emission norms. We will continue to evaluate our strategy in respect of diesel-run cars.
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In addition, we face competition in our export markets. We do not expect that our export sales
will grow significantly as a percentage of our total sales in the near future.
New model introductions
In the highly competitive environment of the Indian passenger car industry, it is important to
periodically introduce new models that address customer demand in terms of their price,
features and performance. Following the settlement in June 1998 of the dispute between our
shareholders, we launched the WagonR (segment B) and Baleno (segment C) in December 1999,
the Alto (segment B) in September 2000 and the Versa (segment C) in October 2001. Thus, in
the short span of 22 months from December 1999, we launched four new models, in addition to
certain variants. We expanded our installed capacity to 350,000 with our third plant becoming
operational in March 1999. The expansion of our capacity and the launch of these models
required substantial capital investment over a relatively short period, resulting in relatively high
depreciation. In addition, the cost of components was relatively high due to low levels of
localisation early in the life of the models. Further, the delay in the launch of our segment B
models allowed competitors to launch and gain market share for their own models prior to the
launch of our models. These factors adversely affected our profitability and contributed to our
loss before tax in fiscal 2001.
The launch of a new model tends to affect our results of operations in the following ways:
• Depreciation. Preparation for the launch of a new model usually requires substantial
capital investment, which results in depreciation charges over the life of the model.
Capitalization of plant and machinery acquired in connection with new model launches
and capacity expansion led to relatively high depreciation of Rs. 2,631 million, Rs. 3,223
million and Rs. 3,429 million in fiscal 2000, 2001 and 2002, respectively. Depreciation as
a percentage of net sales was 3.8%, 4.8%, 4.8% and 4.8% in fiscal 2000, 2001 and
2002, and the nine months ended December 31, 2002. We expect depreciation as a
percentage of net sales to decline in fiscal 2003 and fiscal 2004.
• Cost of Components. Our new models typically use a higher proportion of imported
components, and therefore have lower levels of localisation, than our existing models. We
generally increase the level of localisation over time by working with vendors to increase
the proportion of locally sourced components. Generally, the cost of locally sourced
components is less than the cost of imported components. The high cost of components
in the initial period of production of the WagonR, Alto and Baleno was one of the factors
in the increase in consumption as a percentage of net sales from 74.7% in fiscal 1999 to
80.2% in fiscal 2000 and 88.6% in fiscal 2001. Subsequently, consumption as a
percentage of net sales declined to 80.7% and 79.9% for fiscal 2002 and the nine months
ended December 31, 2002, respectively. Primarily through collaborative efforts with
vendors in India, we expect to increase the initial levels of localisation in our new models.
• Economies of Scale. Our new models typically take time to generate the sales volumes
necessary to achieve significant economies of scale. As a result, early in the life of the
model, the increases in sales may not be sufficient to offset the effect of relatively high
levels of depreciation and cost of components on our results of operations.
• Market acceptance. The ability of our new models to achieve anticipated sales volumes in
order for us to recover our initial investment and achieve economies of scale will depend
on their market acceptance and other market conditions.
• Changing Product Mix. Our product mix changed in fiscal 2002 primarily due to a 12%
increase in the domestic sales of the Zen, WagonR and Alto. The average selling price,
inclusive of excise duty and freight, for our vehicles during fiscal 2000, 2001 and 2002,
and the nine months ended December 31, 2002, was Rs. 218,490, Rs. 241,188, Rs.
240,852 and Rs. 242,379, respectively. The increase in the average selling price between
fiscal 2000 and fiscal 2001 was primarily due to a change in our product mix due to the
launch of the WagonR and Baleno models in December 1999, in the B and C segments,
respectively.
Cost reduction measures
Steel and automobile components comprised 94% of our consumption of raw materials and
components in fiscal 2002. We enter into contracts with suppliers of these inputs in order to fix
- 98 -
our input costs over a defined period. Fluctuations in input costs for steel and automobile
components affect our cost of raw materials and components and therefore our results of
operations.
An essential component of our strategy to remain profitable in a competitive environment is to
reduce our costs and increase our operational efficiency. We have been able to reduce our costs
significantly since fiscal 2001 by:
• reducing the costs of our components primarily through increasing our levels of
localisation;
• increasing productivity in our manufacturing facility and at vendors’ facilities, and
enhanced focus on quality in relation to our products and those of our vendors to reduce
warranty costs;
• measures to reduce costs of producing a component without changing its functional
utility, which we refer to as value analysis and value engineering; and
• better inventory management.
The resulting cost reduction was a primary factor in our ability to generate a profit before tax of
Rs.1,183 million in fiscal 2002 after incurring a loss before tax of Rs.2,692 million in fiscal 2001.
In addition, we have recently entered into a joint venture with Suzuki to establish an aluminium
foundry. The foundry will manufacture components such as cylinder heads, cylinder blocks for
aluminum engines and transmission cases. We believe that this venture will help us to increase
our localisation levels and reduce costs.
We intend to continue these cost reduction measures in the foreseeable future.
We expect that our ability to reduce costs in the next two fiscal years will be enhanced by the
following commitments by Suzuki:
•
•
For fiscal 2004 and fiscal 2005, Suzuki will provide a 10% discount on knocked down
components imported by us, except for components imported for the Alto built for export.
Thereafter, the discounts will be determined subject to market conditions in India. With
respect to the Alto which is built for exports, discounts are already applicable from
February 2003 until January 2004. The value of our purchases of components from
Suzuki in fiscal 2002 and the nine months ended December 31, 2002 is Rs. 7,804 million
and Rs. 5,851 million, respectively.
Suzuki will no longer charge royalty for the Maruti 800, Omni, Gypsy, Esteem and Zen
models. This arrangement is subject to revision in the event of the introduction of new
technology or upgradation in specifications due to changes in market conditions or
requirements of new laws or norms. The total royalty expenses on these models paid to
Suzuki in fiscal 2002 were Rs. 779.5 million.
Due to a decision of the Supreme Court of India applicable to the industrial usage of natural gas,
we are no longer able to use natural gas as fuel for generating power in our captive power plant.
Instead, we are currently using naphtha as fuel. Naphtha is more expensive than natural gas.
We expect that our power and fuel expenses will be higher in fiscal 2003 as compared to fiscal
2002. We continue to look for less expensive sources of fuel.
Environmental and fiscal regulation
Environmental regulation. To comply with current and future environmental regulation, we may
have to incur substantial capital expenditure and research and development costs to upgrade our
products and our manufacturing facility, which may increase our cost of production. For
example, in fiscal 2001 we incurred substantial additional costs to upgrade our vehicles to
comply with Bharat Stage II emission norms. The more stringent Bharat Stage III emission
norms may become applicable in the future, and will entail additional costs for automobile
manufacturers in the industry, including us, and may also result in an increase in the price to the
customer of our products.
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Fiscal regulation. Changes in excise duties, sales tax and customs duties, and other fiscal levies
affect the costs of manufacturers including ourselves, are reflected in the price to the customer,
and therefore can stimulate or adversely affect demand for cars in the country. For example, in
May 2000, in response to the introduction of the uniform sales tax in that month, we reduced the
prices of several models in order to keep the price to the customer unchanged, which resulted in
a decline in the rupee value of our total sales and profitability for fiscal 2001. The rate of excise
duty on passenger cars has declined in recent years, beginning with a reduction from 40% to
32% in March 2001. The GoI’s union budget of March 2003 further reduced the rate of excise
duty to 24% and levied a National Calamity Contingency duty at the rate of 1%. Excise duty is
recovered at actual cost and included in the selling price of our cars. Reduction in the rate of
excise duty therefore reduces the price to the customer and thereby tends to stimulate demand
for passenger cars, especially in the price-sensitive A and B segments. We also benefit from a
duty drawback on exports, which enables us to recover import duties levied on imports used to
manufacture products for export. We expect that changes in taxes or levies, the imposition of
new taxes or levies in the future, or the loss of tax or other benefits we currently enjoy, will
continue to be factors affecting our business, results of operations and financial condition.
Foreign exchange rate fluctuations
We import a substantial proportion of our components, especially for newer models, from Suzuki
in Japan. Since the cost of these components is denominated in Yen, fluctuations with respect to
the exchange rate of Yen for Indian Rupees can increase or reduce our input costs. In addition,
we are subject to exchange rate fluctuations in relation to the export of our products. We enter
into foreign exchange forward and derivative contracts to hedge these risks, but these contracts
may not protect us fully from losses due to fluctuations in foreign exchange rates.
Macroeconomic environment
Income levels of consumers are key determinants of demand in the passenger car market. In
addition, interest rates tend to have an impact on our sales as availability and cost of car finance
is one of the key drivers of demand in India. Demand for passenger cars can also be affected by
factors such as a change in fuel prices, the performance of the Indian economy and competition
from alternative modes of transport. Such changes are likely to continue to have an impact on
the business of passenger car manufacturers in India, including us.
Consolidated reporting
Our audited consolidated financial statements consolidating (1) the results of operations and
financial condition of our subsidiaries for the fiscal year ended March 31, 2002 and the nine
months ended December 31, 2002, and (2) the results of operations and financial condition of
our subsidiaries, our joint ventures and our associates for the nine months ended December 31,
2002, are included elsewhere in this prospectus under “Consolidated Financial Statements as per
AS 21” and “Consolidated Financial Statements as per AS 21, AS 23 and AS 27”, respectively.
Following this offering, we expect to report on a periodic basis our consolidated results of
operations for fiscal 2003 onwards, consolidating the results of our subsidiaries, our joint
ventures and our associates, in addition to our unconsolidated results of operations.
Revenue
Our revenue has two components: total sales and other revenue. Our total sales comprise sales
of products manufactured by us and sales of products manufactured for our vehicles by vendors
and sold by us. The following table sets forth the contribution of the different components of
total sales and of other revenue towards total revenue during each of fiscal 2000, 2001 and
2002, and the nine months ended December 31, 2002:
- 100 -
REVENUE
Nine
months
ended
December
31,
2002
Fiscal 2002
(Rs. in millions)
Sales:
Of Products manufactured by the Company
Vehicles
Domestic
55,897
81,881
Exports
4,384
2,379
Spares, dies and 611
893
moulds
Sub-total (I)
60,892
85,153
Of Products traded by the Company
Spares
and 2,765
4,227
Accessories
Dies and Moulds
10
1,429
Sub-total (II)
2,775
5,656
Total Sales
63,667
90,809
(I + II)
Other Revenue
2,543
3,294
Revenue
66,210
94,103
Fiscal 2001
Fiscal 2000
80,830
2,766
803
84,086
3,620
708
84,399
88,414
3,635
3,028
1,253
4,888
89,287
1,709
4,737
93,151
3,246
92,533
3,574
96,725
Sales of products manufactured by us
The sales of products manufactured by us comprise:
• domestic sales of vehicles;
• exports of vehicles; and
• sales of spares, dies and moulds.
We recognize domestic sales upon dispatch of goods from the factory. We recognize sales from
exports upon dispatch of goods from the port of embarkation. Sales of products manufactured by
us includes excise duty and freight, which are also included in our expenditure.
Domestic sales of vehicles. Domestic sales of vehicles contributed 90.3%, 90.5%, 90.2% and
87.8% to total sales in fiscal 2000, 2001 and 2002, and the nine months ended December 31,
2002, respectively. We sold 384,850, 335,133, 339,964 and 230,618 vehicles in the domestic
market during fiscal 2000, 2001 and 2002 and the nine months ended December 31, 2002,
respectively.
We revise our selling prices periodically depending on market conditions, modifications in product
features and changes in government regulation. Our major revisions in selling prices during the
three years and nine months ended December 31, 2002 occurred in May 2000 for several models
in response to an increase in sales tax resulting from the introduction of the uniform sales tax in
that month, and in July 2002, for the Maruti 800 model.
Exports of vehicles. We export our Alto and Maruti 800 models to various countries including the
Netherlands, Italy, Germany, United Kingdom, France, Bangladesh, Nepal, Sri Lanka, Chile and
Egypt. Our cars are exported mainly under the Suzuki brand. Export sales of vehicles
contributed 3.9%, 3.1%, 2.6% and 6.9%, respectively, to our total sales in fiscal 2000, 2001
and 2002, and the nine months ended December 31, 2002. We exported 21,450, 15,300, 12,233
and 21,172 vehicles, respectively, during fiscal 2000, 2001 and 2002, and the nine months
ended December 31, 2002.
Sales of manufactured spares, dies and moulds. We manufacture spares, dies and moulds for
our vehicles. The spares that are manufactured are primarily body and engine parts. Our sales
- 101 -
of manufactured spares constituted 17.2% of our total sales of spares and accessories in the
nine months ended December 31, 2002.
Sales of manufactured spares, dies and moulds constituted 0.8%, 0.9%, 1% and 1%,
respectively, of our total sales in fiscal 2000, 2001 and 2002, and the nine months ended
December 31, 2002.
Sales of products traded by us
We import or purchase locally spares and accessories and sell them to dealers and wholesale
traders in spare parts, whom we refer to as stockists. Sales of traded spares and accessories
contributed 3.3%, 4.1%, 4.7% and 4.3%, respectively, of total sales in fiscal 2000, 2001 and
2002, and the nine months ended December 31, 2002.
We purchase dies and moulds used in the manufacture of various components for the launch of
new models or modifications of existing models and sell the same to vendors at actual cost for
use in the manufacture of components for us. Sales from traded dies and moulds contributed
1.8%, 1.4%, 1.6% and 0.02%, respectively, of total sales in fiscal 2000, 2001 and 2002, and
the nine months ended December 31, 2002.
Other revenue
Other revenue consists primarily of the sale of scrap, interest on investments and receivables,
net gains from sale of investments, sale of power, sales tax incentives granted under the
Haryana Sales Tax law for a period of 14 years beginning August 2001, and revenue from our
new business initiatives. Sale of power was discontinued in April 2002 after natural gas became
unavailable as a fuel for generating power in our captive power plant.
Revenue from new business initiatives comprises revenue from services provided by us in
connection with automobile finance, leasing and fleet management and sale of pre-owned cars.
We generated Rs.44 million of net revenue in the nine months ended December 31, 2002 from
the new business initiatives.
Other revenue contributed approximately 3.7%, 3.5%, 3.5% and 3.8% of the total revenue in
fiscal 2000, 2001 and 2002 and the nine months ended December 31, 2002 respectively.
Expenditure
Consumption
Consumption includes:
• consumption of raw materials and components, which includes consumption of imported
and indigenous components, steel and other consumables such as paints;
• cost of spares/dies and moulds sold;
• consumption of stores;
• (accretion)/decretion to work-in-progress and finished goods, which includes the value of
goods that are works-in-progress and finished goods that were not sold; and
• vehicles for own use
The consumption of raw materials and components constituted 90% of consumption in the nine
months ended December 31, 2002. We record imported components at landed cost.
Raw materials and components sourced from within India contributed 68%, 67%, 72% and 73%,
respectively, of our total consumption of raw materials and components in fiscal 2000, 2001,
2002 and the nine months ended December 31, 2002.
Excise duty
Excise duty expense includes excise duty on manufactured vehicles, manufactured spares,
manufactured dies and moulds and scrap generated. Excise duty is recovered at actual cost and
included in our selling prices.
- 102 -
Manufacturing/ administrative and other expenses
Our manufacturing/administrative and other expenses consist primarily of running royalty paid
under our licence agreements with Suzuki and power and fuel expenses for the production of
power by our captive power plant. We pay a lump sum and running royalty to Suzuki in
accordance with the terms of licence agreements for the transfer of various technologies. We pay
a fixed amount as lump sum royalty in connection with the launch of each model. Running
royalty is calculated every six months as a fixed percentage of the free on board, or FOB value of
the components not imported from Suzuki, for any given model. In fiscal 2002, the running
royalty was Rs.1,160 million, of which Rs.779.5 million was paid in respect of the Maruti 800,
Omni, Zen, Gypsy and Esteem models.
Power and fuel expenses constituted 11.4%, 16%, 14.5% and 22.9%, respectively, of our
manufacturing/administrative and other expenses in fiscal 2000, 2001, 2002 and the nine
months ended December 31, 2002.
Selling and distribution expenses
Selling and distribution expenses consist primarily of advertisement, publicity and sales
promotion expenses and commissions and incentives to dealers. Freight expenses, which are
also a major constituent of selling and distribution expenses, are, in the case of domestic sales,
recovered at actual cost and included in total sales.
Adjusted Profit/(Loss) after Tax
The adjusted profit/(loss) after tax consists of the net profit/(loss) after tax as per the audited
statement of accounts, adjusted on account of (1) changes in accounting policies and (2) the
impact of material adjustments and prior period items.
Our critical accounting policies
Preparation of financial statements in accordance with generally accepted accounting principles
in India, the applicable accounting standards issued by the Institute of Chartered Accountants of
India and the relevant provisions of the Companies Act, 1956, require our management to make
judgements, estimates and assumptions regarding uncertainties that affect the reported
amounts of our assets and liabilities, disclosures of contingent liabilities and the reported
amounts of revenues and expenses. These judgements, assumptions and estimates are reflected
in our accounting policies, which are more fully described in the auditor’s report appearing
elsewhere in this prospectus.
Certain of our accounting policies are particularly important to the portrayal of our financial
position and results of operations and require the application of significant assumptions and
estimates of our management. We refer to these accounting policies as our “critical accounting
policies”. Our management uses its historical experience and analyses the terms of existing
contracts, historical cost convention, industry trends, information provided by our dealers and
information available from other outside sources, as appropriate, when forming its assumptions
and estimates. However, this task is inexact because our management is making assumptions
and providing estimates on matters that are inherently uncertain.
While we believe that all aspects of our financial statements should be studied and understood in
assessing our current and expected financial condition and results, we believe that the following
critical accounting policies warrant additional attention:
Fixed assets
We carry fixed assets (except freehold land) at cost of acquisition or construction or at
manufacturing cost (in case of own manufactured assets) in the year of capitalization less
accumulated depreciation.
In respect of the various project related activities, which are carried on concurrently with
production, expenses on administration and supervision incurred, the bifurcation of which
between production and construction activities is not ascertainable, are charged to revenue.
- 103 -
Depreciation
Fixed assets except for leasehold land are depreciated on straight-line method on a pro-rata
basis from the month in which the asset is put to use. For assets capitalized before April 2, 1987,
depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of the
Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the GoI.
For assets capitalized on or after April 2, 1987, depreciation has been provided at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except for certain fixed assets where
based on our management's estimate of the useful life of the assets, higher depreciation has
been provided at the following rates:
Plant and Machinery:
Single Shift
7.31%
Double Shift 11.88%
Triple Shift
15.83%
Dies and Jigs:
19.00%
We amortize leasehold land over the period of lease. We depreciate at the rate of 100%, plant
and machinery, the written down value of which at the beginning of the year is Rs.5,000 or less
and other assets the written down value of which at the beginning of the year is Rs.1,000 or
less.
We provide the depreciation on revised unamortised depreciable amount prospectively, over the
residual useful life of the asset, in case of assets where the historical cost has undergone a
change due to increase or decrease in long-term liability on account of foreign exchange
fluctuation, change in duties etc.
Estimates of useful life are subject to changes in economic environment and different
assumptions and conditions. Factors such as changes in planned uses of buildings, machinery or
equipment could result in shortened useful lives or impairment.
Inventories
We value inventories at lower of cost, determined on weighted average basis, and net realizable
value. We estimate the net realizable value based upon the prevailing market prices subsequent
to the end of the fiscal year. We write off tools over a period of three years except for tools
valuing Rs.5,000 or less individually which are charged off to revenue in the year of purchase.
We charge off machinery spares, other than those supplied along with main plant and
machinery, which are capitalized and depreciated accordingly, to revenue on consumption except
those valuing Rs.5,000 or less individually, which are charged off to revenue in the year of
purchase and those whose value are not individually ascertainable are written off over a period
of three years.
Investments
We value our current investments at lower of cost and fair value. We value our long-term
investments at cost except in case of permanent diminution in their value, wherein necessary
provision is made.
Deferred Revenue Expenditure
We write off deferred revenue expenditure over the period of its benefit. Estimates of period of
its benefits are subject to changes in economic environment and different assumptions and
conditions.
Deferred Tax
The tax expense for the year or period, as applicable, comprising current tax and deferred tax, is
included in determining the net profit/(loss) for such year or period.
- 104 -
However, in fiscal 2003, the year during which liability provision must be created, the
accumulated deferred tax liability at the beginning of the year has been recognized with a
corresponding charge to the general reserve in accordance with Accounting Standard 22 issued
by the Institute of Chartered Accountants of India.
We recognize deferred tax assets for all deductible timing differences and carry forward to the
extent it is probable that future taxable profit will be available against which such deferred tax
assets can be realized. We review our deferred tax assets at each balance sheet date and writedown/write-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to
be realized. We may reduce from time to time the amount of our deferred tax assets considered
realizable if our estimates of future taxable income are reduced or there is a change in the
governing taxation laws.
Deferred tax assets and liabilities are measured at the tax rates that have been enacted or
substantively enacted at the balance sheet date.
Contingent liabilities
Contingent liabilities are accounted as per Accounting Standard 4 on “Contingencies and Event
Occurring After Balance Sheet Date” issued by the Institute of Chartered Accountants of India.
Contingent loss arising from tax disputes and other claims are provided for when it is probable
that:
• a liability has been incurred as at the balance sheet date; and
• an amount can be reasonably estimated.
This requires significant management judgements which may be based on opinions of legal
experts, wherever necessary.
Disclosure by way of “notes to the accounts” is made when either of the above conditions is not
met and possibility of loss is not remote.
OUR RESULTS OF OPERATIONS
The table below sets forth various line items from our audited unconsolidated financial
statements for fiscal 2000, 2001 and 2002, and the nine months ended December 31, 2002, as a
percentage of net sales, which is defined as total sales excluding excise duty.
Rs. In millions
COST TO NET SALES RATIO
Nine months
ended
December 31,
2002
Sales
Fiscal
2002
Fiscal
2001
Fiscal
2000
63,667
90,809
89,287
93,151
13,279
19,617
22,070
23,033
Net Sales
50,388
71,192
67,217
70,118
Consumption to Net Sales :
79.9%
80.7%
88.6%
80.2%
Raw Materials and Components
37,299
53,882
54,734
52,225
Consumption of Spares/Dies and
Moulds
Sold
2,038
4,568
4,084
3,936
Less
:
Excise
Duty
on
Sales
- 105 -
COST TO NET SALES RATIO
Nine months
ended
December 31,
2002
Consumption
of
Fiscal
2002
Fiscal
2001
Fiscal
2000
Stores
280
458
622
651
(Accretion)/decretion to Work-inProgress and Finished Goods
702
(1,419)
203
(513)
Vehicle
(42)
(69)
(118)
(88)
40,277
57,420
59,525
56,211
and
3.1%
3.2%
3%
2.7%
and
1,536
2,289
2,003
1,873
Manufacturing/Administrative
and Other Expenses to Net
Sales:
Manufacturing/Administrative and
other
Expenses
4.8%
4.8%
4.8%
4.7%
2,409
3,420
3,222
3,272
Selling
and
Distribution
Expenses to Net Sales:
Selling and Distribution Expenses
8.1%
6.8%
6%
6.1%
4,071
4,821
4,021
4,252
Depreciation to Net Sales
Depreciation
4.8%
2,413
4.8%
3,429
4.8%
3,223
3.8%
2,631
net
3.2%
1.7%
-4%
5.5%
tax
1,627
1,183
(2,692)
3,851
Profit/(loss) after Tax to Net
Sales
Profit/(loss)
after
tax
1.8%
1.5%
-4%
4.7%
929
1,045
(2,694)
3,301
for
own
use
Consumption
Employee Remuneration
Benefits to Net Sales :
Employee
Remuneration
benefits
Profit/(loss)
sales
Profit/(loss)
before
tax
before
to
The nine months ended December 31, 2002
Revenue
Our revenue in the nine months ended December 31, 2002 was Rs.66,210 million.
Total sales
Our total sales in the nine months ended December 31, 2002 were Rs.63,667 million.
- 106 -
Sales of products manufactured by us
The sales of products manufactured in the nine months ended December 31, 2002 were
Rs.60,892 million. Our domestic sales volumes during this period were 230,618 vehicles.
Sales from exports of vehicles in the nine months ended December 31, 2002 were Rs.4,384
million. We exported 21,172 vehicles during this period. Export vehicle sales as a percentage of
total sales increased to 6.9% in the nine months ended December 31, 2002 from 2.6% in fiscal
2002. The increase was primarily due to sales of the Alto model, which we began to export in
January 2002.
Other revenue
Other revenue in the nine months ended December 31, 2002 was Rs.2,543 million. Other
revenue as a percentage of revenue increased to 3.8% in the nine months ended December 31,
2002 from 3.5% in fiscal 2002.
Duty drawback on exports in the nine months ended December 31, 2002 was Rs.210 million.
Interest income from securities and others such as receivables and advances in the nine months
ended December 31, 2002 was Rs.752 million. Sale of scrap in the nine months ended
December 31, 2002 was Rs.601 million.
There was no sale of power in the nine months ended December 31, 2002 as sale of power was
discontinued in April 2002 after natural gas became unavailable as a fuel for generating power in
our captive power plant.
Profit/(Loss) Before Tax
Profit before tax in the nine months ended December 31, 2002 was Rs.1,627 million. Profit
before tax as a percentage of net sales increased to 3.2% in the nine months ended December
31, 2002 from 1.7% in fiscal 2002. This increase was primarily due to:
• a decline in the cost of components supplied by local vendors; and
• higher levels of localisation of the Alto and WagonR.
The increase was partially offset by an increase in selling and distribution expenses as a
percentage of net sales to 8.1% in the nine months ended December 31, 2002 from 6.8% in
fiscal 2002.
Consumption
Consumption in the nine months ended December 31, 2002 was Rs.40,277 million.
Consumption as a percentage of net sales decreased to 79.9% in the nine months ended
December 31, 2002 from 80.7% in fiscal 2002.
Selling and Distribution Expenses
Selling and distribution expenses in the nine months ended December 31, 2002 were Rs.4,071
million. Selling and distribution expenses as a percentage of net sales increased to 8.1% in the
nine months ended December 31, 2002 from 6.8% in fiscal 2002, primarily due to compensation
paid to dealers in the form of additional discounts following reduction in selling prices of our
products in the nine months ended December 31, 2002.
Depreciation
Depreciation in the nine months ended December 31, 2002 was Rs.2,413 million. Depreciation as
a percentage of net sales was 4.8% in the nine months ended December 31, 2002 and fiscal
2002.
Profit/(Loss) after tax
Profit after tax in the nine months ended December 31, 2002 was Rs.929 million. This reflects a
deferred tax provision of Rs. 550 million based on the application of Accounting Standard 22 on
deferred taxes, which became mandatory with effect from April 1, 2002, resulting in significant
increase in the amount of deferred tax provision.
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Adjusted Profit/(Loss) after tax
Adjusted profit after tax in the nine months ended December 31, 2002 was Rs.605 million.
Fiscal 2002 Compared to Fiscal 2001
Revenue
Our revenue increased by 1.7% to Rs.94,103 million in fiscal 2002 from Rs.92,533 million in
fiscal 2001. This increase was primarily due to a 1.7% increase in our total sales.
Sales of products manufactured by us
The sales of products manufactured by us increased by 0.9% to Rs.85,153 million in fiscal 2002
from Rs.84,399 million in fiscal 2001. Domestic sales of vehicles increased by 1.3% to Rs.
81,881 million in fiscal 2002 from Rs. 80,830 million in fiscal 2001. This increase was due
primarily to:
• a 1% increase in the domestic sales volumes to 339,964 vehicles in fiscal 2002 from
335,133 vehicles in fiscal 2001; and
• a change in our product mix, with a 12% increase in the domestic sales of our three
models in the B segment: the Alto, the WagonR and the Zen. The sales of these models
constituted 34.3% of domestic sales in fiscal 2002 as compared to 31% in fiscal 2001.
Sales from exports of vehicles declined by 14% to Rs.2,379 million in fiscal 2002 from Rs.2,766
million in fiscal 2001, primarily due to a 8.2% decline in export sales of our Alto and Zen models.
Sales of manufactured spares, dies and moulds increased by 11% to Rs.893 million in fiscal 2002
from Rs.803 million in fiscal 2001.
Sales of products traded by us
Sales of traded spares and accessories increased by 16.3% to Rs.4,227 million in fiscal 2002
from Rs.3,635 million in fiscal 2001.
Sales of traded dies and moulds increased by 14% to Rs.1,429 million in fiscal 2002 from
Rs.1,253 million in fiscal 2001.
Other revenue
Other revenue increased by 1.5% to Rs.3,294 million in fiscal 2002 from Rs.3,246 million in
fiscal 2001.
We have been granted a sales tax benefit under the Haryana Sales Tax Law on account of the
expansion of our plant with effect from August 2001. In fiscal 2002, we recognized a sales tax
benefit of Rs.161 million.
Duty drawback on exports decreased by 12.8% to Rs.142 million in fiscal 2002 from Rs.163
million in fiscal 2001, primarily due to a decline in sales of exported vehicles of 20.1%.
In fiscal 2001, to supplement our sources of liquidity to meet our working capital and capital
expenditure requirements, we sold certain investments in certain mutual funds and bonds
resulting in a non-recurring gain of Rs.190 million. There was no revenue of this kind in fiscal
2002.
Sale of power increased by 5.9% to Rs.357 million in fiscal 2002 from Rs.337 million in fiscal
2001.
Profit/(Loss) Before Tax
Profit before tax increased to Rs.1,183 million in fiscal 2002 from a loss before tax of Rs.2,692
million in fiscal 2001. Profit before tax as a percentage of net sales increased to 1.7% in fiscal
2002 from -4.0% in fiscal 2001, primarily due to:
• a decline in the cost of components supplied by local vendors;
• the appreciation of the Indian rupee in relation to Yen in fiscal 2002 as compared to fiscal
2001, reducing the cost of our imports from Suzuki;
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•
higher levels of localisation of components of new models such as the Alto and WagonR;
and
• an increase in the prices in the domestic market of certain models.
This increase was partially offset by a 19.9% increase in selling and distribution expenses.
Consumption
Consumption in fiscal 2002 decreased by 3.5% to Rs.57,420 million in fiscal 2002 from
Rs.59,525 million in fiscal 2001. Consumption as a percentage of net sales decreased to 80.7%
in fiscal 2002 from 88.6% in fiscal 2001. The decrease in consumption was primarily due to:
• a decline in the cost of components supplied by local vendors,
• the appreciation of the Indian rupee in relation to Yen in fiscal 2002 as compared to fiscal
2001, reducing the cost of our imports from Suzuki, and
• higher levels of localization of components of new models such as the Alto and WagonR.
Excise Duty
Excise duty expense decreased by 9.0% to Rs.20,132 million in fiscal 2002 from Rs.22,118
million in fiscal 2001. The decrease was primarily due to a reduction of excise duty rates from
40% to 32% from March 2001.
Employees Remuneration and Benefits
Employee remuneration and benefits increased by 14.3% to Rs.2,289 million in fiscal 2002 from
Rs.2,003 million in fiscal 2001. Employee remuneration and benefits as a percentage of net sales
increased to 3.2% in fiscal 2002 from 3% in fiscal 2001. The increase in employee remuneration
and benefits was primarily due to a lower base in fiscal 2001 because of lower-than-normal
production man-hours during the strike by our employees’ union from October 12, 2000 to
January 8, 2001.
Manufacturing/Administrative and other Expenses
Manufacturing/ administrative and other expenses increased by 6.1% to Rs. 3,420 million in
fiscal 2002 from Rs.3,222 million in fiscal 2001. Manufacturing/administrative and other
expenses as a percentage of net sales was 4.8% in each of fiscal 2002 and fiscal 2001. The
increase in manufacturing/administrative and other expenses was primarily due to a 10.3%
increase in expense due to running royalty paid to Suzuki which increased to Rs.1,160 million in
fiscal 2002 from Rs.1,052 million in fiscal 2001, which was in turn primarily due to higher levels
of localisation in the Alto and WagonR models and increase in domestic sales volumes, including
the sales volumes of the Alto, the Zen and the WagonR. This was partially offset by a decrease in
power and fuel expenses of 3.9% to Rs. 494 million in fiscal 2002 from Rs.514 million in fiscal
2001.
Selling and Distribution Expenses
Selling and distribution expenses increased by 19.9% to Rs. 4,821 million in fiscal 2002 from
Rs.4,021 million in fiscal 2001. Selling and distribution expenses as a percentage of net sales
increased to 6.8% in fiscal 2002 from 6.0% in fiscal 2001. The increase in our selling and
distribution expenses was primarily due to an increase of 47.9% in commissions and incentives
paid out to dealers in fiscal 2002 as compared to fiscal 2001 and an increase of 11.3% in
advertisement, publicity and sales promotion expenses in fiscal 2002 as compared to fiscal 2001.
We increased the commissions and incentives paid to dealers in fiscal 2002 primarily because the
profitability of our operations in fiscal 2002 enabled us to do so. In addition, the increase was
intended to compensate dealers for the reduction in the ex-showroom prices of vehicles in
dealers’ inventory following the reduction in the rate of excise duty to 32% in March 2001.
Advertisement, publicity and sales promotion expenses increased in order to promote the sales
of our products and recover market share following our loss before tax in fiscal 2001.
Financial Expenses
Financial expenses increased by 2.4% to Rs.764 million in fiscal 2002 from Rs.746 million in
fiscal 2001.
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Provision for Contingencies
Provision for contingencies increased to Rs. 318 million in fiscal 2002 from Rs.141 million in fiscal
2001. In fiscal 2002, we made a contingency provision of Rs.298 million, on account of
unamortized cost of assets of certain models of vehicles. In fiscal 2001, we had provided for
Rs.137 million for compensation payable on non-fulfillment of purchase obligations.
Depreciation
Depreciation increased by 6.4% to Rs.3,429 million in fiscal 2002 from Rs.3,223 million in fiscal
2001. Depreciation as a percentage of net sales was 4.8% in fiscal 2002 and fiscal 2001. The
increase in depreciation was primarily due to the capitalization of plant and machinery in fiscal
2002 of approximately Rs.5,057 million in connection with:
• the launch of the Versa model in November 2001; and
• routine annual capital expenditure on plant and machinery.
Deferred Revenue Expenditure Charged Off
Deferred revenue expenditure charged off increased by 64.5% to Rs. 324 million in fiscal 2002
from Rs.197 million in fiscal 2001. In fiscal 2002, we had offered the voluntary retirement
scheme to our employees and made a payment of Rs.736 million, which is being amortised over
the estimated future pay-back period of 36 months from the conclusion of the schemes.
Profit/(Loss) After Tax
Profit after tax was Rs.1,045 million in fiscal 2002 as compared to a loss after tax in fiscal 2001
of Rs.2,694 million, as a result of the foregoing factors.
Adjusted Profit/(Loss) After Tax
Adjusted profit after tax was Rs.885 million in fiscal 2002 as compared to an adjusted loss after
tax in fiscal 2001 of Rs.1,573 million.
Fiscal 2001 compared to Fiscal 2000
Revenue
Our revenue decreased by 4.3% to Rs.92,533 million in fiscal 2001 from Rs.96,725 million in
fiscal 2000. This decrease was primarily due to a 4.1% decrease in our total sales.
Sales of products manufactured by us
The sales of products manufactured by us decreased by 4.5% to Rs.84,399 in fiscal 2001 from
Rs.88,414 million in fiscal 2000. Our domestic sales of vehicles decreased by 3.9% to Rs.
80,830 million in fiscal 2001 from Rs. 84,086 million in fiscal 2000. This decrease was due
primarily to a decrease in domestic sales volumes of vehicles by 12.9% to 335,133 vehicles in
fiscal 2001 from 384,850 vehicles in fiscal 2000.
In fiscal 2001, demand for passenger cars in India was subdued and the industry experienced
excess capacity, and competition intensified as a result. In fiscal 2000, the passenger vehicle
industry in India grew by approximately 60% and declined by 7% in fiscal 2000, in terms of
overall sales volumes. The exceptionally high growth in fiscal 2000 was mainly due to the entry
of global and domestic players in the passenger car market and the advancement of purchases
due to expectation of a hike in sales tax from April 2000 onwards as per the then proposed
uniform sales tax policy. The lower growth rates in fiscal 2001 were mainly because of economic
slowdown, bundling of purchases in the earlier year and a larger base.
Sales from exports of vehicles decreased by 23.6% to Rs.2,766 million in fiscal 2001 to from
Rs.3,620 million in fiscal 2000, primarily due to the decrease in the number of vehicles exported
to 15,300 in fiscal 2001 from 21,450 in fiscal 2000.
Sales of manufactured spares, dies and moulds increased by 13.4% to Rs.803 million in fiscal
2001 from Rs.708 million in fiscal 2000.
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Sales of products traded by us
Sales of traded spares and accessories increased by 20% to Rs.3,635 million in fiscal 2001 from
Rs.3,028 million in fiscal 2000.
Sales of traded dies and moulds decreased by 26.7% to Rs.1,253 million in fiscal 2001 from
Rs.1,709 million in fiscal 2000.
Other revenue
Other revenue decreased by 9.2% to Rs.3,246 million in fiscal 2001 from Rs.3,574 million in
fiscal 2000.
Dividend income decreased by 91.8% to Rs.37 million in fiscal 2001 from Rs.451 million in fiscal
2000, primarily due to sale of our investments in certain mutual funds in order to increase
liquidity to meet our working capital and capital expenditure requirements for fiscal 2001.
Profit on sale of investments increased to Rs.190 million in fiscal 2001 from Rs.71 million in fiscal
2000.
Sale of scrap increased by 26.6% to Rs.804 million in fiscal 2001 from Rs.635 million in fiscal
2000.
Sale of power increased by 66.8% to Rs.337 million in fiscal 2001 from Rs.202 million in fiscal
2000.
Profit/(Loss) Before Tax
Loss before tax was Rs.2,692 million in fiscal 2001 as compared to a profit before tax of
Rs.3,851 million in fiscal 2000. Profit/(loss) before tax as a percentage of net sales was -4% in
fiscal 2001 as compared to 5.5% in fiscal 2000. This was primarily due to:
• a decrease in prices in the domestic market of certain models, primarily because the
introduction of uniform sales tax led us to lower prices of several models in June 2000;
• absorption of additional costs to meet Bharat Stage II emission norms;
• the depreciation of the Indian rupee in relation to Yen in fiscal 2001 as compared to fiscal
2000, increasing the cost of our imports from Suzuki; and
• lower levels of localisation of components in new models, namely the Baleno and WagonR
launched in December 1999 and the Alto launched in September 2000.
Consumption
Consumption increased by 5.9 % to Rs.59,525 million in fiscal 2001 from Rs.56,211 million in
fiscal 2000. Consumption as a percentage of net sales increased to 88.6% in fiscal 2001 from
80.2% in fiscal 2000. The increase in consumption was primarily due to:
• absorption of additional costs to meet Bharat Stage II emission norms;
• the depreciation of the Indian rupee in relation to Yen in fiscal 2001 as compared to fiscal
2000, increasing the cost of our imports from Suzuki; and
• lower levels of localization of components in new models, namely the Baleno and WagonR
launched in December 1999 and the Alto launched in September 2000.
Excise Duty
Excise duty expense decreased by 4.9% to Rs.22,118 million in fiscal 2001 from Rs.23,256
million in fiscal 2000. This decrease was primarily due to lower sales volumes in fiscal 2001.
Employees Remuneration and Benefits
Employee remuneration and benefits increased by 6.9% to Rs.2,003 million in fiscal 2001 from
Rs.1,873 million in fiscal 2000. Employee remuneration and benefits as a percentage of net
sales increased to 3% in fiscal 2001 from 2.7% in fiscal 2000.
Manufacturing/Administrative and other Expenses
Manufacturing/administrative and other expenses decreased by 1.5% to Rs.3,222 million in fiscal
2001 from Rs.3,272 million in fiscal 2000. The decrease in manufacturing/administrative
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expense was primarily due to a 6.7 % decrease in running royalty expense, which decreased to
Rs.1052 million in fiscal 2001 from Rs.1,127 million in fiscal 2000, and a 61.4% decrease in
lump sum royalty expense, which decreased to Rs.93 million in fiscal 2001 from Rs.241 million in
fiscal 2000. The decrease in royalty payments was primarily due to the decline in domestic sales
volumes by 12.9% to 335,133 vehicles in fiscal 2001 from 384,850 vehicles in fiscal 2000.
Selling and Distribution Expenses
Selling and distribution expenses decreased by 5.4% to Rs.4,021 million in fiscal 2001 from
Rs.4,252 million in fiscal 2000. Selling and distribution expenses as a percentage of net sales
decreased to 6% in fiscal 2001 from 6.1% in fiscal 2000. The decrease in selling and distribution
expenses was primarily due to a decrease of 17.5% in commissions and incentives paid to
dealers and a decrease of approximately 8% in transportation and distribution expenses.
Financial Expenses
Financial expenses increased by 11.6% to Rs.746 million in fiscal 2001 from Rs.668 million in
fiscal 2000. This increase was primarily because in fiscal 2001, we issued debentures in the
principal amount of Rs.3,000 million. Interest on debentures during fiscal 2001 amounted to
Rs.195 million. Interest on cash credit/ overdraft increased to Rs. 205 million in fiscal 2001 from
Rs. 42 million in fiscal 2000. Interest on advances from dealers decreased to Rs.121 million in
fiscal 2001 from Rs.349 million in fiscal 2000 due to reduction in advances.
Provision for Contingencies
Provision for contingencies decreased by 74.3% to Rs.141 million in fiscal 2001 from Rs.549
million in fiscal 2000. In fiscal 2000, contingency provision of Rs.292 million was made on
account of non-fulfillment of future years’ export obligation against import of capital goods.
Depreciation
Depreciation increased by 22.5% to Rs.3,223 million in fiscal 2001 from Rs.2,631 million in fiscal
2000. Depreciation as a percentage of net sales increased to 4.8% in fiscal 2001 from 3.8% in
fiscal 2000. The increase in depreciation was primarily due to capitalization of plant and
machinery of Rs.3,842 million in fiscal 2001 in connection with the launch of new models and
expansion of capacity.
Deferred Revenue Expenditure Charged Off
Deferred revenue expenditure charged off increased by 20.9% to Rs.197 million in fiscal 2001
from Rs.163 million in fiscal 2000.
Profit/(Loss) after tax
Loss after tax in fiscal 2001 was Rs.2,694 million as compared to a profit after tax of Rs.3,301
million in fiscal 2000, as a result of the foregoing factors.
Adjusted Profit/(Loss) after tax
Adjusted loss after tax in fiscal 2001 was Rs.1,573 million as compared to a adjusted profit after
tax of Rs.2,437 million in fiscal 2000.
Quarterly Variations in Our Results of Operations
After this offering, we will be required to report our results of operations on a quarterly basis to
the Indian stock exchanges. Our results of operations tend to vary from quarter to quarter
based on a number of factors including macroeconomic factors, market conditions and fiscal
regulation, and we expect that they will continue to do so. However, we do not believe that this
variation is due to seasonal patterns or that our business is seasonal in nature.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our primary liquidity needs have been historically to finance our working capital needs and our
capital expenditures. To fund these costs, we have relied on cash flows from operations and
short-term and long-term borrowings.
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Cash Flows
The table below summarizes our cash flows for the years ended March 31, 2002 and March 31,
2001 and the nine months ended December 31, 2002.
Cash Flow
December 31, 2002
Net Cash Flow from 7,640
(used in) operating
activities
Net Cash Used in (9,463)
investing activities
Net Cash flow from 1,333
(used in) financing
activities
(490)
Net
Increase/(Decrease)
in Cash and Cash
Equivalents
Figures in brackets represent cash outflow
March 31, 2002
(Rs. in millions)
6,539
March 31, 2001
(2,448)
(1,281)
(1,935)
(5,415)
4,942
(157)
559
Our cash flows from operations are influenced primarily by capital expenditure, working capital
requirements and cash from operations and incurrence and repayment of debt. Our net cash flow
provided by operating activities was a negative Rs. (2,448) million in fiscal 2001, primarily due
to our increased working capital requirements and our loss before tax in fiscal 2001. Our cash
flow from operating activities before working capital changes in fiscal 2001 was Rs. 440 million.
Our net cash flow from operating activities was Rs. 6,539 million in fiscal 2002, primarily due to
our reduced working capital requirements and profit before tax in fiscal 2002. Our net cash flow
from operating activities for the nine months ended December 31, 2002 was Rs. 7,640 million.
Net cash used in investing activities was a negative Rs.(1,935) million and a negative Rs.(1,281)
million during fiscal 2001 and 2002 respectively and a negative Rs.(9,463) million for the nine
months ended December 31, 2002. Our net cash used in investing activities for fiscal 2001
related primarily to purchase of fixed assets for the launch of new models and capacity
expansion, partially offset by proceeds received from the sale of our investments in certain
mutual funds and bonds. Our net cash used in investing activities for fiscal 2002 related
primarily to the purchase of fixed assets for the launch of the Versa model in November 2001.
Our net cash used in investing activities for the nine months ended December 31, 2002 related
primarily to investment of surplus funds in mutual funds.
Our net cash flow from financing activities was Rs. 4,942 million in fiscal 2001, primarily due to
an issuance of non-convertible debentures to help fund our capital expenditure requirements,
and a negative Rs.(5,415) in fiscal 2002, primarily due to repayment of short-term borrowings.
Our net cash from financing activities increased to Rs.1,333 million in the nine months ended
December 31, 2002, primarily due to proceeds we received from our rights issue to Suzuki in the
amount of Rs. 3,990 million in May 2002, partially offset by repayment of short-term borrowings.
Indebtedness
Key terms of our outstanding indebtedness as of December 31, 2002 were as follows:
11.20% secured non-convertible redeemable debentures.
We had an aggregate principal
amount of Rs. 2,000 million of our 11.20% secured non-convertible redeemable debentures
(Series I) outstanding at December 31, 2002. These debentures are redeemable at par on July
24, 2007 with a put or call option on July 24, 2005. These debentures bear interest at a rate of
11.2% per annum and are secured by mortgages on specific buildings and plant and machinery.
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12.00% secured non-convertible redeemable debentures. We had an aggregate principal amount
of Rs. 1,000 million of our 12.00% secured redeemable non-convertible debentures (Series II)
outstanding at December 31, 2002. Of this aggregate principal amount, 30% is payable on
December 4, 2005, 30% on December 4, 2006 and the remaining 40% on December 4, 2007.
These debentures bear interest at the rate of 12% per annum and are secured by mortgages on
specific buildings and plant and machinery.
Long-term foreign currency loan. We had an aggregate principal amount of US$30 million
outstanding under long term foreign currency external commercial borrowing from Bank of Tokyo
– Mitsubishi at December 31, 2002. The first tranche of US$10 million of the outstanding
principal amount is repayable on February 16, 2004, and the second tranche of US$20 million is
repayable on February 27, 2004. The interest rate applicable to the long-term foreign currency
loan is 0.60% per annum over six months floating London Interbank Offered Rate, or LIBOR, the
LIBOR rate being reset every six months. The loan is secured by a negative lien on specific fixed
assets of our company.
Working capital facility. We had an aggregate principal amount of Rs. 115 million outstanding
under a secured working capital facility from HDFC Bank at December 31, 2002. The interest rate
applicable to the loan is 0.75% per annum over the Mumbai Interbank Offered Rate, or MIBOR,
compounded on a daily basis. The loan is secured by a pari passu first charge on our stock, book
debts and other current assets.
Off-balance sheet arrangements
Vendors of certain components need specific dies and moulds to manufacture those components
for us. These dies and moulds are customized for specific models. Substantial investment is
required for the purchase of these dies and moulds. To make these dies and moulds available to
vendors, we have entered, as co-lessee, into various agreements between various vendors, as
lessees, and finance companies or banks, as lessors, for the leasing of dies and moulds for
certain models. The aggregate amounts of our obligations under such agreements were Rs.1,639
million at March 31, 2000, Rs. 3,545 million at March 31, 2001, Rs. 3,384 million at March 31,
2002, and Rs. 2,645 million at December 31, 2002.
We have also provided guarantees to finance companies for term loans and for lease finance
given to various vendors, for purchase of dies and moulds for certain models. At December 31,
2002, we were guarantors to certain finance companies for term loans in the aggregate principal
amount of Rs. 60 million and for lease financing of Rs. 437 million, to facilitate the purchase by
various vendors of dies and moulds of certain models.
We have also provided a guarantee to HDFC Limited for a term loan of Rs.350 million to Maruti
Employees Co-operative House Building Society Limited and the amount outstanding under the
loan at December 31, 2002 was Rs.190 million.
Historical and planned capital expenditures
In fiscal 2001, we had purchased fixed assets amounting to Rs.6,036 million, primarily for the
launch of new models and capacity expansion. Our total borrowings in fiscal 2001 increased by
Rs.5,617 million.
In fiscal 2002, we had purchased fixed assets amounting to Rs.2,229 million, primarily for the
launch of the Versa model in November 2001. Our total borrowings in fiscal 2002 decreased by
Rs.4,626 million.
We have received the necessary authorizations and expect to spend an aggregate amount of
approximately Rs. 3,580 million in fiscal 2004 on the following projects:
•
•
•
•
automation and research and development;
minor modifications to existing models and workshops;
normal annual capital maintenance; and
construction of a new corporate office and marketing plaza.
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We may adjust the amount of our capital expenditure upward or downward based on our cash
flow from operations and market conditions.
Principal sources of liquidity
At December 31, 2002, cash and bank balances and current investments amounted to Rs.9,992
million. We believe that our anticipated cash flows from operations, together with our existing
cash and issuance of short-term and long-term debt, will be sufficient to meet our working
capital and capital expenditure requirements for fiscal 2004. Our anticipated cash flows from
operations however depend on a number of factors beyond our control, such as demand for
passenger cars, prevailing economic conditions in the market, the competition in the automobile
industry and the cost of our inputs. We may therefore need to incur additional indebtedness.
TRANSACTIONS WITH RELATED PARTIES
We have entered into several transactions for transfer of technology, purchase of components
and training of personnel with Suzuki. We believe that the prices paid for the purchase of
components from Suzuki are not comparable with prevalent market prices, as the components
are of a specialised nature. We enter into contracts for exports of vehicles to some of Suzuki’s
subsidiaries in other countries. We have also entered into certain transactions with many of our
joint ventures and subsidiaries. In the ordinary course of business, certain loans and advances
are given to many of our vendors on commercially reasonable terms having regard to market
conditions. Some of our joint ventures and associates avail of the same policy. For more
information, see “Related Party Transactions” on page 158 of this draft red herring prospectus.
In addition, our board of directors has approved long-term and short-term loans to be granted
from time to time of a maximum aggregate amount of Rs.950 million to Suzuki Metals Private
Limited, or SMPIL, our joint venture with Suzuki, set up to establish an aluminium foundry. As of
December 31, 2002, an aggregate amount of Rs.60 million in loans was outstanding. The
interest rate charged by Maruti to SMPIL was benchmarked against interest rates offered by
financial institutions.
As of March 31, 2003, we had no loans outstanding to directors and an aggregate amount of
Rs.953,051 outstanding in loans to key management personnel. All employees, including
directors and key management personnel, are entitled to various categories of loans in
accordance with our policy.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is a function of our manufacturing and selling activities. We are
exposed to market risk from changes in both foreign exchange rates and interest rates.
Exchange rate risk
We face exchange rate risk to the extent that our receivables and payables are denominated in
currencies other than Indian rupees. We import raw materials and components and make
royalty payments for technology licenced from Suzuki. All these costs are denominated in foreign
currencies, with substantially all imports of components denominated in Yen, imports of raw
materials denominated in US dollars and royalty payments denominated in Yen.
Our aggregate cost of imported raw materials and components was Rs. 17,924 million and Rs.
15,003 million in fiscal 2001 and 2002, respectively. Our aggregate cost for running royalty
payments to Suzuki was in the amount of Rs. 872 million in the nine months ended December
2002 and Rs. 1,160 million in fiscal 2002, respectively.
Exports of vehicles contributed 3.9%, 3.1%, 2.6% and 6.9%, respectively, of our total sales in
fiscal 2000, 2001 and 2002, and the nine months ended December 31, 2002. These sales were
denominated primarily in US dollars.
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In addition, we have US$30 million outstanding under a long-term foreign currency loan
repayable in February 2004.
Appreciation or depreciation of the Indian rupee relative to the currency of our payables and
receivables can increase our payment obligations or reduce our export sales. We enter into
foreign exchange forward and derivative contracts to hedge these risks, but these contracts may
not protect us fully from losses due to fluctuations in foreign exchange rates.
Interest rate risk
Our interest rate risk results from changes in interest rates, which may affect our financial
expenses. We bear interest rate risk with respect to the following indebtedness:
The rate of interest applicable to the US$30 million outstanding at December 31, 2002 under our
long-term foreign currency loan is 0.60% per annum over six months floating LIBOR, the LIBOR
rate being reset every six months. This loan is repayable in full in February 2004.
The rate of interest applicable to the Rs. 115 million outstanding at a spread of 0.75% per
annum over the Mumbai Interbank Offered Rate, or MIBOR, compounded on a daily basis.
On November 13, 2001, we entered into a rupee-interest rate swap with a nominal value of Rs.
1,000 million to be amortised in line with the repayment schedule for our 12.00% secured
redeemable non-convertible debentures (Series II) with Citibank N.A.
Under the swap
agreement, effective November 15, 2001, we swapped our fixed interest rate liability of 12% per
annum on our debentures Series II of Rs. 1,000 million until maturity on December 4, 2007, into
a floating rate of interest at a spread of 3.18% over the “Average five year GoI Securities”,
computed as the simple average of the daily five year annualized yield for GoI securities for ten
business days preceding and including the interest payment date. The first setting of five year
GoI securities rate was done in advance at the time of entering into the swap at 7.46% per
annum to be valid till December 3, 2002. The subsequent resets will be done annually in arrears.
We are entitled under the swap agreement to receive a fixed rate of interest on the aggregate
principal amount of Rs. 1,000 million at the fixed rate of 12% per annum.
A rise in interest rates may increase our interest payment obligations under the instruments
described above. We do not bear interest rate risk in relation to our other indebtedness, all of
which requires interest payments at fixed rates of interest.
EFFECT OF INFLATION
During fiscal 2000, 2001 and 2002, the All India Consumer Price Index increased by 3.5%, 3.8%
and 4.2%, respectively. Since we set the price for our products sold in India based on various
factors, including inflation, inflation has not had a significant effect on the result of our
operations to date. We do not expect that inflation rates in India will have a significant impact on
our results of operations for the foreseeable future.
UNUSUAL AND INFREQUENT EVENTS OR TRANSACTIONS
There have been no events, to our knowledge, other than as described in this prospectus, which
may be called “unusual” or “infrequent”.
SIGNIFICANT ACCOUNTING AND REGULATORY CHANGES
Accounting Standard 22 on deferred taxes became mandatory with effect from April 1, 2002,
resulting in significant increase in amount of income tax provision.
NEW PRODUCTS OR BUSINESS SEGMENTS
We are in the business of manufacturing cars. As part of our continuing operations, we have
introduced and will continuing to introduce various new models or variants of existing models
depending on varying market conditions and customer preferences. We have recently entered
into certain new businesses. For more information on these businesses, see “Our Business New Business Initiatives” on page 81 of this draft red herring prospectus.
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OUR MANAGEMENT
BOARD OF DIRECTORS
Our Managing Director, Jagdish Khattar, is also our chief executive officer. He conducts the dayto-day operations of our Company under the overall supervision, direction and control of our
Board. Under our Articles of Association we cannot have fewer than 3 or more than 12 directors.
We currently have ten directors.
The following table sets forth certain details regarding the members of our Board as on the date:
Name, Designation, Father's
Name, Address, Occupation and
Term
Shinzo Nakanishi
Chairman
(S/o Shintaro Nakanishi)
Age (years)
Other Directorships
55
• Suzuki Motor Corporation
60
• Climate Systems India Limited
• J.J. Impex (Delhi) Pvt. Limited
• Maruti Countrywide Auto Financial
Services Limited
• Citicorp Maruti Finance Limited
62
• Bharat Seats Limited
• Subros Limited
59-3, Saiwai 2 Chome
Hamamatsu
Shizuoka-pref.
Japan
Business Executive
Part-time Non-Retiring
Jagdish Khattar
Managing Director
(S/o Shyam Khattar)
N-128 A, Panchsheel Park,
New Delhi – 110017
India
Business Executive
Whole-time Non-Retiring
Tenure Expires: May 29, 2005
Yuichi Nakamura
Joint Managing Director
(S/o Tadao Nakamura)
Ashok Hotel, Chanakyapuri,
New Delhi - 110021
India
Business Executive
Whole-time Retiring
Tenure Expires: September 19, 2003
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Kinji Saito
Director (Marketing and Sales)
(S/o Shigeo Saito)
44
• Maruti Countrywide Auto Financial
Services Limited
• Citicorp Maruti Finance Limited
55
• Krishna Maruti Limited
• Machino Plastics Limited
• Suzuki Metal India Limited
B-61, Paschimi Marg,
Vasant Vihar,
New Delhi – 110057
India
Business Executive
Whole-time Retiring
Tenure Expires: May 29, 2005
Shinichi Takeuchi
Director (Production)
(S/o Kunihei Takeuchi)
Ashok Hotel, Chanakyapuri,
New Delhi - 110021
India
Business Executive
Whole-time Retiring
Tenure Expires: September 26, 2004
40
Motohiro Atsumi
Director (Finance)
(S/o Yuji Atsumi)
•
Suzuki Metal India Limited
Ashok Hotel, Chanakyapuri,
New Delhi –110021
India
Business Executive
Whole-time Retiring
Tenure Expires: May 29, 2005
73
Osamu Suzuki
Director
(S/o Eihachi Matsuda)
3-19-18, Shijimizuka-cho,
Hamamatsu
Japan
Industrialist
Part-time Non-Retiring
- 118 -
• Suzuki Motor Corporation
50
Hirofumi Nagao
Director
(S/o Late Tatsuo Nagao)
Nil
Hilltop, Matsushiro 103
Matsushiro – cho 201-7
Hamamatsy city
Shizuoka – pref.
Japan
Business Executive
Suzuki Nominee; Part-time Retiring
V. K. Malhotra
Director
(S/o O.C. Malhotra)
57
• Bharat Heavy Electricals Limited
• Andrew Yule & Company Limited
• HMT Limited
54
• Bharat Bhari Udyog Nigam Limited
• Engineering Projects (I) Limited
• Scooters India Limited
12A, HUDCO Place,
Andrews Gunj,
New Delhi - 110049
India
Government Official
GoI Nominee; Part-time Retiring
S. V. Bhave
Director
(S/o V. D. Bhave)
C – II/ 62, Shah Jahan Road,
New Delhi – 110 011
India
Government Official
GoI Nominee; Part-time Retiring
DETAILS OF DIRECTORS
Shinzo Nakanishi, Chairman of our Company, age 55 years, was appointed as a non-retiring
part-time Director of our Company with effect from May 2002. Mr. Nakanishi joined Suzuki in
1971. Mr. Nakanishi is presently Director (Board Member) and Executive General Manager,
Overseas Automobile Marketing in Suzuki.
Jagdish Khattar, Managing Director, age 60, completed his Bachelor in Arts (with Honours)
degree from St. Stephen’s College, University of Delhi and his LL.B from the Delhi University.
Mr. Khattar has been an officer of the Indian Administrative Service, or IAS, and has more than
37 years of experience. Prior to joining us, he served in the following positions: as an officer of
the Uttar Pradesh State Government from 1965 to 1979; as director of the Tea Board of India,
London from 1979 to 1983; as chairman of the Tea Board, Ministry of Commerce, from 1983 to
1984; as chairman and managing director of the Uttar Pradesh State Cement Corporation from
1984 to 1986; as secretary and then chairman of the Uttar Pradesh Road Transport Corporation,
Transport Department from 1986 to 1988); and as joint secretary in the Ministry of Steel, GoI
from 1988 to 1993. Mr. Khattar is currently the Vice President of Society of Indian Automobile
Manufacturers.
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Mr. Khattar joined us on July 1, 1993 as Director (Marketing). He was appointed Second
Managing Director on July 1, 1999 and was nominated by GoI and appointed as Managing
Director and Chief Executive Officer on August 18, 1999. Prior to being appointed as the Second
Managing Director, Mr. Khattar has held the positions of Executive Director(Marketing) and
Director (Marketing). Pursuant to the Revised Joint Venture Agreement, Mr. Khattar resigned
and was immediately re-appointed as Managing Director nominated by Suzuki on May 30, 2002.
Yuichi Nakamura, Joint Managing Director, age 62, is a Graduate from the Department of
Technology, Shizuoka University. Mr. Nakamura has 40 years of experience in automobile
production and engineering. He started his career with Suzuki in 1963. He was appointed plant
manager of the Kosai Plant in 1989. He was in charge of the Overseas Production Engineering
Division from 1991. He was appointed Joint Managing Director of Maruti in 1992. In 1993, Mr.
Nakamura was appointed to the Suzuki Board, and in 1995, he returned to the Suzuki head
office in Japan (hence vacating the seat of Joint Managing Director of our Company) and was
made Director and Deputy Executive General Manager of the Manufacturing Division of Suzuki.
He was later promoted to Managing Director and Executive GM in 1997, and then to Senior MD
and Executive GM of the Manufacturing Division in 2000.
Mr. Nakamura rejoined the Maruti Board on September 21, 2001, as Joint Managing Director. He
is responsible for the materials and engineering functions of our Company.
Kinji Saito, Director (Marketing and Sales), age 44, is a Graduate from the Hiroshima
University. Mr. Saito has more than 21 years of experience in the automobile industry, through
various roles in marketing research, product and sales planning, and marketing at Suzuki. Mr.
Saito has been involved with the marketing aspect of Suzuki’s Indian market operations since
1995, before becoming Head of Suzuki’s Representative Office in India in 1999.
Mr. Saito joined Maruti on May 30, 2002. He is responsible for marketing and sales functions of
our Company.
Shinichi Takeuchi, Director (Production), age 55, is a Graduate from the Department of
Technology, Shizuoka University, Japan. Mr. Takeuchi has more than 32 years of experience in
production engineering in the automobile industry. Mr. Takeuchi joined Suzuki in 1970. In 1989,
he was appointed Deputy Manager of the Production Engineering Division of Suzuki. He was
made Deputy General Manager in the Production and Engineering Division in 1995, before being
transferred to the Kosai Plant in 1997 as General Manager. He was appointed as Plant Manager
of the Kosai Plant in 2001.
Mr. Takeuchi joined us on September 27, 2001. He is responsible for the production activities of
our Company. Mr. Takeuchi is also the occupier of our factory under the Factories Act, 1948.
Motohiro Atsumi, Director (Finance), age 40, is a Graduate from the Department of
Administration Engineering at the Keio University, Japan. Mr. Atsumi has over 17 years of
experience in the automobile industry, in purchasing and finance. He joined Suzuki in 1986 and
was assigned to the Purchasing Department. In 1992, he was transferred to the Accounting
Department and appointed Assistant Manager in 1996 and Deputy Staff Manager in 2002.
Mr. Atsumi joined us on September 16, 2002. As head of our Finance division and as a specialist
in costing, he is responsible for our finance related activities.
Osamu Suzuki, age 73 years, is the Chairman & Chief Executive Officer of Suzuki Motor
Corporation, Japan. Mr. Suzuki was appointed as a Director of our Company with effect from May
24, 1983.
Hirofumi Nagao, age 50 years, was appointed as a retiring part-time Director of our Company
with effect from May 30, 2002. Mr. Nagao joined Suzuki in 1978. Mr. Nagao is currently the
General Manager (China/West Asia Automobile Marketing Division), Overseas Automobile
Marketing Division II in Suzuki.
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V. K. Malhotra, age 56 years, is an Additional Secretary & Financial Adviser, Ministry of Heavy
Industries & Public Enterprises, GoI. Mr. Malhotra is an IAS officer. Mr. Malhotra was reappointed as a retiring part-time Director of our Company with effect from September 20, 2002.
S. V. Bhave, age 54 years, is a Joint Secretary, Ministry of Heavy Industries & Public
Enterprises, GoI. Mr. Bhave is an IAS Officer. Mr. Bhave was appointed as a retiring part-time
Director of our Company with effect from March 25, 2003.
Compensation of Our Directors
For details of compensation of our whole-time Directors, please refer to the section entitled
“Statutory and Other Information”. Our part-time Directors do not receive any remuneration
from us.
Shareholding of Our Directors
Our Articles do not require our Directors to hold any equity shares in our Company. The following
table details the shareholding of our Directors:
Name of Directors
Mr.
Mr.
Mr.
Mr.
Shinzo Nakanishi (Chairman)
Kinji Saito
Shinichi Takeuchi
Motohiro Atsumi
Number of equity
Number of equity shares
shares of Rs.5/- each
of Rs.5/- each
(Post Issue)
(Prior to Issue)
20
20
20
20
20
20
20
20
Term of Office
In accordance with the Act, all our Directors except Mr. Nakanishi, Mr. Khattar, and Mr. Suzuki,
are required to retire by rotation. For the details of the terms of office of the above directors,
please refer the section “Statutory and Other Information”.
Changes in Our Board of Directors during the last three years
Changes to our Board of Directors during the last 3 years are as follows:
Name
Yoshio Saito
Junzo Sugimori
Pradeep Kumar
K. Kumar
Tsuneo Kobayashi
A.R. Halasyam
A.V. Singh
K.K. Jaswal
Yuichi Nakamura
Date of
Appointment
June 9, 1998
June 9, 1998
June 9, 1998
June 22, 1998
September 8, 1998
September 8, 1998
September 27, 1999
January 25, 2000
September 21, 2001
Shinichi Takeuichi
September 27, 2001
Hirofumi Nagao
May 30, 2002
Jagdish Khattar
August 18, 1999
Jagdish Khattar
May 30, 2002
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Date of Cessation
May 27, 2002
May 27, 2002
September 11, 2002
June 8, 2001
September 15, 2001
September 7, 2001
October 25, 1999
July 2, 2002
May 30, 2002
Reason
Resignation
Completed tenure
Resignation
Superannuation
Resignation
Superannuation
Resignation
Resignation
Appointed in place
of Mr. Kobayashi
Appointed in place
of Dr. K. Kumar
Appointed pursuant
to RJVA
Resignation
pursuant to RJVA
Appointed pursuant
to RJVA
Kinji Saito
May 30, 2002
Isao Ozawa
Motohiro Atsumi
May 30, 2002
September 16, 2002
Shinzo Nakanishi
May 28, 2002
V.K. Malhotra
July 19, 2002
S.V. Bhave
March 25, 2003
August 31, 2002
Appointed in place
of Mr. Sugimori
Resignation
Appointed in place
of Mr. Ozawa
Appointed pursuant
to RJVA
Appointed in place
of Mr. Jaswal
Appointed in place
of Mr. P. Kumar
CORPORATE GOVERNANCE
The guidelines in respect of corporate governance will be applicable to us immediately upon the
listing of our equity shares on the Stock Exchanges. We undertake to adopt the Corporate
Governance Code as per clause 49 of the listing agreement of the Stock Exchanges prior to
entering into the listing agreement.
We intend to comply with SEBI guidelines in respect to corporate governance, especially with
respect to the appointment of independent directors to our board and constituting our board
committees: the Shareholding/Investor Grievance Committee; and the Audit Committee; and the
Compensation Committee.
Key Managerial Personnel
Amitava Nandy, Executive Director (Production), age 55, has a Bachelor’s degree in Mechanical
Engineering and a Master’s degree in industrial engineering from the Indian Institute of
Technology, Kanpur. Mr. Nandy has more than 31 years of experience with various companies.
Prior to joining us, he served in the following positions: as systems analyst in the Management
Services Division of Air India from 1971 to 1974; as consultant with the Management Services
Division of A F Ferguson & Co. from 1974 to 1975; and as Manager at Bharat Heavy Electricals
Ltd from 1976 to 1982.
Mr. Nandy joined us on April 29, 1982 in the production engineering division. Mr. Nandy has held
many positions in our Company, such as Regional Manager (Sales), head of Spares, head of
Human Resources, and is now responsible for, and head of, Production.
S.K. Bhatia, Executive Director, age 57, has a Bachelor’s degree in Mechanical Engineering from
the Indian Institute of Technology, Delhi and a Master’s degree in Business Administration from
Faculty of Management Studies, Delhi University. Mr. Bhatia has more than 35 years of
experience. Prior to joining us, he served at the Ministry of Industry, GoI from 1967 to 1993,
where he left as director.
Mr. Bhatia joined us on March 24, 1993 as General Manager and was responsible for vendor
upgradation. He has since headed Supply Chain and Parts Inspection and is currently on
deputation to one of our joint venture companies, Mark Exhaust Systems Ltd, as Joint Managing
Director.
C.K. Dave, Chief General Manager (Spares), age 52, has a Master’s degree in Mechanical
Engineering from the Indian Institute of Science, Bangalore. Mr. Dave has 28 years of
experience. Prior to joining us, Mr. Dave served as senior engineer at Bharat Heavy Electricals
Ltd from 1975 to 1984.
Mr. Dave joined us on November 27, 1984. He was appointed head of Supply Chain in 1996 and
is currently the head of Spares since May 2001.
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S. Maitra, Chief General Manager (Engineering), age 47, has a Bachelor’s degree in Technology
from the Indian Institute of Technology, Delhi and has passed the Intermediate exam of the
Institute of Cost & Works Accountants of India. Mr. Maitra has 27 years of engineering
experience. Prior to joining us, he served in the following positions: as graduate engineer trainee
at GKW Limited from 1976 to 1977, as foreman in charge at Bata India Ltd from 1977 to 1979,
as engineer with Tata Engineering & Locomotive Company Ltd from 1979 to 1982, and as senior
engineer at Eicher Goodearth Ltd from 1982 to 1983.
Mr. Maitra joined us on July 4, 1983, when he was first appointed head of Quality and
Inspection, and later, Production. He currently heads Research and Development and has been
head of Engineering since May 2001.
M.M. Singh, Chief General Manager (Production – Plant 1), age 47, has a Bachelor’s degree in
Engineering from the Birla Institute of Technology (BIT), MESRA, Ranchi. Mr. Singh has 25 years
of experience in engineering. Prior to joining us, he served as junior engineer at Tata
Engineering & Locomotive Company Ltd from 1978 to 1981 and as assistant engineer at Tata
Iron & Steel Company Ltd from 1982 to 1983.
Mr. Singh joined us on August 4, 1983. He has since headed Maintenance, Paint Shop
operations and Production at Plant 2, and currently heads Production at Plant 1.
I.V. Rao, Chief General Manager (Production Engineering), age 50, has a Master's degree
Mechanical design from the Indian Institute of Technology, Kanpur. Mr. Rao has 26 years
experience in engineering. Prior to joining us he served as assistant development engineer
Jyoti Ltd from 1977 to 1979 and as senior engineer at KG Khosla Compressors Ltd from 1979
1983.
in
of
at
to
Mr. Rao joined us on May 13, 1983. He headed Engineering for 7 years and was appointed head
Production Engineering in May 2001.
A.K. Talukdar, Chief General Manager (Human Resources), age 47, has a bachelors degree in
science with honours from Kolkatta University and a post graduate diploma in management from
the Indian Institute of Management, Kolkata. Mr. Talukdar has 25 years of experience in human
resources. Prior to joining us he served in the following positions: as senior personnel assistant
in the human resources department of Indian Aluminium Company Ltd from 1978 to 1981; at
BOC India Ltd from 1982 to 1990 where his last assignment was Regional Personnel ManagerWest; as personnel manager at Britannia Industries Ltd from 1990 to 1994; at Pepsi Foods Ltd
from 1994 to 1997 where his last assignment was General manager-employee relations; and as
director of human resources at Whirlpool of India Ltd from 1997 to 1999.
Mr. Talukdar joined us on August 13, 1999 and is head of Human Resources.
R. Dayal, Chief General Manager (Supply Chain), age 50, has a Bachelor’s degree in Mechanical
Engineering (with Honours) from the Birla Institute of Technology & Science (BITS), Pilani. Mr.
Dayal has 29 years of professional experience. Prior to joining us he served as foreman at
Hindustan Motors Ltd from 1974 to 1979 and as senior engineer at Bharat Heavy Electricals Ltd
from 1980 to 1985.
Mr. Dayal joined us on August 1, 1985. He has headed a number of divisions within our
Company, including Parts Inspection, Quality Assurance, and After-Sales Service. Currently, Mr.
Dayal heads Supply Chain.
K. Kumar, Advisor (Engineering), age 64, is a Graduate in Mechanical Engineering from the
University of Delhi, has a Ph.D from the Indian Institute of Technology and has a Masters in
Science from Council of National Academic Awards. Dr. Kumar has more than 38 years of
professional experience. Prior to joining us he has served in the following positions: as assistant
divisional mechanical engineer at Northern Railways from 1964 to 1970; as deputy director at
Research Design & Standards Organisation, Lucknow from 1970 to 1977; as joint director at
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Research Design & Standards Organisation, Lucknow from 1977 to 1984; and as additional
director at the Ministry of Railways from 1984 to 1985.
Dr. Kumar joined us on July 25, 1985. He has headed Engineering and After-Sales Service. He
superannuated as Director (Engineering) in June 2001 and has since been retained as Advisor
(Engineering) on a contractual basis. As per the Office order no. 305/ 2002 dated June 8, 2002,
he will continue to discharge his responsibilities in his present position till further orders.
A.K. Mishra, Chief General Manager (Vigilance), age 57, has a Master’s degree in Science
(Defence) and Post graduate diplomas in Management(HR) and Training and Development. Prior
to joining us, he served in the Indian Army for 33 years and took Pre mature retirement as a
Brigadier on 31 May 1999.
Brigadier Mishra joined us on June 15, 1999 and has since been our head of Vigilance on a
contractual basis. His contract expires on December 31, 2003.
All key managerial personnel except Dr. K Kumar and Brig. A K Mishra are permanent
employees of our Company.
Bonus or Profit sharing plan for our Key Managerial Personnel
The Incentive Scheme of our Company, which is effective from April 1,1999 till April 1, 2003 is
based on productivity, performance and profitability of our Company. Our Company has defined
certain parameters for the payment of incentive to the regular employees.
The parameters on which the Company gives incentive to the Employees are as follows:
1.
Payment for achieving base level performance;
2.
Payment for achieving higher than base level performance;
3.
Payment for improvement in quality; and
4.
Payment for improvement in productive time.
5.
Payment linked to performance of individual employee.
6.
Payment linked to performance of the Company.
Changes in our Key Managerial Personnel during the last three years
Following are the changes in our key managerial personnel in the last three years:
Manager Name
Function
Human Resources
DVM
Mr. A.K. Talukdar
Vigilance
DVM
Brig. Bahri
Brig. A.K. Mishra
Production Engineering
DVM
Mr. S.M. Kapoor
Marketing
Chief General Mr. Rohtash Mal
Manager
Marketing
and Sales
DVM = Divisional Manager
Date of
Appointment
Date of
Cessation
Reason
August 13, 1999
July 21, 1999
End of Tenure
July 2001
Superannuated
June 15, 1999
1997
November
2000
18,
Resigned
Expected changes to our Board of Directors and Key Management Personnel
In terms of the RJVA, Suzuki has the right to appoint the majority of the directors on our Board
of Directors. Suzuki has by way of a letter dated April 2, 2003 informed us that it proposes to
make certain changes to the nominations to Directors and also the Key Management Personnel.
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The changes would be subject to the acceptance of our Board of Directors and shareholders. The
changes proposed are:
(1) Mr. J. Sugimori, who is a member of the Board of Directors of Suzuki, is to be appointed
Joint Managing Director in charge of Finance, Human Resources, Information Technology,
Corporate Services and Vigilance.
(2) Mr. Y. Nakamura, who is currently a Joint Managing Director, shall resign from this post
and return to another post within Suzuki.
(3) Mr. S. Takeuchi shall be appointed as Joint Managing Director in charge of Production,
Production Engineering, Supply Chain and Engineering, in the place of Mr. Y. Nakamura.
(4) Mr. M. Osada, who is currently already working with us, is to be appointed as the head of
the Engineering Division.
(5) Mr. H. Totsuka, is to be appointed as Plant Manager.
The details of the above appointments once accepted by the Board of Directors and the
shareholders shall be set out in the sections related to “Our Management ”.
- 125 -
OUR PROMOTER
Our promoters are Suzuki and GoI. With 54.2% of our share capital, Suzuki has management
control of our operations. GoI holds 45.8% of our share capital, which is expected to reduce to
20.8% after this Offer. After the completion of this Offer, GoI has the right to sell the remainder
of its shareholding. For further details, please refer “GoI
SUZUKI MOTOR CORPORATION
Suzuki Motor Corporation is the largest manufacturer of mini cars in Japan since fiscal 1974, in
terms of sales volumes, with a market share of 31.6% in 2002, according to Japan Mini Vehicles
Association. Suzuki was also the eleventh largest vehicle manufacturer in the world and the
fourth largest manufacturer in Japan in terms of worldwide sales volumes in 2000, according to
Automotive Intelligence. In 2002, Suzuki had a 22% share of the market in Asia for vehicles
exported from Japan, according to the Japan Automobile Manufacturers Association.
In Japan, the WagonR manufactured by Suzuki became Japan’s top selling vehicle from 1997 to
2000, posting sales of nearly 250,000 units per year. In 2000, Suzuki became the fastest
growing Japanese car company in America, with sales increasing by 22% over the previous year.
Suzuki also manufactures small cars for other manufacturers like General Motors, Nissan and
Honda.
In fiscal 2002, Suzuki produced a total of 1,642,468 cars and 1,624,911 motorcycles. In fiscal
2002, Suzuki earned 78.6% from car sales and 18.7% from motorcycle sales. The break up of
Suzuki’s car sales across different geographies is shown below:
Fiscal 2000
Japan
Asia
Europe
North America
Other areas
Fiscal 2001
790
137
321
192
81
805
143
292
271
89
(in billions of yen)
Fiscal 2002
787
137
331
315
98
Source: Suzuki
Suzuki is headquartered in Hamamatsu in Shizuoka, Japan. As on July 1, 2002, Suzuki employed
about 15,000 employees worldwide and had 6 plants in Japan. In addition, Suzuki products are
manufactured in 40 companies in 22 countries around the world including 2 companies in North
America, 6 companies in South America, 2 companies in Europe and 22 companies in Asia.
Suzuki also has two research and development centres located in Yokohama and Miyakoda,
Japan, a training center located in Inasa-gun, Japan and 3 training centers in Ryuyo, Shimokawa
and Sagara, in Japan.
HISTORY
Michio Suzuki promoted Suzuki under the name Suzuki Loom Works in 1909, in the town of
Hamamatsu, Japan. The firm was in the business of manufacturing weaving looms. The firm was
incorporated as Suzuki Loom Manufacturing Co. in March 1920. With the objective of
diversification, Michio Suzuki decided to enter into the small car business, and built several
innovative small car prototypes in the late 1930s. The name of the company was then changed
to Suzuki Motor Co., Ltd in June 1954. In 1954 Suzuki was manufacturing 6,000 motorcycles per
annum.
The company launched its first lightweight car, “Suzulight”, in 1955. By the early 1960s, Suzuki’s
products were being sold in the European and US markets. Over the next few decades, Suzuki
gained a reputation as a top manufacturer of small cars. By 1977, Suzuki started selling its
outboard motors in the US, maintaining a rich tradition of innovation in all its product offerings.
In October 1990, the name of the company was changed to Suzuki Motor Corporation.
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Some of the other products manufactured by Suzuki include outboard motors, generators,
welders, general-purpose engines, boats, motorized wheelchairs, electro-scooters, ultrasonic
related products (cleaner, cutter, etc.) and pre-fabricated houses.
SUZUKI AND US
Suzuki has always played, and continues to play, an important role in the management of our
Company. Some of our key management personnel and technical personnel are deputed Suzuki.
Currently, two of our directors are also directors of Suzuki. In 1982, Suzuki acquired a 26%
stake in our Company. Since then, Suzuki has increased its stake in our Company and currently
holds about 54.2%. Suzuki provided us access to some of their products, licensed their
technology, shared with us their best practices in manufacturing processes and helped us
develop and manage our supply chain. Suzuki has also provided support in training our
personnel and integrating Japanese management practices such as Kaizen in our plant.
Due to our collaborative efforts, we believe that we have become more efficient than many of
Suzuki’s plants worldwide.
BOARD OF DIRECTORS
The Board of Directors, under the guidance of Chairman and CEO Osamu Suzuki, currently
manages Suzuki. The Board of Directors of Suzuki as on July 1, 2002 is as follows:
Name
Osamu Suzuki
Masao Toda
Akira Tsutsui
Sokichi Nakano
Chuichi Mizuguchi
Katsuhiro Yokota
Hiroshi Tsuda
Shunichi Wakuda
John F. Smith Jr.
Toshitaka Suzuki
Tsuneo Kobayashi
Takahira Kiriyama
Osamu Matsuoka
Kiyoshi Aoshima
Akio Kosugi
Junzo Sugimori
Yasuhiro Yamada
Takashi Nakayama
Kazuyoshi Suzuki
Sigeaki Hamada
Sadayuki Inobe
Masanori Atsumi
Kenji Yamamoto
Shinzo Nakanishi
Yoshihiko Kakei
Akihiro Sakamoto
Katsumi Takata
Hirotaka Ono
Designation
Chairman & CEO
President & COO
Executive Vice President and Assistant to the
President
Executive Vice President and Assistant to the
President
Senior Managing Director
Senior Managing Director
Senior Managing Director
Senior Managing Director
Director
Managing Director
Managing Director
Managing Director
Managing Director
Managing Director
Managing Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Source: Suzuki annual report FY2002
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SHAREHOLDING
The shareholding pattern of Suzuki as on March 31, 2002 is as follows:
Name of Shareholder
Number of shares
owned
General Motors of Canada Limited
The Chase Manhattan Bank N.A.,
London
UFJ Bank Limited
The Mitsubishi Trust and Banking
Corporation
The Asahi Bank, Limited
The Nichido Fire and Marine Insurance
Co. Limited
Japan Trustee Services Bank, Limited
The Shizuoka Bank, Limited
UFJ Trust Bank Limited
The Chuo Mitsui Trust and Banking Co.,
Limited
Other individuals
Total
Percentage
Shareholding
(%)
108,660,000
35,373,000
20.1
6.5
23,756,000
17,819,000
4.4
3.3
13,836,000
13,349,000
2.6
2.5
12,895,000
12,500,000
11,494,000
11,242,000
2.4
2.3
2.1
2.1
280,158,074
541,082,074
51.8
100.0
STRATEGIC ALLIANCE WITH GENERAL MOTORS CORPORATION
Suzuki entered into a business arrangement with General Motors Corporation in 1981. On
January 18, 2001, General Motors Corporation increased their shareholding in Suzuki to 20.1%,
and became the largest shareholder in Suzuki. Suzuki and General Motors Corporation
collaborate in various activities such as joint purchase of components, cost-reductions, product
development, development of advanced technologies, sharing of distribution networks and
research and development. Suzuki also manufactures some products that are marketed under
the General Motors brand name.
FINANCIAL PERFORMANCE
The financial performance of Suzuki on a consolidated basis for the last three years is presented
below:
(Figures in Millions of Yen except per share amounts)
FY02
FY01
FY00
Equity Capital
119,736
119,629
90,546
Reserves
500,268
474,141
407,210
Misc expenditure
Shareholders’ Equity
620,004
593,770
497,756
Sales (Net)
1,668,251 1,600,253
1,521,192
Profit after Tax (PAT)
22,392
20,248
26,886
Earnings per share (EPS) (Fully diluted) Yen
41.16
40.24
55.32
Net Asset Value (NAV) per share yen
1,145.86
1,098.09
1,017.57
LICENSE AGREEMENTS WITH SUZUKI
1. License agreements dated October 2, 1982 as amended on April 24, 1989, December 14,
1992 and March 26, 1997 supplemented by licence agreement dated July 13, 1998:
•
We entered into a license agreement to obtain the license and the right to use the
technical know-how required for the manufacture, sale and after sale service of the five
series of motor vehicles in India.
- 128 -
•
Suzuki had agreed to provide technical collaboration and license necessary for the
engineering, design and development, manufacture, assembly, testing, quality control,
sale and after-sales service of the products and parts. We have agreed to maintain
production standards and quality comparable to the standards of Suzuki. Suzuki has also
agreed to export parts manufactured by us.
•
Suzuki has the right to discontinue the manufacture of any product and replace a line of
product with any other line of product manufactured by us. We retain the right to
continue the manufacture of such discontinued line of products and Suzuki has agreed to
grant all assistance in this regard.
•
Any improvements in any of the products manufactured discovered by us, are to be given
to Suzuki along with all related information. We are allowed to sublicense the rights
under this Agreement to entities that will manufacture parts in India for us, but with
Suzuki’s consent.
•
Suzuki has granted us a non-exclusive right to export the products covered by these
agreements to all countries other than those where Suzuki manufactures the products
and parts or where a Suzuki licensee already exists. We are required to give Suzuki prior
notice 180 days before exporting to any country and to follow Suzuki quality
requirements.
•
The obligations relating to confidentiality of the information that Suzuki makes available
and its intellectual property, under the agreement, will continue even after the
termination of the agreement.
•
We have agreed to indemnify Suzuki from any product liability claims in connection with
the products or parts covered by the agreement, and will procure insurance policies for
the benefit of Suzuki at our cost.
•
We have approved the extension of the validity of License Agreements dated October 2,
1982, April 24, 1989 and December 14, 1992, with Suzuki for a further period of three
years from 22nd November, 2002 till 21st November, 2005 on the same terms and
conditions. The License Agreement dated March 26, 1997 is due to expire only in
December 2003. Suzuki will not extend the royalty provisions of the license agreement
for Maruti 800, Omni, Gypsy, Esteem and Zen and thus not charge royalty for these
models. In case of introduction of new technology or upgradation in specifications due to
change in market conditions or requirement of new laws/norms, fresh proposal for
extension of the license agreement shall be made.
2. License agreement dated December 15, 1998.
•
Suzuki agreed to supply us technical know-how, assistance and information for the
manufacture of two new series of cars.
•
The term of the license is for a period of 10 years from the date all approvals are
obtained. The agreement shall be automatically extended for successive periods of five
years unless either party terminates with written notice to other party at least six months
before the end of the current period.
•
Under this agreement, we pay Suzuki a lumpsum of Japanese Yen 400,000,000 and a
running royalty based on a percentage of prices of products and components.
•
We have agreed to indemnify Suzuki from any product liability claims in connection with
the products or parts covered by the agreement, and will procure insurance policies for
the benefit of Suzuki at our cost.
- 129 -
•
Suzuki has granted us a non-exclusive right to export the products covered by these
agreements to all countries other than those where Suzuki manufactures the products
and parts or where a Suzuki licensee already exists. We are required to give Suzuki prior
notice 180 days before exporting to any country and to follow Suzuki quality
requirements. In February 2000, Suzuki permitted us to export the products licensed
under this agreement to Bangladesh, Sri Lanka, Bhutan, Nepal and Mauritius.
3. License agreement dated August 3, 1999.
•
Suzuki agreed to supply us technical know-how, assistance and information for the
manufacture of two new series of cars.
•
The term of the license is for a period of 10 years from the date all approvals are
obtained. The agreement shall be automatically extended for successive periods of five
years unless either party terminates with written notice to other party at least six months
before the end of the current period.
•
Under this agreement, we pay Suzuki a lumpsum of Japanese Yen 300,000,000 and a
running royalty based on a percentage of prices of products and components.
•
We have agreed to indemnify Suzuki from any product liability claims in connection with
the products or parts covered by the agreement, and will procure insurance policies for
the benefit of Suzuki at our cost.
•
We have no right to export the products licensed under this agreement. In February
2000, Suzuki permitted us to export products licensed under this agreement to
Bangladesh, Sri Lanka, Bhutan, Nepal and Mauritius.
4. License agreement dated January 9, 2001.
•
Suzuki agreed to supply us technical know-how, assistance and information for the
manufacture of a new series of cars.
•
The term of the license is for a period of 10 years from the date all approvals are
obtained. The agreement shall be automatically extended for successive periods of five
years unless either party terminates with written notice to other party at least six months
before the end of that current period.
•
Under this agreement, we pay Suzuki a lumpsum of Japanese Yen 200,000,000 and a
running royalty based on a percentage of prices of products and components.
•
We have agreed to indemnify Suzuki from any product liability claims in connection with
the products or parts covered by the agreement, and will procure insurance policies for
the benefit of Suzuki at our cost.
•
We have no right to export the products licensed under this agreement without the prior
approval of Suzuki. In July, 2002, Suzuki permitted us to export products licensed under
this agreement to fifteen countries.
Under all the license agreements we have agreed not to enter into any other license or export or
distribution or agency agreement with respect to India with any manufacturer or seller of motor
vehicles during the term of the above licenses wherein we would directly or indirectly
manufacture, assemble, sell, distribute or promote the sale of any product which is in
competition with any of the products or parts covered by the license agreements. We have a
non-exclusive right to export our products. Under all the licence agreements we have agreed not
to export our products to countries where Suzuki has its own manufacturing facilities or another
licensee for the products, without the concurrence of Suzuki.
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Additionally, we cannot directly or indirectly, in India, sell, distribute or promote the sale of any
such competing product. We are however permitted to sell any motor vehicles directly or
through a third party to GoI or any of its agencies or any company, a majority of whose equity is
owned by GoI.
In all the above license agreements, we have recognised Suzuki’s ownership of the licensed
information and licensed trademarks under the licenses and have undertaken not to apply for
patents on such intellectual property of Suzuki without their consent. We are required to notify
Suzuki immediately if we discover an infringement of any licensed information. Suzuki has
certified to us that no third party has raised any patent claim against them, which claim might
have a material adverse effect on the manufacture, use, sale, repair or service of the products or
parts by or for us. Suzuki has agreed to make reasonable efforts to provide us with a technical
solution that will not violate the relevant patent if any claim is raised during the term of the
agreement, and cannot be settled with the relevant third party. Suzuki will cooperate with us in
the defence of law suits alleging infringement by us of a third party’s patents in respect of the
products or parts manufactured in strict conformity with Suzuki’s licensed information. Suzuki
has provided no other warranty with respect to products, parts, or licensed information or
trademarks. Suzuki will not be liable to us for damages arising from the use of the licensed
information. Suzuki also disclaims responsibility for representations and warranties made by us
with respect to the products or parts manufactured, assembled or sold by us. We have agreed to
indemnify Suzuki for claims arising from our representations or warranties.
If any third party brings an action for patent or trademark infringement against either Suzuki or
us, both parties shall consult each other regarding the resolution of the matter. We shall
cooperate with Suzuki to make a proper defence against any action brought against Suzuki
alleging infringement of any patent or trademark owned by others by any act of ours. We have
agreed not to use the licensed information in connection with or in the manufacture, assembly
and/or the sale of any product other than those products or parts covered by the agreement.
DISCOUNTS FROM SUZUKI
Suzuki regularly grants our Company discounts in respect of components imported from them.
The details of the discounts provided by Suzuki are set forth below:
S.No
Model
Period of discounts
Discount rate
From
To
1
BALENO/ ALTURA
10%
November 1999
February 2003
2
WAGON R
5%
January 2000
February 2003
3
ALL MODELS
3%
June 2000
May 2001
4
ALTO
5%
July 2000
February 2003
5
VERSA
10%
September 2001
May 2003
5%
June 2003
May 2004
6
ALTO EXPORT
5% + JPY 30,000
February 2002
November 2002
5% + JPY 50,000
December 2002
February 2003
JPY 50,000
March 2003
March 2003
JPY 50,000 EU
specs
JPY 30,000 GCC
specs
April 2003
March 2004
Suzuki will provide a 10% discount on knocked down components imported by us, except Alto
built for export specifications, for the period April 2003 to March 2005. Thereafter the discounts
would be determined subject to market conditions in India. As for the Alto model, which is built
for exports, discounts are already applicable from February 2003 upto January 2004. The value
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of our purchases of components from Suzuki in the fiscal 2002 and the nine-month period ended
December 31, 2002 is Rs. 7,804 million and Rs. 5,851 million respectively.
Suzuki will not extend the royalty provisions of the license agreement for Maruti 800, Omni,
Gypsy, Esteem and Zen and thus not charge royalty for these models. In case of introduction of
new technology or upgradation in specifications due to change in market conditions or
requirement of new laws/norms, fresh proposal for extension of the license agreement shall be
made. The total expense due to royalty on these models paid by us to Suzuki in the fiscal 2002
is Rs. 779.5 million
REVISED JOINT VENTURE AGREEMENT
Suzuki entered into a license agreement (the “License Agreement”) with us on October 2, 1982.
In order for us to implement the License Agreement, we invited Suzuki to become a shareholder
in our Company and entered into a Joint Venture Agreement with GoI and Suzuki on October 2,
1982. Pursuant to the Joint Venture Agreement, Suzuki subscribed to 26% of the paid up and
issued equity share capital of our Company, which was later increased to 40% in 1988. Suzuki,
GoI and we entered into an agreement concerning major policy decisions dated October 2, 1982.
This agreement listed the decisions for which the concurrence of Suzuki was required. Suzuki,
GoI and we also entered into a Subscription and Amendment Agreement dated June 2, 1992
(“Amendment Agreement”) whereby Suzuki increased its shareholding in our company to
50%.
As part of its ongoing disinvestment program GoI decided to transfer management control to
Suzuki by renouncing its share in the rights issue of our Company to Suzuki and entered into the
RJVA on May 15, 2002. Suzuki paid Rs 10,000 million as control premium to the GoI and in
addition to its own, it also subscribed to GoI’s share of the our rights issue. Suzuki agreed to
subscribe and pay for 1,216,341 equity shares at the subscription price of Rs. 3,280 per equity
share (Rs. 100 being the face value and Rupees Three Thousand One Hundred and Eighty (Rs.
3,180) being the premium). Suzuki became our majority shareholder and now owns 54.2% of
our equity shares.
The RJVA substituted and replaced, in its entirety, the Joint Venture
Agreement as amended subsequently by the Subscription and Amendment Agreement and the
Major Policy Decisions Agreement between GoI and the Suzuki.
The RJVA and Suzuki’s subsequent letter dated February 19, 2003 provide that GoI shall divest
all of its shareholding or at least 25% of our paid up share capital in a public offer through price
discovery by way of a book building process by July 31, 2003 in one tranche. GoI has the option
to extend the time for completing the offer upto December 31, 2003.
The RJVA also provides that the minimum floor price for a bid for our equity shares of face value
Rs. 100/- shall be Rs. 2,300. Suzuki has agreed that if the Offer Price for this Offer were fixed at
the Floor Price, Suzuki would bid for any shortfall in the demand for the Offer. Please see
“Terms of the Offer” on page 272 of this Draft Red Herring Prospectus.
After the completion of this Offer, GoI has the right:
(i)
to sell the remainder of its shareholding in our Company on any Indian stock exchange
within twenty four (24) months commencing from the date of the listing; or,
(ii)
GoI by exercising their put option under the RJVA can cause Suzuki to purchase its unsold
equity shares. GoI may exercise this put option at any time after four (4) months from
the date of listing of our equity shares upto the expiry of twenty four (24) months after
the date of listing of our equity shares.
The RJVA additionally provides that no equity share held by GoI can be transferred by or on
behalf of GoI without the written consent of Suzuki. The RJVA provides that GoI is entitled to
divest its equity shares in the Indian market subject to the restriction that no person shall hold
more than 5% of the total paid up equity shares except for Indian public financial institutions,
- 132 -
multilateral and bilateral development financial institutions, scheduled commercial banks, mutual
funds, foreign institutional investors, foreign venture capital investors and venture capital funds
registered with SEBI may hold 10% of the equity shares.
By entering into the RJVA, subject to certain restrictions in the RJVA, Suzuki has among other
rights, the right to nominate a majority of the directors on our Board. The chairman of our Board
has a casting vote in a board meeting. The RJVA also provides that our managing director will
be our chief executive officer and is vested with substantial operational management powers,
subject to the overall superintendence, direction and control of our Board and exercise of such
powers by the Board.
As per the RJVA, prior to December 31, 2003 and so long as GoI holds 25% of our equity shares,
GoI has the right to nominate for appointment two directors on our Board. After GoI’s right to
appoint two directors ceases, so long as GoI holds upto 10% of our equity shares, or until the
end of the period of 12 months after the expiry of the last put option under the RJVA (whichever
is earlier), GoI has the right to appoint one (1) director on our Board. In addition as per the
RJVA, the affirmative rights of GoI will decline with time and these rights will cease after
December 31, 2003.
The RJVA will terminate automatically and all rights of GoI would cease once the GoI
shareholding reduces to less than 10%.
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GROUP COMPANIES
Our group companies comprise 3 wholly owned subsidiaries, 16 companies in which we have
joint venture participation and 1 company in which Suzuki (and not Maruti) has joint venture
participation. The list of our group companies and the relationships with them is enclosed below:
Sl.No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Name of Company
Relationship
Maruti Insurance Brokers Limited
Maruti Insurance Distribution
Services Limited
True Value Solutions Limited
Asahi India Glass Limited
Bharat Seats Limited
Caparo Maruti Limited
Citicorp Maruti Finance Limited
Climate Systems India Limited
Denso India Limited
J.J Impex (Delhi) Private Limited
Jay Bharat Maruti Limited
Krishna Maruti Limited
Machino Plastics Limited
Mark Auto Industries Limited
Mark Exhaust Systems Limited
Maruti Countrywide Auto
Financial Services Limited
Nippon Thermostat (India)
Limited
Sona Koyo Steering Systems
Limited
Suzuki Metal India Limited
Subros Ltd
Subsidiary
Subsidiary
Percentage of ownership
interest held by us
100.00
100.00
Subsidiary
Associate
Associate
Associate
Associate
Associate
Associate
Joint Venture
Associate
Associate
Associate
Associate
Joint Venture
Associate
100.00
12.00
14.81
20.00
26.00
39.00
10.27
49.00
29.28
13.14
15.32
33.89
44.37
26.00
Associate
10.00
Associate
7.85
Associate
Suzuki group
company
49.00
Nil
OUR GROUP COMPANIES
OUR SUBSIDIARIES
We have the following wholly owned subsidiaries:
• Maruti Insurance Brokers Ltd.
• Maruti Insurance Distribution Services Ltd.
• True Value Solutions Ltd.
The details of our subsidiaries are as under:
Maruti Insurance Brokers Limited (MIBL)
MIBL was incorporated on January 14, 2002 as a wholly owned subsidiary of Maruti with an
authorized capital of Rs. 5 million. It obtained the certificate to commence business on May 1,
2002 from the RoC. The company has been established to act as an insurance intermediary to
provide services as brokers, agents, insurance consultants, surveyors, loss assessors and third
party administrators.
In order to distribute insurance products to Maruti customers and leverage Maruti’s nationwide
dealership network, MIBL has obtained a corporate agency license of National Insurance
Company Limited from the Insurance Regulatory Development Authority.
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The company distributes insurance products of National Insurance under the “Maruti Insurance”
brand. Maruti Insurance was launched nationwide on May 10, 2002 and provides online issuance
of policies and cashless transactions for post accident repairs through Maruti dealerships.
Board of Directors:
The directors on the Board of the company as on March 20, 2003 are
Ram Suresh Akella
Rajan Walia
Rajiv Khanna
Financial performance:
The financial performance of MIBL is as follows:
6 months ended
Sept 30, 2002
500
Equity Capital
1,427
Reserves (Excluding Revaluation Reserve)
43,048
Income
1,527
Profit / (loss) after Tax (PAT)
30.54
Earnings per share (EPS)
38.54
Net Asset Value (NAV)
Rs. 000
Period ended
March 31, 2002
500
(123)
(4)
7.54
Please refer to the section entitled “Financial Statements” for the detailed financial accounts
Maruti Insurance Distribution Services Limited (MIDSL)
MIDSL was incorporated on January 14, 2002 as a wholly owned subsidiary of Maruti with an
authorized capital of Rs. 5 million. It obtained the certificate to commence business on May 1,
2002 from the RoC, NCT of Delhi and Haryana. The company has been established to act as an
insurance intermediary to provide services as brokers, agents, insurance consultants, surveyors,
loss assessors and third party administrators.
In order to distribute insurance products to Maruti customers and leverage Maruti’s nationwide
dealership network, MIDSL has obtained a corporate agency license of Bajaj Allianz General
Insurance Company Limited from the Insurance Regulatory Development Authority. The
company distributes insurance products of Bajaj Allianz under the “Maruti Insurance” brand.
Maruti Insurance was launched nationwide on May 10, 2002 and provides online issuance of
policies and cashless transactions for post accident repairs through Maruti dealerships.
Board of Directors:
The directors on the Board of the company as on March 20, 2003 are:
Surendra Srivastava
D S Kedia
Vandana Singla
- 135 -
Financial performance:
The financial performance of MIDSL is as follows:
6 months ended
Sept 30, 2002
500
(143)
13,279
(43)
7.14
Equity Capital
Reserves (Excluding Revaluation Reserve)
Income
Profit / (loss) after Tax (PAT)
Earnings per share (EPS)
Net Asset Value (NAV)
Rs. 000
Period ended
March 31, 2002
500
(123)
(4)
7.54
Please refer to the section entitled “Financial Statements” for the detailed financial accounts
True Value Solutions Limited (TVSL)
TVSL was incorporated on January 14, 2002 as a wholly owned subsidiary of Maruti with an
authorized capital of Rs. 5 million. It obtained the certificate to commence business on May 1,
2002 from the RoC, NCT of Delhi and Haryana. TVSL provides value-added services to owners
and users of motor vehicles on matters relating to manpower services with regard to
recruitment, training and development.
The company also intends to provide services to Maruti, MIDSL and MIBL to promote their
business in the areas of pre-owned cars, lease and fleet management, finance and insurance.
These services shall include compliance with predefined business processes at the dealership,
continuous training of dealer staff in order to ensure quality of operation to ultimately achieve
the business objectives of TVSL.
Board of Directors:
The directors on the Board of the company as on March 20, 2003 are:
Arun Kumar Dey
Satish Chandra
S Srivathsan
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Income
Profit / (loss) after Tax (PAT)
Earnings per share (EPS)
Net Asset Value (NAV)
Rs 000
9 months ended
December 31,
Period ended
March 31, 2002
2002
500
500
441
(169)
5,479
596
(60)
11.92
18.82
6.42
Please refer to the section entitled “Financial Statements” for the detailed financial accounts
OUR JOINT VENTURES AND ASSOCIATES
We have signed joint venture agreements for our participation in 16 companies. The details of
these companies are presented below:
All share quotations stated below are sourced from a software package named, Trend.
- 136 -
Asahi India Glass Limited (AIG)
AIG, a joint venture between Maruti, Asahi Glass Company Ltd. (Japan), The Indo-Asahi Glass
Company Ltd., B. M. Labroo & Associates was originally incorporated on December 10, 1984 with
the name “Indian Auto Safety Glass Private Limited”. The company changed its name to Asahi
India Safety Glass Ltd and was issued a fresh certificate of incorporation by the RoC on February
7, 1986. The company changed its name to Asahi India Glass Ltd and was issued a fresh
certificate of incorporation by RoC on September 26, 2002.
AIG owns 79.62% of the share capital of Floatglass India Ltd. (FGI), a listed company. The
Boards of Directors of AIG and FGI, in its meetings held on January 30, 2003, approved the
merger of FGI with AIG subject to the requisite approvals. The proposal envisages amalgamation
of FGI with the AIG, following which shares held in FGI by AIG is proposed to be cancelled.
The salient features of the proposal as approved by the Boards are as below:
! Merger to become effective from April 1, 2002 and thus, after requisite approvals, the
merger will allow corporate tax benefits retrospectively from that date.
! AIG shares valued at two times FGI shares. Hence a swap ratio of 1 equity share of AIG
for every 2 equity shares of FGI has been recommended.
! The Boards have approved part equity and part preference shares (in lieu of cash) swap.
The shareholders and the creditors of the company have also approved the merger. The merger
process, which has now commenced, is likely to be completed by November 2003.
AIG has been incorporated for the purpose of setting up a tempered glass unit to primarily
provide for our needs and in general for the automobile industry.
Under the joint venture agreement dated September 14, 1985 with regard to AIG, we have a
right to appoint 2 out of 12 directors to the board of directors of AIG on the basis that for every
10% of the equity shareholding, there should be one director on the board. As long as we are
party to the agreement, our concurrence is required for all major policy decisions covering
certain limited areas such as capital expenditure in excess of Rs. 1 million, sale and disposal of
assets.
We have agreed to give the first preference to purchase tempered glass from AIG. AIG is
required to manufacture tempered glass to meet our specifications and requirements. AIG is
required to satisfy our requirements for original equipment and spares. After satisfying our
requirements, if AIG has excess capacity, AIG may manufacture and sell tempered glass in the
open market as per AIG’s policy of sale. .
Shareholding pattern as on March 20, 2003:
(Face value of the equity shares was changed from Rs. 10/- to Re. 1/- with effect from October
18, 2002)
Name of shareholder
Asahi Glass Co. Ltd., Japan
(Foreign promoters)
Maruti
B M Labroo & Associates
Public
Total
Number of shares
(face value Re. 1)
17,760,000
8,880,000
17,760,000
29,600,000
74,000,000
- 137 -
% shareholding
24
12
24
40
100
Board of Directors as on March 20, 2003:
The directors of the company are:
B.M. Labroo
Sanjay Labroo
K. Miyazawa
P.L. Safaya
Arvind Singh
Yuji Hara
Surinder Kapur
Amitava Nandy
Gautam Thapar
K. Yonamoto
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
Rs million
FY02
FY01
FY00
74.00
37.00
37.00
309.91
286.20
213.40
2,331.65 2,238.60 2,200.36
118.62
79.60
93.32
16.03
21.51
25.22
51.88
87.35
67.68
Source: Annual reports of AIG
In April 1987, AIG made a public issue of 740,000 equity shares of Rs. 10/- each for cash at par
aggregating Rs. 7.4 million.
Share Quotation
Highest and lowest price in the last six months
Month
High (Rs.)
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
Low (Rs.)
37.00
35.60
34.90
39.00
40.00
39.50
31.80
33.00
33.00
34.00
38.30
35.00
As on April 17, 2003, the price of the shares of AIG quoted on the BSE was Rs.41.20.
Bharat Seats Ltd. (BSL)
BSL, a joint venture between Maruti, Suzuki, and Rohit Relan & Associates was incorporated on
March 6, 1986. The certificate of commencement of business dated March 18, 1986 has been
issued by RoC.
BSL is engaged in the business of manufacturing seats to be supplied to us, to be used by us for
the manufacture of vehicles. The company is listed on Delhi, Mumbai, and Ahmedabad Stock
Exchanges.
The joint venture agreement dated May 10, 1988 provides, amongst other things, that we have
a right to nominate 1 out of 6 directors on the board of BSL, as long as we remain a shareholder
- 138 -
of BSL. The chairman shall be nominated upon consultation and agreement amongst us, Suzuki
and Rohit Relan & Associates. As long as we hold more than 10% of the total number of issued
shares, all major corporate and policy decisions with regard to BSL shall be made only after
consultation with us and with our concurrence.
BSL shall supply such parts of the four wheeler vehicles as required by Maruti. BSL may engage
in only such other business as agreed upon by Maruti, Suzuki and Rohit Relan & Associates.
Shareholding pattern as on March 13, 2003:
Name of shareholder
Maruti
Suzuki
Rohit Relan & Associates
Non Promoters
Total
Number of shares
(face value Rs. 10)
465,000
465,000
930,000
1,280,000
3,140,000
% shareholding
14.81
14.81
29.62
40.76
100
Board of Directors as on March 13, 2003:
The directors on the board are:
N D Relan
Rohit Relan
Yuichi Nakamura
C K Dave
Ajay Relan
G. N. Mehra
P. K. Lahiri
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
31.40
130.00
831.57
15.36
4.89
51.40
FY01
31.40
120.96
904.33
11.27
3.59
48.52
Rs. million
FY00
31.40
114.88
928.79
15.12
4.81
46.59
Source: Annual reports of BSL
In August 1988, the company made a public issue of 2,999,300 equity shares of Rs. 10 each for
cash at par which included allotments of 929,300, 465,000 and 465,000 equity shares of Rs.10/each to Indian resident directors, their friends and relations, Maruti and Suzuki respectively. The
balance 1,140,000 equity shares of Rs.10/- each were offered to the public for cash at par.
Share Quotation
Highest and lowest price in the last six months
Month
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
High (Rs.)
Low (Rs.)
18.45
20.00
18.10
19.40
18.15
18.05
14.75
16.50
16.50
16.50
16.00
17.00
As on April 16, 2003, the price of the shares of BSL quoted on the BSE was Rs.19.50.
- 139 -
Denso India Limited (“DIL”)
DIL was incorporated on November 22, 1984 with the name “SRF NipponDenso Limited”. The
name of this company was changed to Nippon Denso India Limited and a fresh certificate of
incorporation was granted by RoC on October 19, 1994. The company changed its name to
Denso India Limited and a fresh certificate of incorporation was granted by RoC on October 1,
1996.
The company has been set up for the purpose of manufacturing, assembling and selling in India
and exports to the other countries, parts and components for automobiles, trucks, buses,
motorcycles and other vehicles.
The equity shares of the company are listed on the Delhi, Mumbai, Chennai and National Stock
Exchanges.
Maruti entered into a joint venture agreement dated April 1, 1993 with NipponDenso Company
Ltd and Sumitomo Corporation. Pursuant to the terms of the agreement, we have a right to
nominate 1 out of 10 directors on the board of DIL on the basis of the respective shareholding
ratio of the joint venture parties. Certain matters to be transacted at the board meeting and/or
general meeting are subject to prior consultation and written agreement between the joint
venture parties.
Shareholding pattern as on March 24, 2003:
Name of shareholder
Denso Corporation, Japan
Sumitomo Corporation, Japan
Asmo Co Ltd, Japan
Number of shares
(face value Rs. 10)
13,362,091
2,862,794
1,393,982
Maruti
UTI
Public
Total
2,862,758
1,819,545
5,578,474
27,879,644
Board of Directors as on March 24, 2003:
The directors on the board are:
H Hirahata
J S Baijal
Dr. K Kumar
R K Bhatnagar
A C Chakrabortti
H Niwa
K Matsumoto
K Ando (alternate to K Matsumoto)
K Matsuyama
T Yoshimoto (alternate to K Matsuyama)
Yasushi Nei (alternate to M Ohta
- 140 -
% shareholding
47.93
10.27
5.00
10.27
6.53
20.00
100.00
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
Rs. million
FY02
FY01
FY00
278.79
278.79
278.79
698.67
688.72
651.16
2,496.66 2,380.35 1,954.15
91.83
68.20
14.33
3.29
2.45
0.51
35.06
34.70
33.36
Source: Annual reports of DIL
In January 1986, the company made a public issue of 6,131,490 equity shares of Rs. 10 each for
cash at par aggregating Rs. 61 million.
Share Quotation
Highest and lowest price in the last six months
Month
High (Rs.)
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
Low (Rs.)
20.00
23.40
25.80
26.70
26.00
24.80
18.70
18.70
21.30
22.10
23.50
20.50
As on April 16, 2003, the price of the equity shares of DIL quoted on the BSE was Rs.23.50.
Jay Bharat Maruti Ltd. (JBML)
JBML was incorporated on March 19, 1987. The certificate of commencement of business was
issued by the RoC on April 1, 1987. JBML is engaged in the manufacture and assembly of
automotive sheet metal components.
Maruti entered into a joint venture agreement dated March 17, 1988 with S. K. Arya. Pursuant
to the terms of the agreement, we have a right to nominate 3 out of 12 directors.
We have agreed to give the first preference to purchase items manufactured by JBML, and would
keep JBML as the primary source of supply for the products. JBML is required to satisfy our
requirements for original equipment and spares. After satisfying our requirements, if JBML has
excess capacity, JBML with the prior consent of the joint venture partners may manufacture and
sell similar parts in the market or to other automobile manufacturers in India or abroad.
In case we introduce any new models, the requirement of components will be given to JBML.
The price of such components would be agreed between JBML and ourselves. JBML is required to
manufacture the products as per our quality requirements, for which we will provide technical
know-how to JBML. After 7 years from the date of the agreement, JBML can continue to produce
and manufacture under the same name, style and trademark.
We have indemnified JBML against claims arising out of JBML manufacturing products as per our
drawings, specifications and quality requirements. We have agreed to provide standby water and
power on a chargeable basis to JBML from our own facilities.
- 141 -
Shareholding pattern as on March 20, 2003:
Name of shareholder
Promoters
Non Promoters (Institutional
investors, Banks, FII’s and
FI’s
Others
(Private
corporate
bodies,
Indian
public,
NRI’s/OBCs
Total
Number of shares
(face value Rs. 10)
31,70,201
1,21,075
% shareholding
58.47
2.24
21,21,224
5,412,500
39.19
100.00
* Source filing with the Bombay Stock Exchange for December 31, 2002
Board of Directors as on March 20, 2003:
The directors on the board are:
F.C. Singhal
S.K. Arya
S. Maitra
U.C. Aggarwal
D.P. Agarwal
S.D.S. Mongia
S.P. Arya
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
FY01
54.13
54.13
181.67
263.08
2797.82 2457.59
19.36
21.89
3.58
4.04
43.56
58.60
Rs. million
FY00
54.13
256.10
1890.19
37.95
7.01
57.31
Source: Annual reports of JBML
In September 1988, the company made a public issue of 1,950,000 equity shares of Rs. 10 each
for cash at par aggregating to Rs. 19.5 million.
Share Quotation
Highest and lowest price in the last six months
Month
High (Rs.)
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
Low (Rs.)
25.75
26.25
27.25
28.85
27.50
27.85
23.05
24.00
24.40
25.50
25.50
24.05
As on April 16, 2003, the price of the shares of JBML quoted on the BSE was Rs.25.65.
- 142 -
Machino Plastics Limited (MPL)
MPL a joint venture between Maruti, Suzuki, Machino Techno (Sales) Pvt. Ltd. and M D Jindal
was incorporated on April 2, 1986. The certificate of commencement of business dated April 2,
1986 has been issued by the RoC.
The company has been set up to undertake the business of manufacture of injection plastic parts
in India to be supplied to us for the manufacture of four-wheel vehicles. The company can
engage in only such other business as will be agreed on among Maruti, Suzuki, and Machino
Techno (Sales) Pvt. Ltd.
Maruti entered into a Joint venture agreement dated May 14, 1987 with Suzuki, Machino Techno
(Sales) Pvt. Ltd. Pursuant to the terms of the agreement, we have a right to nominate 1 out of 6
directors on the board of MPL, as long as we remain a shareholder of MPL. So long as we hold
more than 10% of the total number of the issued shares, all major corporate and policy decisions
shall be made after consulting us and with our concurrence.
We shall give first preference to MPL to purchase our requirement for injection plastic parts for
four wheeler vehicles. MPL may engage in only such other business as is agreed upon among
Maruti, Suzuki, Machino Techno (Sales) Pvt. Ltd.
Shareholding pattern as on March 20, 2003:
Name of shareholder
Maruti
Other Indian Promoters
Foreign Promoters
Public
Total
Number of shares
(face value Rs. 10)
470,850
1,274,555
470,850
852,145
3,068,400
% shareholding
15.35
41.53
15.35
27.77
100.00
Board of Directors as of March 20, 2003:
The directors on the board are:
M.D. Jindal
Sanjiv Jindal
Shinichi Takeuchi
G.C. Dwivedi
H.C. Bhasin
Jagdish Kapur
R.L. Gaggar
Harbhajan Singh
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
30.68
212.73
593.64
23.16
7.55
79.33
FY01
30.68
226.19
567.65
22.33
7.28
83.72
Rs. million
FY00
30.68
210.63
493.58
106.52
34.72
78.64
Source: Annual reports of MPL
In January 1989, MPL made a public issue of 2,079,993 equity shares of Rs. 10 each for cash at
par which included allotments of 644,993, 322,500 and 322,500 equity shares of Rs.10/- each to
Indian resident directors, their friends, relatives and private promoters, Maruti and Suzuki
- 143 -
respectively. The balance 790,000 equity shares of Rs.10/- each were offered to the public for
cash at par.
Share Quotation
Highest and lowest price in the last six months
Month
High (Rs.)
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
Low (Rs.)
18.50
18.20
19.20
18.80
16.10
13.80
14.60
14.40
16.00
15.70
13.30
12.50
As on April 16, 2003, the price of the shares of MPL quoted on the BSE was Rs.14.00.
Sona Koyo Steering Systems Ltd. (SKSS)
SKSS a joint venture between Maruti and Dr. Surinder Kapur and associates was incorporated as
“Sona Steering Systems Ltd” on June 14, 1984. The certificate of commencement of business
dated September 20, 1985 has been issued by the RoC. It changed its name to Sona Koyo
Steering Systems Ltd and a fresh certificate of incorporation was issued by the RoC on
September 18, 1998.
SKSS manufactures steering gear systems. SKSS is listed on Mumbai, Delhi, Kolkata, Bangalore,
Ludhiana and Ahmedabad Stock Exchanges.
The joint venture agreement dated 4th February, 1986 provides among other things for its
management. Pursuant to the terms of the we have a right to appoint 1 director to the board of
directors of SKSS, so long as the total number of directors, excluding the directors nominated by
the financial institutions / banks, is not more than 10. In the event this number exceeds 10,
additional representation on the board of directors shall be determined in consultation with Dr.
Surinder Kapur.
We have agreed to give the first preference to purchase steering gear systems from SKSS.
SKSS will endeavour to meet our total requirement for steering gear systems, both original
equipment and spares.
Shareholding pattern as of March 20, 2003:
Name of shareholder
Dr.
Surinder
Associates
Maruti
Public
Kapur
Number of shares
(face value Rs. 10)
% shareholding
&
3,573,955.00
690,000
4,529,445
8,793,400
- 144 -
40.64
7.85
51.51
100.00
Board of Directors as of March 20, 2003:
The directors on the board are:
Dr. Surinder Kapur
A.K. Jain
Kiyoshi Takeda
Jugmohan Kapur
B.L. Passi
Lalit Suri
Chander Uday Singh
Ravi Bhoothalingam
P.K. Chadha
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
Rs. million
FY02
FY01
FY00
87.93
87.93
87.93
391.07
529.08
551.11
2,047.67 2,135.36 2,262.71
47.72
17.79
90.72
5.43
2.02
10.32
54.47
70.17
72.67
Source: Annual reports of SKSS
In August 1991, the company made a public issue of 2,300,000 14% partly convertible
debentures of Rs. 40 each for cash at par aggregating to Rs. 92 million.
Share Quotation
Highest and lowest price in the last six months
Month
High (Rs.)
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
Low (Rs.)
49.75
55.25
55.25
60.00
67.75
69.30
45.00
44.00
40.00
52.15
52.00
58.00
As on April 16, 2003, the price of the shares of SKSS on the BSE was Rs.70.10
Caparo Maruti Ltd. (CML)
CML, a joint venture between Maruti, Caparo Group Ltd., M. D. Jindal and associates, was
incorporated on April 6, 1994. The certificate of commencement of business dated July 5, 1994
has been issued by the RoC.
CML manufactures sheet metal sub-assemblies and components.
Maruti entered into a joint venture agreement dated January 7, 1994 with Caparo Group Ltd. and
M.D. Jindal. Pursuant to the terms of the agreement, we have a right to appoint 2 out of 12
directors to the board of directors of CML.
CML is required to satisfy our requirements for original equipment and spares. After satisfying
our requirements, if CML has excess capacity, CML with the prior consent of the joint venture
partners may manufacture and sell similar parts in the market or to other automobile
- 145 -
manufacturers in India or abroad. We have agreed to supply standby water and power from our
facilities on a chargeable basis to CML.
We have also indemnified CML against any claim that may arise out of CML’s manufacture of
products as per drawings, specifications and quality standards specified by us.
Shareholding pattern as of March 20, 2003:
Name of shareholder
Caparo India Ltd. (UK)
Maruti Udyog Limited
Machino Plastic Ltd.
Machino Techno Sales
Limited.
Machino Finance Pvt. Limited
Others
Total
Number of shares
(face value Rs. 10)
74,999,600
25,000,000
12,500,000
% shareholding
59.99
20.00
10.00
12,499,300
1,100
125,000,000
9.99
0.00
100.00
Board of Directors as of March 20, 2003:
The directors on the board are:
M.D. Jindal
Angad Paul
Ambar Paul
Collin G. Steele
Amitava Nandy
Anil Kr. Asthana
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
125.00
64.50
565.18
31.62
2.53
15.16
FY01
125.00
46.59
410.24
85.71
6.86
13.73
Rs. million
FY00
125.00
42.68
358.05
41.11
3.29
13.41
Source: Annual reports of CML
The company has not made any public or rights issue of its equity shares.
Citicorp Maruti Finance Ltd. (CMFL)
CMFL, a joint venture between Maruti and Citicorp Overseas Investment Corporation Ltd, was
incorporated on October 7, 1997. The certificate of commencement of business has been issued
on November 27, 1997 by the RoC.
CMFL is in the business of providing a full range of consumer finance packages to purchasers of
our vehicles.
Maruti and Citicorp Overseas Investment Corporation Ltd have entered into joint venture
agreement dated September 18, 1997. Pursuant to the terms of this agreement, we have a
right to appoint directors on the basis of proportional representation. All decisions of the board of
directors shall be taken on the basis of approval by majority vote.
- 146 -
There are no financial commitments for either of the joint venture partners other than
contributions made to the capital of CMFL.
We have agreed to license to CMFL, our trade names and applicable trademarks.
The joint venture agreement provides that we will be paid a one-time fee of 0.35 % of the loan
value of each loan given for the purchase of cars manufactured by us.
Shareholding pattern as on March 24, 2003:
Name of shareholder
Maruti
Citicorp Finance (India) Ltd.
Total
Number of shares
(face value Rs. 10)
26,000,000
74,000,000
100,000,000
% shareholding
26.00
74.00
100.00
Board of Directors as on March 24, 2003:
The directors on the board are:
Sarvesh Sarup
Sanjoy Sen
Nanoo Pamnani
Jagdish Khattar
Kinji Saito
N Rajashekaran
P S Jayakumar
S Venkatachalam
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Income
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
FY01
1000.00 1000.00
-23.65
-42.28
1,091.64
967.14
86.40
84.10
0.86
0.84
9.76
9.58
Rs. million
FY00
750.10
-29.72
699.96
70.46
0.94
9.60
Source: Annual reports of CMFL
The company has not made any public or rights issue of its equity shares.
Climate Systems India Ltd. (CSIL)
CSIL, a joint venture between Maruti and the Ford Motor Company (“Ford”), was incorporated as
Climate Control (India) Pvt. Ltd. on December 6, 1991. The company changed its name to
Climate Systems India Ltd and was given a fresh certificate of incorporation consequent to
change of name dated March 24, 1994.
CSIL is in the business of manufacture and sale of mechanically assembled aluminum radiators,
primarily for the Indian markets and for exports.
Maruti and Ford have entered into a joint venture agreement dated December 17, 1991.
Pursuant to the terms of the agreement, we have a right to appoint 1 permanent director out of
the 3 directors on the board. In the event the board of directors comprises 5 directors, we shall
be entitled to appoint 1 permanent director and one non-permanent director.
- 147 -
The joint venture agreement also provides for CSIL to expand into a full service engine cooling
and climate control supplier primarily for the Indian market. We have to purchase from CSIL
100% of its production of mechanically assembled aluminum radiators to be installed in certain
vehicles. We have entered into a purchase agreement with CSIL for this purpose.
During the term of the agreement, Ford and we will not, directly or through a subsidiary, affiliate
or related company manufacture, assemble or sell mechanically assembled aluminum radiators,
automotive heaters, and other climate control products in India.
Shareholding pattern as of March 20, 2003:
Name of shareholder
Visteon International Holding
Inc., USA
Maruti
Sumitomo Corporation
Total
Number of shares
(face value Rs. 100)
744,800
% shareholding
56.00
518,700
66,500
1,330,000
39.00
5.00
100.00
Board of Directors as of March 20, 2003:
The directors on the board are:
N.S. Mohan
Jagdish Khattar
Clifford B. Dawson
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
133.00
81.58
368.60
13.02
9.79
161.34
FY01
133.00
81.51
438.56
7.01
5.27
161.29
Rs. million
FY00
133.00
83.31
432.50
5.45
4.10
162.64
Source: Annual reports of CSIL
The company has not made any public or rights issue of its equity shares.
J J Impex (Delhi) Private Limited (“JJIDPL”)
JJIDPL a joint venture between Maruti, Sumitomo Corporation, Maruti Countrywide Auto Financial
Services Ltd. was incorporated on June 13, 1976.
The company is in the business repair and service of our automobiles, sale of spare parts and
accessories of motor vehicles and sale and purchase of automobiles and dealers in articles and
commodities connected to the business of JJIDPL.
Maruti entered into a joint venture agreement dated April 1, 1999 with Sumitomo Corporation
and Maruti Countrywide Auto Financial Services Ltd. Pursuant to the terms of the agreement, we
have a right to nominate 3 directors out of 7 directors to the board of directors. We have a right
to appoint the chairman as well as managing director or chief executive officer of JJIDPL. The
chairman shall have a casting vote in a board meeting. In order to constitute a valid quorum for
a meeting of the board of directors, at least 1 of our nominee directors should be present.
Subject to the due constitution of the quorum, any action of the Board may be taken by an
affirmative vote of at least 1 of our directors.
- 148 -
We cannot set up any other joint venture for workshops in Delhi without prior consent from
Sumitomo. This restriction applies for five years after activation of the first workshop with
Sumitomo and MCFL.
We have agreed that for setting up additional workshops after five years, we will consider
Sumitomo on merit basis. Outside Delhi, we shall be free to own and set up additional
workshops through joint ventures.
Shareholding pattern as on March 20, 2003:
Name of shareholder
Maruti
Sumitomo Corporation
Maruti
Countrywide
Auto
Financial Services Ltd.
Sumitomo Corporation India
Pvt. Ltd.
Total
Number of shares
(Face value Rs. 10)
4,323,750
3,443,750
152,500
% shareholding
49
39
1.73
880,000
10.00
8,800,000
100
Board of Directors as on March 20, 2003:
The directors on the board are:
Jagdish Khattar
Dr. K. Kumar
Pankaj Narula
Sanjay Gupta
K. Matsuyama
Shoichiro Oka
Toshio Yoshimoto
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS)
Net Asset Value (NAV) per share
FY02
30.50
4.47
127.78
5.05
1.65
11.47
(in Rs. million)
FY01
FY00
30.50
30.50
-0.89
-2.96
80.22
22.10
1.76
-1.82
0.58
9.71
9.03
Source: Annual reports of JJIDPL
The company has not made any public or rights issue of its equity shares.
Krishna Maruti Limited (KML)
KML, a joint venture between Kapur & Associates, Suzuki and Maruti, was originally incorporated
on June 25, 1991 in the name of “Sona Car Seats Ltd.”. The certificate for the commencement of
business dated September 17, 1991 has been issued by the RoC. The name of the company was
changed to “Krishna Maruti Ltd.” a fresh certificate of incorporation dated November 15, 1994
was issued by RoC.
The company is in the business of manufacturing seats for four-wheel vehicles.
Maruti entered into a joint venture agreement dated June 24, 1993 with Suzuki and Kapur &
Associates. Pursuant to the joint venture agreement we have the right to nominate 1 director
- 149 -
out of 6 directors to the board of directors. All major corporate and policy decisions shall be
made after consulting us and with our concurrence, so long as we hold more than 10% of the
total number of the issued shares.
KML may engage in only such other business as will be agreed upon among Suzuki, Kapur &
Associates and us from time to time.
Suzuki and we have agreed not to undertake any business in competition with KML’s business in
India either directly or indirectly. Suzuki and our existing investments are not affected by this
restriction.
Shareholding pattern as on March 20, 2003 :
Name of shareholder
Suzuki
Maruti
Mr. Ashok Kapur & Associates
Fidelity Investments Limited
Total
Number of shares
(Face value Rs. 10)
1,240,000
670,000
1,910,000
1,280,000
5,100,000
% shareholding
24.31
13.14
37.45
25.10
100.00
Board of Directors as on March 20, 2003 :
The directors on the board are:
Ashok Kapur
K. Kumar
S. Takeuchi
Sanjay Labroo
Arminder S. Sawhney
Sunandan Kapur
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
Rs. million
FY02
FY01
FY00
51.00
51.00
51.00
283.82
220.04
215.83
1,690.52 1,558.87 1,154.06
76.89
17.16
67.11
15.08
3.36
13.16
65.65
53.15
52.32
Source: Annual reports of KML
The company has not made any public or rights issue of its equity shares.
Mark Auto Industries Ltd (MAIL)
MAIL, a joint venture between Maruti, K M Talwar and Rattan Kapur & Associates, was
incorporated on March 18, 1986. The certificate of commencement of business dated April 4,
1986 has been issued by the RoC.
The company is in the business of manufacturing of automotive assemblies and components.
Maruti, K M Talwar and Rattan Kapur & Associates entered into a joint venture agreement dated
December 19, 1986. Pursuant to the terms of the agreement, we have a right to nominate 2
directors out of 12 directors to the board of directors.
- 150 -
MAIL will be the primary source of Maruti for products manufactured by MAIL. After meeting
Maruti’s requirements, MAIL shall be free to manufacture the products for the industry in
general.
Shareholding pattern as of March 20, 2003 :
Name of shareholder
Maruti
Bodies Corporate
Non-Resident Indians
Resident Individuals
Total
Number of shares
(Face value Rs. 10)
1,840,000
2,124,150
326,000
1,139,850
5,430,000
% shareholding
33.89
39.12
6.00
20.99
100.00
Board of Directors as of March 20, 2003 :
The directors on the board are:
R.P. Goyal
Kallol Roy
S. Natarajan
Amitava Nandy
R. Dayal
Rattan Kapur
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
Rs. million
FY02
FY01
FY00
54.30
54.30
54.30
140.44
137.73
158.77
1,270.53 1,220.66 1,260.82
3.02
-25.11
6.90
0.56
1.27
35.86
25.36
39.24
Source: Annual reports of MAIL
The company has not made any public or rights issue of its equity shares.
Maruti Countrywide Auto Financial Services Limited (MCAFSL)
MCAFSL, a joint venture between Maruti, Housing Development Finance Company Ltd. and GE
Capital Services India Ltd., was incorporated on June 26, 1995. The company is in the business
of leasing and financing of Maruti vehicles, office equipment and machinery.
Maruti, Housing Development Finance Company Ltd. and GE Capital Services India Ltd. entered
into a joint venture agreement dated May 24, 1995. Pursuant to the terms of the agreement, we
(along with our dealers) have a right to nominate 2 out of 6 directors on the board, as long as
our shareholding remains at 10% or more. A valid quorum shall require the presence of at least
1 of our directors. All decisions of the board of directors shall be taken on the basis of approval
by majority vote.
- 151 -
Shareholding pattern as on April 1, 2003:
Name of shareholder
Maruti
Housing
Development
Finance Corporation Ltd.
GE Capital Services India Ltd.
Total
Number of shares
10,400,000
14,800,000
% shareholding
26
37
10,400,000
40,000,000
37
100
Board of Directors as on April 1, 2003:
The directors on the board are:
Pramod Bhasin
Jagdish Khattar
Vishal Pandit
Ridha Wirakusumah
Kinji Saito
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Total Income
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
400.00
37.97
581.60
-44.67
FY01
400.00
39.32
625.38
-4.73
10.95
10.98
Rs. million
FY00
400.00
100.26
699.57
24.52
0.61
12.51
Source: Annual reports of MCAFSL
The company has not made any public or rights issue of its equity shares.
Nippon Thermostat (India) Limited (“NTIL”)
NTIL, a joint venture between Maruti, Nippon Thermostat Corporation and Mr. V. Chidambaram,
was incorporated on May 16, 1994. The Additional Registrar of Companies, Tamil Nadu, issued
the certificate of commencement of business dated May 23, 1994.
The company is in the business of manufacturing of automotive components.
Maruti, Nippon Thermostat Corporation and Mr. V. Chidambaram entered joint venture
agreement dated April 26, 1995. Pursuant to the terms of the agreement, we have a right to
nominate 1 director out of 9 directors on the board of directors.
NTIL is required to satisfy our requirements for original equipment and spares. After satisfying
our requirements, if NTIL has excess capacity, NTIL with the prior consent of the joint venture
partners may manufacture and sell similar parts in the market or to other automobile
manufacturers in India or abroad.
Shareholding pattern as on March 20, 2003 :
Name of shareholder
Nippon Thermostat
Corporation
Maruti
Mrs. Seetha Chidambaram
Mr. V. Venkatachalam
Number of shares
(Face Value Rs. 10/-)
375,000
125,000
441,623
232,625
- 152 -
% shareholding
30.00
10.00
35.33
18.61
Others
Total
75,752
1,250,000
6.06
100.00
Board of Directors as on March 20, 2003 :
The directors on the board are:
Seetha Chidambaram
Y Onishi
T Hatanaka
I V Rao
J Sridhar
C Venkatachalam
T K Kameshwaran
If the composition of the Board is as on March 20, 2003, then V. Chidambaram will be replaced
with Mrs. Seetha Chidambaram. Mrs Seetha Chidambaram appointed as an Executive
Chairperson at the Board Meeting held on 03.02.2003.
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
12.50
14.18
90.15
4.81
3.85
21.34
FY01
12.50
10.66
75.24
1.45
1.16
18.53
Rs. million
FY00
12.50
10.03
44.53
3.25
2.60
18.02
Source: Annual reports of NTIL
The company has not made any public or rights issue of its equity shares.
Mark Exhaust Systems Ltd (“MESL”)
MESL, a joint venture between Maruti and Kapur & Associates, was incorporated on November 3,
1993. The certificate of commencement of business dated January 18, 1994 has been issued by
the RoC. MESL commenced business on February 12, 1996.
The company is in the business of manufacturing of exhaust systems and door sashes.
Maruti and Kapur & Associates entered a joint venture agreement dated February 10, 2002.
Pursuant to the terms of the agreement, we have a right to nominate 3 directors out of 6
directors to the board of directors. As long as we hold at least 26% of the shareholding in MESL,
we have the right to appoint the joint managing director. The appointment of the managing
director by Kapur & Associates can only be made after consulting us and obtaining our
concurrence and approval. So long as we hold, directly or indirectly, at least 26% of the
shareholding, all major corporate and policy decisions shall be made by the board of directors
only.
MESL is required to satisfy our requirements for Exhaust Systems and Door Sashes. After
satisfying our requirements, if MESL has excess capacity, MESL may supply the excess Exhaust
Systems and Door Sashes to any other party. However, MESL, with our prior consent, may
manufacture and sell similar parts in the market or to other automobile manufacturers in India
or abroad. (Annexure 1 to the JV Agreement not available in our copy, so we are unable to
comment upon this sentence.)
- 153 -
If we grant our consent, MESL has agreed to pay a royalty to us on the sale of such products to
customers, other than us. This royalty is 3% (for 4 - wheelers) and 2% (for 2 - wheelers) of exfactory value of product minus cost of raw material.
Kapur & Associates have agreed that it will not directly or indirectly compete with the business of
MESL in India except where the investment has been made by Kapur & Associates in companies
in India manufacturing exhaust systems or door sashes prior to the date of the agreement.
Shareholding pattern as of March 20, 2003:
Name of shareholder
Maruti
Sankei Giken Kogyo Co. Ltd.
Japan
Nissho
Iwai
Corporation,
Japan
Chanson
Shipping
&
Packaging Co. Pvt. Ltd.
Spinx Auto (India) Pvt. Ltd.
Rattan Kapur (HUF)
Others
Total
Number of shares
(Face Value Rs. 10/-)
4,437,465
750,000
% shareholding
375,000
44.37
10.00
5.00
1,075,000
1,875,000
387,465
1,100,070
10,000,000
5.17
100.00
Board of Directors as of March 20, 2003 :
The directors on the board are:
R.P. Goyal
Rattan Kapur
S.K. Bhatia
S. Natarajan
K.T.S. Tulsi
Kallol Roy
Sandeep Chandok
Financial performance:
Equity Capital
Share Application Money
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS) (Rs.)
Net Asset Value (NAV) per share (Rs.)
FY02
FY01
75.00
75.00
25.00
6.25
41.97
34.82
1,155.10 1,118.41
16.01
15.62
2.13
2.08
15.60
14.64
Rs. million
FY00
75.00
0.00
12.57
631.54
5.13
0.68
11.68
Source: Annual reports of MESL
The company has not made any public or rights issue of its equity shares.
Suzuki Metal India Limited (“SMIL”)
SMIL a joint venture between Maruti and Suzuki was incorporated on November 14, 2002. The
certificate of commencement of business dated November 21, 2002 was issued by the RoC.
- 154 -
The company has not begun its operations and will be engaged in the business of manufacturing
aluminum die casting and low pressure casting engine parts such as cylinder blocks,
transmission cases, cylinder heads, etc. for four wheelers and two-wheelers.
Maruti and Suzuki entered into a joint venture agreement dated November 1, 2002. Pursuant to
the terms of the agreement, as long as the shareholding ratio between us and Suzuki remains
49% and 51% respectively, we have a right to nominate 2 directors and Suzuki has a right to
nominate 3 directors.
We have agreed that SMIL will be granted license and rights under a license agreement, to be
entered into between Suzuki and SMIL for technical information, which may be construed as
conflicting with the rights and licenses already granted under the existing license agreements
between Suzuki and us. (See details under section titled “License Agreements” under “Our
Promoter”). We have agreed that we will not insist on its exclusivity nor claim from Suzuki or
SMIL any compensation, fee, royalty or other consideration in connection with the execution of
the license agreement and any transactions as contemplated thereby.
Shareholding pattern:
Name of shareholder
Suzuki and 5 Nominees
Maruti
Total
Number of shares
(Face Value Rs. 10/-)
12,750,000
12,250,000
25,000,000
% shareholding
51.00
49.00
100.00
Board of Directors:
The directors on the board are:
Motohiro Atsumi
Tadashi Kitano
S. Takeuchi
Shosei Yamamoto
Vipin Dang
The company has not completed its first year of operations.
The company has not made any public or rights issue of its equity shares.
VENTURES PROMOTED BY SUZUKI
Suzuki has promoted another venture in India, Subros Ltd., the details of which are listed below:
Subros Ltd.
Subros, a joint venture between Denso Corporation, Japan and Suzuki, was incorporated on
February 14, 1985 with the name Subros Pvt. Ltd. Subsequently, the name was changed to
Subros Ltd and the RoC issued a fresh certificate of incorporation on October 17, 1985. The
company is engaged in the business of manufacturing, processing, assembling, repairing or
otherwise dealing in all kinds of air conditioners, water coolers, refrigerators, cooling towers and
their allied machines, equipment units, parts and accessories in India and abroad.
- 155 -
Shareholding pattern as on April 1, 2003:
Name of shareholder
Promoters and associates
Suzuki
Denso Corporation, Japan
Foreign Financial Institutions
Govt./
Banks/
Govt.
sponsored Institutions
Public (Others)
Total
Number of shares
(Face Value Rs. 10/-)
2,400,000
780,000
780,000
28,101
143,975
% shareholding
40.00
13.00
13.00
0.47
2.41
1,866,784
5,998,860
31.12
100.00
Board of Directors as on April 1, 2003:
The directors on the board are:
Ramesh Suri
Lalit Suri
Shradha Suri
Y Nakamura
Hiroshi Uchiyama
P Sabanayagam
G N Mehra
Yasushi Nei
Shailendra Swarup
KR Ramamoorthy
Financial performance:
Equity Capital
Reserves (Excluding Revaluation Reserve)
Sales (Gross including excise)
Profit after Tax (PAT)
Earnings per share (EPS)
Net Asset Value (NAV) per share (Rs.)
FY02
FY01
59.99
59.99
548.06
697.65
4784.11 5053.51
50.81
28.47
8.47
4.75
101.36
126.29
Rs. million
FY00
59.99
700.59
4845.18
139.04
23.18
126.78
In April 1995, the company made a rights issue of 2,250,000 equity shares of Rs. 10 each for
cash at a premium of Rs. 23/- per equity share aggregating Rs. 74.25 million to existing
shareholders in the ratio of 3 equity shares for 5 equity shares held.
Share Quotation
Highest and lowest price in the last six months
Month
High (Rs.)
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
Low (Rs.)
34.00
31.95
32.40
37.70
35.30
32.50
30.50
28.45
29.65
29.60
31.20
24.75
As on April 16, 2003, the price of the shares of Subros on the BSE was Rs. 28.50.
- 156 -
COMPANIES WITH WHICH SUZUKI HAS DISASSOCIATED IN THE LAST THREE YEARS
TVS Suzuki Ltd.
After several years of a joint venture with Sundaram Clayton Limited (“SCL”) in TVS-Suzuki
Limited, now known as TVS Motor Company Limited (“TVS”), Suzuki and SCL mutually agreed for
a gradual and amicable parting of ways in order to pursue their respective business interests.
The terms of the amicable disassociation are given below:
•
•
Suzuki sold its entire shareholding of 6 million shares to Anusha Investments Limited, a
subsidiary of SCL, for a consideration of Rs. 90 million.
The License Agreement between Suzuki and TVS was continued for a period of thirty
months from September 27, 2001 to enable TVS to produce the licensed products during
the said period under the Suzuki brand name. However, TVS had the option for an early
termination of the License Agreement. Pursuant to the exercise of this option, the
License Agreement came to an end on April 30, 2002.
The TVS Group is entitled to continue manufacturing two-wheeler vehicles under its own brand
name. While TVS and SCL gave no-objection certificates to Suzuki to establish commercial
production and sale of Suzuki’s two-wheeler and other products in India through such presence
as Suzuki may determine, Suzuki contractually agreed to commence commercial production
supply and sale of powered two wheelers in India after a period of thirty months from September
27, 2001, i.e. after April 26, 2004.
NEW VENTURES OF SUZUKI IN INDIA
Suzuki has received permission from the FIPB for investment upto 100% in the paid-up equity
capital of a venture in India for the manufacture of two-wheelers.
COMPANIES FOR WHICH AN APPLICATION IS MADE TO
STRIKING OFF NAME
REGISTRAR OF COMPANIES FOR
No application has been made to the Registrar of Companies for striking off the name of any
promoter group company from its records.
- 157 -
RELATED PARTY TRANSACTIONS
The Company has entered into the following related party transactions. Such parties and transactions are identified as per Accounting
Standard 18 issued by Institute of Chartered Accountants of India.
Related Party
Relationship
Period
Outstanding at year/period end
Loans and advances recoverable
Amounts payable
Guarantees given to third parties by the
Company / Co-lessee in agreements
entered between vendors, as lessee and
Finance Companies, as lessors
Proposed Dividend
Amount recoverable
Interest recoverable
Transaction during the year/period
Purchases of Capital items
Sale of goods
Other Income
Rendering of services
Finance Income
Recovery of Power & Fuel Cost
Dividend
Royalty
Commission
Others
Expenditure
Purchases of goods
Royalty
Interest
Receiving of services
(Rs. in million)
Maruti Insurance
True Value
Maruti
Distribution
Solutions Limited
Insurance
Brokers Limited Services Limited
Joint Venture
Joint Venture
Subsidiary
Subsidiary
Subsidiary
Apr
02- Apr 01- Apr
02- Apr 01- Apr
Apr 01- Apr 02- Apr
Apr 02- Apr 01Dec 02
Mar 02 Dec 02
Mar 02 02-Dec Mar 02 Dec 02
01Dec 02 Mar 02
02
Mar 02
J.J. Impex (Delhi)
Private Limited
Mark Exhaust
Systems Limited
10
-
19
-
13
21
248
7
79
302
1
-
0
-
1
-
0
-
0
-
0
-
3
7
6
-
2
42
5
-
-
-
-
-
-
33
41
-
33
-
-
-
-
-
-
-
1
-
10
-
14
8
-
-
-
-
-
-
-
-
469
0
-
709
0
-
-
-
-
-
5
-
- 158 -
Related Party
Relationship
Period
Outstanding at year/period end
Loans and advances recoverable
Amounts payable
Guarantees given to third parties by the
Company / Co-lessee in agreements
entered between vendors, as lessee and
Finance Companies, as lessors
Proposed Dividend
Amount recoverable
Interest recoverable
Transaction during the year/period
Purchases of Capital items
Sale of goods
Other Income
Rendering of services
Finance Income
Recovery of Power & Fuel Cost
Dividend
Royalty
Commission
Others
Expenditure
Purchases of goods
Royalty
Interest
Receiving of services
(Rs. in million)
Denso India
Asahi India Glass
Bharat Seats
Caparo Maruti Climate Systems
India Limited
Limited
Limited
Limited
Limited
Associate
Associate
Associate
Associate
Associate
Apr
02- Apr 01- Apr
02- Apr 01- Apr
Apr 01- Apr 02- Apr
Apr 02- Apr 01Dec 02
Mar 02 Dec 02
Mar 02 02-Dec Mar 02 Dec 02
01Dec 02 Mar 02
02
Mar 02
0
30
-
0
45
-
3
29
-
39
-
1
14
-
12
21
-
0
15
-
20
-
0
36
-
62
-
-
0
0
-
4
-
35
7
299
30
-
0
-
-
0
-
-
0
-
2
-
279
-
-
-
-
4
6
5
-
2
-
4
5
1
-
5
4
1
-
0
32
7
2
92
38
8
4
104
1
5
-
2
2
-
6
3
-
8
3
-
573
0
-
787
0
-
591
0
-
516
0
-
331
0
-
293
0
-
224
0
-
270
-
832
-
1,135
0
-
- 159 -
Related Party
Relationship
Period
Outstanding at year/period end
Loans and advances recoverable
Amounts payable
Guarantees given to third parties by the
Company / Co-lessee in agreements
entered between vendors, as lessee and
Finance Companies, as lessors
Proposed Dividend
Amount recoverable
Interest recoverable
Transaction during the year/period
Purchases of Capital items
Sale of goods
Other Income
Rendering of services
Finance Income
Recovery of Power & Fuel Cost
Dividend
Royalty
Commission
Others
Expenditure
Purchases of goods
Royalty
Interest
Receiving of services
(Rs. in million)
Machino
Mark Auto
Nippon
Plastics Limited
Industries
Thermostat
Limited
(India) Limited
Associate
Associate
Associate
Associate
Associate
Apr
02- Apr 01- Apr
02- Apr 01- Apr
Apr 01- Apr 02- Apr
Apr 02- Apr 01Dec 02
Mar 02 Dec 02
Mar 02 02-Dec Mar 02 Dec 02
01Dec 02 Mar 02
02
Mar 02
Jay Bharat Maruti
Limited
Krishna Maruti
Limited
34
95
58
232
1
50
8
96
23
25
9
46
64
23
30
72
1
3
10
737
943
199
254
343
437
180
227
-
-
29
6
237
11
0
2
0
59
0
61
1
6
1
17
1
0
0
0
21
139
-
0
1
33
-
2
-
-
4
37
24
4
166
9
45
26
4
252
8
-
14
3
0
3
20
1
-
11
17
1
-
7
16
1
0
12
14
0
1
-
1
0
-
1,671
0
-
2,082
0
-
1,056
0
-
950
0
-
409
0
-
516
0
-
477
0
-
520
-
61
0
-
99
-
- 160 -
Related Party
Relationship
Period
Outstanding at year/period end
Loans and advances recoverable
Amounts payable
Guarantees given to third parties by the
Company / Co-lessee in agreements
entered between vendors, as lessee and
Finance Companies, as lessors
Proposed Dividend
Amount recoverable
Interest recoverable
Transaction during the year/period
Purchases of Capital items
Sale of goods
Other Income
Rendering of services
Finance Income
Recovery of Power & Fuel Cost
Dividend
Royalty
Commission
Others
Expenditure
Purchases of goods
Royalty
Interest
Receiving of services
Sona Koyo
Citicorp Maruti
Steering Systems
Finance Limited
Limited
Associate
Associate
Apr
02- Apr 01- Apr
02- Apr 01Dec 02
Mar 02 Dec 02
Mar 02
(Rs. in million)
Maruti Countrywide Auto
Financial Services Limited
Apr
02
Suzuki Motor
Corporation
Associate
Holding Company
02-Dec Apr 01- Mar Apr 02- Apr
0102
Dec 02
Mar 02
1
37
-
0
75
-
7
18
-
30
-
6
13
-
23
-
483
-
645
-
-
1
-
-
5
-
-
3
-
5
-
199
4
-
-
-
-
-
-
-
4
-
508
-
6
1
-
10
2
-
7
12
20
15
16
2
8
14
10
1
-
-
783
0
-
1,256
0
-
-
-
-
-
6,002
872
8,034
1,186
5
47
9
29
74
108
- 161 -
Related Party
Suzuki Metals India
Limited *
Relationship
Fellow Subsidiary
Period
Apr
02- Apr
01- Apr 02-Dec 02
Dec 02
Mar 02
Outstanding at year/period end
Loans and advances recoverable
60
Amounts payable
Guarantees given to third parties by
the
Company
/
Co-lessee
in
agreements entered between vendors,
as lessee and Finance Companies, as
lessors
Proposed Dividend
Amount recoverable
Interest recoverable
Transaction
during
year/period
Purchases of Capital items
Sale of goods
Suzuki Motor
GMBH
Deutschland
Fellow Subsidiary
-
(Rs. in million)
Suzuki Europe S Suzuki France S Suzuki Italia S P
A
A
A
Fellow
Subsidiary
Apr 02-Dec 02
Fellow
Subsidiary
Apr 02-Dec 02
Fellow
Subsidiary
Apr 02-Dec 02
0
-
-
-
0
8
-
-
0
-
-
-
-
-
-
-
-
-
363
1
-
-
-
-
-
-
-
-
3,517
4
5
4
-
the
16
Other Income
Rendering of services
Finance Income
Recovery of Power & Fuel Cost
Dividend
Royalty
Commission
Others
Expenditure
Purchases of goods
Royalty
Interest
Receiving of services
-
-
-
4
-
-
-
-
-
-
-
-
- 162 -
Related Party
Suzuki Australia
Pty. Ltd.
Relationship
Fellow Subsidiary
Period
Apr 02-Dec 02
Outstanding at year/period end
Loans and advances recoverable
Amounts payable
Guarantees given to third parties by the Company /
Co-lessee in agreements entered between vendors,
as lessee and Finance Companies, as lessors
Proposed Dividend
(Rs. in million)
Suzuki Austria
Suzuki GB PLC
Automobil Handels
GmBH
Fellow Subsidiary
Fellow
Subsidiary
Apr 02-Dec 02
Apr 02-Dec 02
Magyar Suzuki
Corp.
Fellow Subsidiary
Apr 02-Dec 02
-
-
-
0
0
-
5
-
-
-
-
Amount recoverable
-
Interest recoverable
0
-
-
-
-
-
14
0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Transaction during the year/period
Purchases of Capital items
0
Sale of goods
Other Income
Rendering of services
2
-
Finance Income
-
Recovery of Power & Fuel Cost
-
Dividend
-
Royalty
-
Commission
-
Others
-
Expenditure
Purchases of goods
-
- 163 -
-
Royalty
-
-
Interest
Receiving of services
-
-
-
-
-
-
Related Party
Suzuki Motor Poland
Ltd.
Fellow Subsidiary
Apr 02-Dec 02
Relationship
Period
Outstanding at year/period end
Loans and advances recoverable
Amounts payable
Guarantees given to third parties by the Company / Colessee in agreements entered between vendors, as
lessee and Finance Companies, as lessors
Proposed Dividend
Amount recoverable
Interest recoverable
Transaction during the year/period
Purchases of Capital items
Sale of goods
Other Income
Rendering of services
Finance Income
Recovery of Power & Fuel Cost
Dividend
Royalty
Commission
Others
Expenditure
Purchases of goods
Royalty
Interest
Receiving of services
Note:
1.
-
-
(Rs. in million)
Faffin Gesellschaft for
factoring & leasing
Fellow Subsidiary
Apr 02-Dec 02
Total
Apr 02-Dec 02 Apr 01- Mar 02
0
-
-
226
905
1,707
143
1,495
2,163
-
-
505
23
199
681
48
0
-
4
3,613
508
529
-
-
4
119
72
29
20
34
263
9
166
69
37
27
3
364
-
-
13,479
872
0
93
17,167
1186
0
184
Maruti Udyog Limited (MUL) became subsidiary of Suzuki Motor Corporation (Suzuki) in May 02. Hence, subsidiaries of Suzuki became fellow
subsidiaries of MUL as per AS-18. Therefore, transaction details for fellow subsidiaries have been given for the period Apr 02 – Dec 02 only.
- 164 -
Remuneration paid to Key Management Personnel during the period April 2001 - March 2002 and
April 2002 – December 2002 is as follows:
(Rs. in million)
Name
Designation
April 02- Dec 02 April 01 - March
02
Jagdish Khattar
Yuichi Nakamura
Managing Director
Joint Managing Director
(from 21st September 2001)
T. Kobayashi
Joint Managing Director
(upto 15th September 2001)
J Sugimori
Director (Marketing & Sales)
(upto 27th May, 2002)
Kinji Saito
Director (Marketing & Sales)
(from 30th May, 2002)
A.R. Halasyam
Director (Finance)
(upto 7th September, 2001)
Isao Ozawa
Director (Finance)
(from 30th May 2002 to 31st August, 2002)
Motohiro Atsumi
Director (Finance)
(from 16th September, 2002)
Shinichi Takeuchi
Director (Production)
(from 27th September, 2001)
Dr.Krishan Kumar
Director (Engineering)
(upto 8th June 2001)
Shinzo Nakanishi
Chairman
(from 30th May 2002)
Yoshio
Saito Chairman
(upto 27th May 2002)
Osamu Suzuki
Director
Hirofumi Nagao
Director
(from 30th May 2002)
Pradeep Kumar
Director
(upto 11th September 2002)
K.K.Jaswal
Director
(upto 02nd July 2002)
V.K.Malhotra
Director
(from 19th July 2002)
Total
- 165 -
6
5
3
2
-
2
1
4
4
-
-
2
1
-
2
-
5
2
-
1
-
-
-
-
-
-
-
-
-
-
-
-
24
16
RELATED PARTY TRANSACTIONS DETAILS FOR THE PERIOD APRIL 01 – MARCH 02 AND APRIL 02- DECEMBER 02
(Rs. in million)
Relationship
Joint Venture
Subsidiary
Associate
Holding
Fellow
Total
Company
Subsidiar
y
Period
Apr
Apr
Apr
Apr
Apr
Apr
Apr 02- Apr
Apr
02- Apr 02- Apr 0102-Dec 0102-Dec 0102-Dec 01Dec 02
01Dec 02
Dec 02 Mar 02
02
Mar 02 02
Mar 02 02
Mar 02
Mar 02
Outstanding at year/period end
Loans and advances recoverable
23
26
2
0
141
117
-
-
60
226
143
Amounts payable
21
79
-
-
388
771
483
645
13
905
1495
248
302
-
-
1,459
1,861
-
-
-
1,707
2,163
Guarantees given to third parties by the
Company / Co-lessee in agreements entered
between vendors, as lessee and Finance
Companies, as lessors
Proposed Dividend
-
-
-
-
-
-
-
199
-
-
199
Amount recoverable
3
48
-
-
129
629
5
4
368
505
681
Interest recoverable
9
5
-
-
14
43
-
-
-
23
48
-
-
-
-
-
-
4
508
-
4
508
33
74
-
-
22
455
-
-
3,558
3,613
529
Transaction during the year/period
Purchases of Capital items
Sale of goods
Other Income
Rendering of services
Finance Income
-
-
-
-
4
9
-
-
-
4
9
10
14
-
-
109
152
-
-
-
119
166
Recovery of Power & Fuel Cost
-
-
-
-
72
69
-
-
-
72
69
Dividend
-
-
-
-
29
37
-
-
-
29
37
Royalty
-
1
-
-
20
26
-
-
-
20
27
Commission
-
-
-
-
34
3
-
-
-
34
3
Others
-
8
-
-
259
356
-
-
4
263
364
Expenditure
Purchases of goods
469
709
-
-
7,008
8,424
6,002
8,034
-
13,479
17,167
Royalty
-
-
-
-
-
-
872
1,186
-
872
1186
Interest
0
0
-
-
0
-
-
-
-
0
0
Receiving of services
-
-
5
-
14
76
74
108
-
93
184
Note:
1.
Maruti Udyog Limited (MUL) became subsidiary of Suzuki Motor Corporation (Suzuki) in May 02.Hence, subsidiaries of Suzuki became fellow
subsidiaries of MUL as per AS-18. Therefore, transaction details for fellow subsidiaries have been given for the period Apr 02 – Dec 02 only.
- 166 -
Remuneration paid to Key Management Personnel during the period April 2001 - March 2002 and April 2002 – December 2002 is as
follows:
Period
April 2001 – March 2002
April 2002 – December 2002
(Rs. in Million)
Amount
16
24
- 167 -
HOLDING COMPANY:
Suzuki Motor Corporation
SUBSIDIARIES
Maruti Insurance Brokers Limited
Maruti Insurance Distribution Services Limited
True Value Solutions Limited
ASSOCIATES
Asahi India Glass Limited
Bharat Seats Limited
Caparo Maruti Limited
Climate Systems India Limited
Citicorp Maruti Finance Limited
Denso India Limited
Jay Bharat Maruti Limited
Krishna Maruti Limited.
Machino Plastics Limited.
Mark Auto Industries Limited.
Maruti Countrywide Auto Financial Services Limited.
Nippon Thermostat (India) Limited
Sona Koyo Steering Systems Limited
FELLOW SUBSIDARIES
Suzuki Metals India Limited *
Faffin Gesellschaft for factoring & leasing.
Magyar Suzuki Corp.
Suzuki Motor Poland Ltd.
Suzuki GB PLC.
Suzuki Australia Pty. Ltd.
Suzuki Austria Automobil Handels GmBH.
Suzuki Motor GMBH Deutschland
Suzuki Europe S A
Suzuki France S A
Suzuki Italia S P A
JOINT VENTURE
J.J. Impex (Delhi) Private Limited
Mark Exhaust Systems Limited
KEY MANAGEMENT PERSONNEL
Shinzo Nakanishi (from 30th May 2002)
Yoshio Saito (upto 27th May 2002)
Jagdish Khattar
Yuichi Nakamura (from 21st September 2001)
T.Kobayashi (upto 15th September 2001)
Kinji Saito (from 30th May, 2002)
J. Sugimori (upto 27th May, 2002)
Motohiro Atsumi (from 16th September, 2002)
Isao Ozawa (from 30th May 2002 to 31st August, 2002)
A.R. Halasyam (upto 7th September, 2001)
Shinichi Takeuchi (from 27th September, 2001)
Dr. Krishan Kumar (upto 08th June 2001)
Osamu Suzuki
Hirofumi Nagao (from 30th May 2002)
Pradeep Kumar (upto 11th September 2002)
K.K.Jaswal (upto 02nd July 2002)
V.K.Malhotra (from 19th July 2002)
Suzuki Metal India Limited is an associate of Maruti Udyog Limited and a subsidiary of Suzuki Motor Corporation. For above disclosure, it
has been considered as fellow subsidiary of Maruti Udyog Limited.
- 168 -
REGULATIONS AND POLICIES
GoI has over the years formulated various regulations and policies for the development of the
automobile industry in India.
Foreign investment regulations
A new industrial policy was formulated in 1991, in order to implement the economic reforms
initiated by GoI. The objective of the policy was to improve the technical capabilities and
production capacities of manufacturers in India with minimum foreign exchange outflow. GoI has
since allowed foreign investment in various sectors in a phased manner, gradually allowing
higher levels of foreign participation in Indian companies. Since March 2002, GoI has permitted
equity ownership by overseas manufacturers of up to 100% in entities manufacturing
automobiles and components in India.
Fiscal regulations
In India, various taxes and levies account for around 50% of the acquisition cost of the
passenger car. Levies and taxes include excise duty (24%), uniform state sales tax (12%), and
road and registration tax (1-4%).
From fiscal 2003, Value Added Tax, or VAT, is to be levied across India in a phased manner. VAT
is a broad based tax covering the value added in a product at each stage of production and
distribution. The automobile industry involves multi-tiered supply chains, with components and
sub-assemblies moving from different states to the final assembly plant. It is expected that the
introduction of VAT will rationalize the indirect tax structure and ensure that a simple rate on the
value addition will be collected.
Trade regulations
According to the automotive policy formulated by GoI in 1995, global manufacturers were
required to sign a memorandum of understanding with the Directorate General of Foreign Trade,
in order to obtain licenses to import CKD/SKD kits assembled at plants in India. They were also
required to comply with the conditions imposed by GoI with respect to their investment in Indian
companies, which included requirements pertaining to levels of indigenisation, minimum capital
investment and minimum export obligations.
The World Trade Organisation (WTO), of which India is a member, does not allow quantitative
restrictions or QRs (such as import licenses and import quotas) on foreign trade. Since April 1,
2001, all QRs on automobiles have been removed and imports of all categories of new and used
cars have been allowed. However, the customs duty on imports of new and used cars remains
high, with the basic customs duty at the rate of 60% on new CBUs and 25% on CKD and SKD
units. In addition, GoI has imposed several conditions on the import of new and used vehicles
such as restrictions on the age and the residual life of the used car being imported, restriction on
the port through which the imports are allowed, requirements of certification from notified
agencies regarding various matters, requirements pertaining to the availability of spares and
servicing facilities and a requirement that the used cars can only be exported from the country in
which they have been manufactured. It is expected that GoI, in order to fulfil its obligations
under the WTO, will gradually have to lower tariffs on the import of components, CKDs and
SKDs, which in turn is likely to reduce the input costs of car manufacturers in India.
New Automobile Policy
In March 2002, GoI announced the new automobile policy or NAP. The highlights of the policy
and their effects on the manufacturers have been summarized below:
• requirements of minimum levels of indigenisation were removed;
• requirements of minimum export commitments were removed;
• up to 100% equity owership in Indian companies by overseas manufacturers was
permitted;
• fiscal incentives were provided for cars less than 3.8 meters in length in order to establish
India as the centre in Asia for the export of small cars; and
- 169 -
•
tax incentives, automatic approvals for investment by overseas entities in Indian entities
and concessional duty on import of equipment were provided to entities setting up of
automotive design firms in India.
Environmental Regulations
The Environment Protection Act, Water (Prevention and Control of Pollution) Act and the Air
(Prevention and Control of Pollution) Act require companies to obtain consents for emissions and
discharge of effluents into the environment. In addition, GoI notified norms relating to emission
by vehicles, age of vehicles and specifications about quality and sales of fuels. These
environmental regulations are increasingly driving technology innovation in the passenger car
market.
Environmental policy
Under the NAP, GoI has announced the environmental policy for automobiles. The policy’s key
provisions include:
• approval of Mashelkar committee report dated ___ , or the Mashelkar Committee Report,
described below;
• encouragement for cars using alternative fuel technologies like CNG and electric batteries;
• adoption of international standards for levy of road tax such as charging higher tax for
older cars, in order to discourage the use of old vehicles. At present, road taxes are levied
at the time of purchase and are based on the size of the vehicle.
GoI has been developing a regulatory framework to reduce pollution from cars, through a phased
introduction of emission norms. The framework as introduced by GoI, based on the
recommendations of the Mashelkar Committee Report, is as follows:
• sale of only Bharat Stage II compliant cars in the cities of Mumbai, New Delhi, Kolkatta
and Chennai, as applicable from 2000;
• Bharat Stage II norms are applicable from April 1, 2003 to the cities of Bangalore,
Hyderabad Ahmedabad, Pune, Surat, Kanpur and Agra and from April 1, 2005 to the
whole of India;
• Euro Stage III equivalent emission norms are expected to be made applicable to the cities
of New Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune,
Surat, Kanpur and Agra by April 2005 and Euro IV equivalent norms by April 2010; and
• Bharat Stage II and Euro III equivalent emission norms specifying quality of petrol and
diesel that can be sold in various cities that become applicable at the same time as the
norms applicable to the sales of cars.
Mashelkar Committee recommendations
The key recommendations of the Mashelkar Committee Report are the following:
• GoI should only decide the vehicular emission standards and the corresponding fuel
specifications without specifying the vehicle technology and the type of fuel to be
used;
• a roadmap for the implementation of vehicular emission norms and automobile fuel
quality;
• vehicles running on alternative fuels, like di-methyl ether, bio-diesel, hydrogen, LNG,
CNG, electric and fuel cells, need to be encouraged, giving the choice of fuel and
vehicle technology to the customers; and
• putting in place other cost effective measures, such as a comprehensive inspection
and certification systems for in-use vehicles with private sector participation, fitting
emission reduction devices in-use vehicles, traffic management and construction of
bypasses.
In order to meet the new emission norms, substantial investments are required to produce
appropriate quality of fuel and vehicles. The Mashelkar Committee Report has estimated that
the investment required for upgrading refineries to produce Bharat Stage II automobile fuels
(petrol and diesel) is estimated to be around Rs. 170 billion. An additional amount of around
Rs. 180 billion would be required to produce Euro-III equivalent petrol and diesel. Also, the
test facilities currently available in the country are inadequate to meet the new regulations.
According to SIAM estimates, the cost of setting up additional facilities to test vehicles as per
- 170 -
the new regulations would be around Rs. 10.4 billion (excluding the cost of setting up
inspection and certification centers). Hence, the Mashelkar Committee Report has
recommended that preferential treatment be given to the oil and automobile industry in
matters relating to:
• customs duty on imported capital goods, equipment and machinery needed for the
upgradation of technology/facilities;
• excise duty on indigenously manufactured capital goods, equipment and machinery
needed for upgradation;
• 100% depreciation on plant and machinery set up for upgradation;
• soft loans for technology modernization/upgradation projects;
• adequate incentives, such as tariff differentials and other measures to enable the
domestic industry to compete with imports; and
• financial incentives to the manufacturers and users of electric vehicles in order to
make these vehicles competitive.
Safety norms
GoI has notified the requirement for use of safety belts in all cars. In addition, new noise control
norms for passenger cars were notified by GoI and became effective from January 1, 2003. GoI
has also indicated that in the future additional safety norms will be made applicable to passenger
cars to align them with international standards.
- 171 -
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS
There are no contingent liabilities not provided for, outstanding litigation, disputes, non payment
of statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial
institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits,
and arrears on cumulative preference shares issued by the Company, defaults in creation of full
security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any
other offences (including past cases where penalties may or may not have been awarded and
irrespective of whether they are specified under paragraph (i) of part 1 of Schedule XIII of the
Companies Act, 1956) against our Company except the following:
AGAINST OUR COMPANY
Criminal Cases
There are 17 cases filed by customers against the Company and its dealers u/s 420 of the
Indian Penal Code, 1860 alleging that the Company and its dealers have failed to perform their
obligations either under the contract of sale of vehicle or the obligation under warranty. Of
these cases fifteen (15) cases relate to sale wherein the complainant has filed the criminal
complaint relating to sales. Two relate to non-performance of warranty obligation after the sale
of vehicle. In sixteen (16) of these cases the Managing Director has been made a party to the
case or the case has been filed against the company through the Managing Director.
Civil Cases
A. Money Recovery
1. We have a total of 45 money recovery suits pending against us in various courts in India.
The total amount claimed from us is Rs. 173,190,686. A few material cases are disclosed
below:
•
Classic Motors Ltd was a dealer appointed by us and had collected booking amounts for
vehicles from various parties. Ashok Leyland Limited has initiated legal proceedings
against Classic Motors and our Company alleging a total amount of Rs. 42,700,000/-.
Tata Finance Limited has also initiated legal proceedings against Classic Motors and our
Company. Tata Finance Limited has alleged that they had booked 40 Maruti vehicles
through Classic Motors Limited. Tata Finance Limited has claimed a refund of Rs
3,100,000 from our Company and Classic Motors Ltd. Escorts Finance Ltd has also
initiated proceedings against Classic Motors Ltd. We have been named as a party in the
suit but Escorts Finance Ltd has not sought any relief against us. All the above suits are
pending before the High Court at New Delhi.
•
ICICI Bank Ltd has filed a case against our Company and Ganga Automobiles, a dealer of
our Company. ICICI Bank had paid Ganga Automobiles for the booking of 60 cars. The
total amount being claimed by ICICI Bank is Rs. 17,845,000/-. The case is pending
before the City civil Court at Ahmedabad.
•
DCL Finance Limited (“DCL”) had filed three (3) suits against Mahalaxmi Motors, RKS
Motors and our Company in the Court of the III Additional Chief Judge, City Civil Court of
Hyderabad. The City Civil Court of Hyderabad has decreed the suits in favour of DCL. As
on the date of the decree, the consolidated amount of all 3 decrees, inclusive of interest
and costs, is Rs. 9,240,473/-. Our Company has filed 3 appeals in the High Court of
Andhra Pradesh against the decrees of the City Civil Court. The appeals are pending
before the High Court of Andhra Pradesh. The High Court of Andhra Pradesh has passed a
stay order in all three cases and directed us to deposit half of the decretal amount plus
cost and interest. We have deposited half of the decretal amount and the interest plus the
costs. There has been no objection raised by DCL vis-à-vis the amount deposited. Pennar
- 172 -
Paterson Securities Limited has filed a suit against our Company and Mahalaxmi Motors,
an erstwhile dealer of our Company. The suit is filed before the Court of the III Additional
Chief Judge, City Civil Court at Hyderabad. Pennar Paterson has alleged that demand
drafts had been made in favour of our Company for the booking of 20 cars. The claim is
for a refund of a sum of Rs. 9,240,473/-.
•
Gujarat Lease Financing has initiated legal proceedings against Competent Automobiles (a
dealer appointed by our Company) and our Company in the High Court of Delhi. Gujarat
Lease Financing has alleged that it intended to lease certain vehicles manufactured by our
Company from Competent Automobiles. Gujarat Lease Financing has claimed that
booking amounts were advanced to Competent Automobiles but no specifications as to
vehicles were stated at that time. It is alleged that 1431 cars were booked but not
delivered. Gujarat Lease Financing has claimed a refund of Rs. 16,655,643.28.
•
ICICI Bank Ltd has initiated legal proceedings against Rama Automobiles (an erstwhile of
our Company) and our Company before the Debt Recovery Tribunal, Ahmedabad. ICICI
Bank is seeking relief against Rama Automobiles in terms of an agreement entered into
between Rama Automobiles and ICICI Bank. The Company is not a party to this
agreement. The total refund claimed is Rs. 75,603,000.
A substantial portion of the amounts involved in the above cases is regarding the nondelivery of cars by dealers appointed by MUL after accepting payments from customers.
As per the terms of the dealership agreement entered into between MUL and the dealers
our dealers are appointed on a principal-to-principal basis. The terms of the sale to the
customers do not create a privity of contract between MUL and the customer. The sale by
MUL to the dealer and the sale from the dealer to the customer are on a principal to
principal basis. MUL’s responsibility is to provide the dealer with the vehicles booked by
the dealer.
•
A claim for recovery of Rs. 20 million has been filed by one, Mr. Pradeep Arora against us
and Allied Motors (Pvt.) Ltd., an erstwhile dealer
•
Hyundai Motor India Limited has initiated proceedings against Varun Motors (our dealer)
and our Company. Hyundai Motors has alleged that Varun Motors tampered with a car
(manufactured by Hyundai) and used that car for a test drive offer to potential buyers. It
is alleged that customers were asked to compare the Hyundai car with a Maruti vehicle. It
is alleged that the Hyundai car used was tampered and had been made defective thus
resulting in below par performance. The Hyundai Motor India Ltd has claimed
compensation of Rs. 10,000,000. The matter is at the trial stage in the City Civil Court in
Hyderabad.
B. Other Civil cases
In addition to the above there are 24 other cases relating to various aspects, such as dealership
disputes, claim for damages and directions, which are pending before various courts.
Labour Cases
1. Cases relating to strike
Our Company faced major labour unrest in September 2000 with regard to the proposed
changes to the incentive scheme of the Company. Upon the changes to the incentive scheme
in October 2000, the workmen of the Company undertook a tool down strike which later
evolved into a strike. Our management advised the workmen to sign a good conduct
undertaking reiterating their adherence to the standing orders of the Company and to join
duties before the occurrence of such strike. A large number of workmen chose not to sign the
good conduct undertaking. The union and the management reached a settlement dated
- 173 -
January 8, 2001. The incentive scheme was accepted by the Union on the same terms as
initially proposed by the Company.
The union challenged the introduction of the requirement to sign the good conduct
undertaking and sought a permanent injunction against the signing of the good conduct
undertaking in the court of Civil Judge Senior Division, Gurgaon. The Civil Court has refused
to grant the injunction in favor of the union. The union filed an appeal against the order of
the Civil Court before the District Judge, which was dismissed.
The union then filed a writ petition before the High Court, Punjab and Haryana at Chandigarh,
seeking an interim stay of the requirement of the signing of the good conduct undertaking.
This application for stay has also been dismissed. The writ petition is pending before the
High Court.
Summary dismissal for instigation or agitation during strike.
Some of the agitating workers, including some union leaders had been dismissed from
service on the grounds of instigating a strike. A total of 24 workmen who had been
summarily dismissed have filed cases against the Company in the court of the LCO seeking
reinstatement of services with arrears of back wages and continuity of service. The
challenges are on the grounds that the mandatory provision in the Standing Order had not
been followed and the principles of natural justice have been violated. The cases are in
different stages of proceedings before the Labour Court, Gurgaon.
Non-confirmation of trainees
Some trainees who were working with us at the time of the strike were subsequently not
confirmed on the grounds that their performance in the training had been unsatisfactory and
that, in certain cases, they were lacking in integrity. A total of 52 trainees have filed
applications with the LCO, Gurgaon and have sought confirmation as employees of our
Company on the grounds that they are employees and the certified standing orders of the
Company are applicable to them and the dismissals are illegal. The trainees have alleged that
we are victimizing them for not signing the Undertaking and joining the recognized union in
the strike. The trainees have served notice on our Company under Section 2A of the
Industrial Disputes Act, 1947. A few of these cases are pending before the LCO and a few
have been referred to the Labour Court, Gurgaon
Unauthorised absence from work
The Company issues charge sheets to workmen for unauthorized absence from their place of
work. Pursuant to the respective charge sheets given to individual workers, enquiry
committees are set up. In certain cases where the enquiry reports found the charges against
the workers accurate and the explanations of the workers unsatisfactory, the enquiry
committee recommended dismissal of the workers.
17 workers have filed applications before the LCO, Gurgaon alleging that they have been
dismissed from service for taking part in the agitation and that the dismissal was against the
provisions of the standing orders of the Company and the Industrial Disputes Act, 1947. The
Company has filed replies to all these applications and the matters are pending with the LCO,
Gurgaon.
Derecognition of Maruti Udyog Employees Union (“MUEU”)
The Company has passed an order derecognising the Maruti Udyog Employees Union
(“MUEU”) on February 22, 2002. This was done following the de-registration of MUEU by the
Registrar of Trade Unions of Haryana.
The Registrar of Trade Unions of Haryana
derecognised MUEU following a complaint by some members that there was mismanagement
of funds. We understand that the MUEU has filed a case challenging this decisions in a civil
- 174 -
suit in Gurgaon. The Company has in the interim recognized another union, the Maruti
Udyog Kamgar Union (“MUKU”). MUKU was registered during the days of the employee
unrest in 2001.
2. Litigation arising out of the Voluntary Retirement Scheme dated September 24, 2001 (“VRS
scheme”), and alleged premature retirement
Approximately 200 employees have filed applications before the LCO, Gurgaon alleging that
they had been pressurized to resign before the VRS scheme was announced and that the VRS
scheme is actually a retrenchment scheme and is in violation of the Section 9A of the
Industrial Disputes Act, 1947. The relief being sought by these employees is reinstatement of
jobs, arrears of back wages and continuity of service.
Some employees have claimed that they had been retired prematurely under the VRS
Scheme illegally without consent on their part. The New Delhi High Court rejected this claim
of the petitioners and refused to pass an order directing their reinstatement. An appeal
against the order of the single Judge has been filed. Our Company has filed its written
statement in the said Appeal.
Some employees opted for voluntary retirement under the VRS scheme but were denied the
benefit of payment of 24 months salary, on the grounds that at the time of opting for VRS a
disciplinary proceeding was pending against them. Conciliation proceedings were held but
failed. The dispute was not referred to the Labour Court-cum-Industrial Tribunal. The
employees have filed a petition praying for directions to the Labour Department to refer the
dispute to the Labour Court-cum-Industrial Tribunal and to award costs to the workmen.
3.
Cases relating to the erstwhile Maruti Ltd.
Workmen and employees of Maruti Ltd. were retrenched with one month’s salary in lieu of
notice, in terms of the settlement between the Official Liquidator and workmen and
employees of Maruti Ltd.
Some of the employees of Maruti Ltd initiated legal proceedings in the High Court of Punjab
and Haryana at Chandigarh seeking reemployment in the Company. The employees claimed
that as they were employees of Maruti Ltd and the Company should give them preference for
employment. A Division Bench of the High Court upheld their claim and directed the
Company to provide the workers employment. The Company filed a special leave petition
before the Supreme Court of India which passed an order that status quo be maintained.
The matter is pending for hearing before the Supreme Court.
Employees and workmen of Maruti Ltd filed further cases on the same grounds as above.
4. Cases concerning the Employees Union
The Company has filed a suit against the employees union seeking an injunction to stop the
union from creating disturbances by way of strikes and disrupting activities within the factory
premises. The Court refused to pass such an injunction. Revision petitions were filed before
the High Court to set aside the Order of the lower court. The High Court has issued an order
stating that the union is restricted from holding any demonstration within a radius of 500
metres of the factory boundary wall. The matter has been referred back to the lower court.
A similar injunction has been granted restraining workmen from holding demonstrations
within 100 meters of the Corporate Office Building in New Delhi.
5. Cases on House Building Allowance Deduction
13 cases are before the Consumer Disputes Redressal Forum, Gurgaon, under the Consumer
Protection Act. All these cases relate to deductions for the House Building Allowance. There
- 175 -
are cases relating to the deductions from the employees salaries that took place relating to
the house building loans by the company and small claims relating to the same. The
Employees of Maruti formed a society, which is registered as Maruti Employees Co-operative
Housing Society. The Society arranged an aggregate loan from HDFC for its members for
construction of flats over the plots by the said society for its members. Payments are made
on monthly installments from the salary of the employees and the disputes concern these
deductions and also deductions from the VRS amount. These deductions relate to possible
increases in the compensation amount relating to land acquisition by Society.
6. Termination for Misconduct of workmen
R.S. Panwar a worker against whom enquiry proceedings have been initiated has filed a civil
suit in the Civil Court, Gurgaon asking for an injunction against the proceedings on the
grounds that the enquiry committee had rejected the workman’s nominee as co-worker in the
enquiry proceedings. The Civil Court had passed an injunction restraining our Company from
having any enquiry without the nomination of a co-worker. The Company then proceeded to
dismiss the worker from service without any enquiry vide a letter dated September 27, 2001.
As a result of the dismissal, the workman has also filed a suit before the Civil Court Gurgaon
initiating contempt proceeding against the Company on the grounds that by proceeding with
the inquiry without allowing him representation, it had violated the interim injunction of the
Court. The Company has filed its reply in the contempt proceedings.
7. Contract labour cases
80 contract labourers employed in our canteen have filed a suit for regularization of
employment as workmen of the Company in the High Court of Punjab and Haryana at
Chandigarh. The court has passed an order that the labourers are not to be dismissed during
the pendency of the suit. The contractor, Bharat Trading, has in the interim terminated the
employment of 3 contract labourers. The High Court had held the contractor and the
Company in contempt and granted the contractor one month to reinstate the dismissed
contract labourers. The contractor has reinstated the contract laborers. The contempt
petition has been disposed off. The main suit for regularisation has been referred to the
Labour Court for adjudication.
8. Other Cases
In addition to the cases details above there are 43 cases relating to labour disputes between
the Company and workers in which the company has either received notices and no
proceedings have been initiated or that are pending at various stages at different courts.
Monopolies and Restrictive Trade Practices
We have thirteen (13) cases pending before the MRTPC, the material claims against the
Company are as follows:
1. There are three applications under Section 12B of the MRTP before the MRTPC filed by
various parties against the Company and M/s Ganga Automobiles. The cases relate to the
non-delivery of automobiles by Ganga Automobiles. The total amount claimed is
Rs.7,838,108/- plus interest on the claimed amount.
2. There are 5 enquiry proceedings/cases pending in relation to alleged restrictive trade
practices followed by our Company. The enquiries relate to various issues, such as:
• Payment of incentives to our dealers
• Dealership agreements which we enter into with each of our dealers contain restrictive
covenants
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•
•
•
Conditions imposed at the time of booking of our cars with the dealer
Practices followed for over the counter delivery of cars
Interest paid to customers on booking amounts
These enquiries seek cease and desist orders against the Company.
3. In addition to the cases detailed above there are 4 cases filed by our customers against the
Company for compensation that are pending at various stages before the MRTP Commission.
4. There is one unfair trade practice enquiry filed against the Company. The relief sought is to
restrain the Company from delivering certain models under a particular scheme.
Consumer Disputes
1. Various consumer cases against our dealers and us (where we have been made a party) are
pending before National Consumer Disputes Redressal Commission, State Commission or the
District Forums. Such pending consumer claims are classified on the basis of the forum in
which they are pending and listed below.
Forum
1.
2.
3
National Consumer Dispute
Redressal Commission
State Consumer Dispute
Redressal Commissions
District Consumer Disputes
Redressal Forum
Number of
Cases
23
Total Amounts Claimed
(in Rupees)
61,801,591
83
37,391,308
677
125,727,453
There are two claims for an aggregate amount of Rs. 64,900,907/- relating to our erstwhile
dealer M/s Ganga Automobiles.
A customer, Smt Shukla Ghosh has filed a claim for Rs. 2,000,000/- alleging at there is a
manufacturing defect in the steering system of one of our car models. The matter is pending
before the State Consumer Disputes Redressal Commission, Kolkata.
2. Cases relating to Catalytic converter installation
There are 28 claims filed before the District Consumer Disputes Redressal Forum, Chandigarh
pursuant to a newspaper article alleging that the car prices by the Company were hiked on
account of installation of catalytic converters but the Company did not fit the part. All
customers in the above complaints had sought the refund of Rs. 7,000 on the ground that
Maruti had enhanced the price by Rs. 7,000 on account of fitting of catalytic converter and
their cars are without catalytic converters.
In some of the claims, the District Consumer Disputes Redressal Forum, Chandigarh had held
that Maruti have charged the price of a component, which they have not supplied and the
enhanced price on account of catalytic converter is clearly refundable to the complainant.
The State Consumer Disputes Redressal Commission, Chandigarh dismissed the appeal, inter
alia, with the observation that "if the machine delivered does not contain any particular part /
gadget, the customer will get the part/gadget or return of the value thereof." The National
Consumer Disputes Redressal Commission confirmed the earlier orders and dismissed the
Revision Petitions.
Our company has filed a special leave petition in the Supreme Court of India, which has
stayed the operations of the order(s) passed in the revision petitions. All the above matters
were adjourned sine die.
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3. Cases relating to refund of excise duty for taxis
There are 37 cases pending before various Consumer Disputes Redressal Forum relating to
the refund of excise duty to customers who have bought vehicles for use as taxis.
There are some cases in which the respective District Consumer Forums have passed adverse
orders against the Company in this regard. The Company has preferred appeals against such
cases.
Motor Accident Claims
The Company has eight motor accident claims pending against it before the MACT, with the
amount claimed (not including interest) totaling to Rs. 72,19,184/ Arbitration
We have initiated arbitration proceedings against a few of our dealers as follows:
Name of
Dealer
Mahalaxmi
Motors
Classic
Motors
Limited
Our Claim
Counter claim
Rs. 153,025,610/- with further interest at
18% with effect from 1.11.2002
Rs. 367,471,000/-
Rs. 737,037,776/interest at 30% p.a.
with
In the case of Mahalaxmi Motors, the Honourable sole arbitrator has passed an order dated 25th
March 2003 stating that he is prima facie satisfied that our Company has made out a prima facie
case for an interim order and directed Mahalaxmi Motors to furnish a bank guarantee for a sum
amounting to Rs 76.3 million.
Excise claims
No. Date of
Show
Cause
Notice/
order
Period
Nature
Demand Pending
Amount Before
(Rs.
million)
1
June 12,
2001
July 23, 1996 Modvat Credit
- March 2000 capital goods
2
August 08,
2002
July 2001 March 2002
3
January 31, July 2001 2003
March 2001
and April 2001
to June 2001
January 02, December
Excise
duty
on
2002 and
2000 - March Freight and Service
charges
August 6,
2002
2002
4
on
Excise duty on tool
kits
&
Jack
Assembly
Excise duty on free
after-sales service.
Status/Last Decision
2,003.58Commissioner Pending before Commissioner.
Finance bill 2003 has proposed
amendment in excise rates with
retrospective effect from 1996.
we believe that passing of this
bill by parliament, the excise
department is likely to drop this
demand
28.3Commissioner Pending before Commissioner
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249.72CEGAT
Pending before CEGAT
639.50Commissioner Pending before Commissioner
5
December
12, 2002
6
January 16, March 26,
Cenvat Credit on
2002
2001 - April 3, supplementary
2001
invoices
Modvat Credit on
October 25, September
waste and scrap &
1996
1988 - June
1995
duty on value of
tool kit
April 4, 2003 August 2000 – Cenvat
Credit
February 2002 availed in case of
export oriented unit
February 4, June 1998 Modvat on parts of
2000
June 1993
seats
7
8
9
16.80
Appeal by the Company against
the Order No. 7/2002 of the
Commissioner dated 28.02.02.
CEGAT vide Final Order No.
631/2002-A dated 12.12.02 set
aside the penalty and held that
discharge duty liability after
including
cost
of
electro
coating
and
the
depositing
Company is eligible to take
Modvat Credit of duty paid on
coating materials. The Company
has made a provision for
payment of Rs. 16.8 million
190.54Commissioner Pending before Commissioner
August 1996 - Electro
deposition
parts
March 2001
coating
transferred to spare
parts department.
10
March 17,
1997
April 1991 June 1993
11
April 16,
2002
March 1999 - Input
inventory
March 2000
discrepancy
12
October 4,
2002
13
December
18, 2002
14
March 27,
2003
August 2001 - Excise duty on sales
July 2002
tax concession as
capital subsidy
Penalty imposed by
Commissioner
of
Excise, New Delhi in
the case of FOC
parts
of
certain
models removed to
vendors
April 2002 to Excise
duty
on
December
extended warranty
rd
th
2002
for 3 and 4 year.
108.38Commissioner The Commissioner has deferred
the decision.
10.19CEGAT
499.57CEGAT
Modvat on parts of
seats
TOTAL
Pending before CEGAT
Appeal by the Company against
the order of the Commissioner.
The CEGAT allowed our appeal
vide Final Order No.A/77-782000NB(D).
The
Excise
Department has filed a reference
application before Delhi High
Court and Delhi High Court has
referred two questions to CEGAT.
Court Appeal by the Company against
Order of the Commissioner. The
CEGAT vide Final Order No.
A/377-380/97NB dated 17.03.97
allowed the appeal of the
Company.
The
Excise
Department has filed a reference
application before Delhi High
Court
6.48Commissioner The total of the Show Cause
Notice was for Rs.86.5 million,
out of this the Company has
deposited Rs. 80 million, vide TR6 challan.
The Company has
made a provision for this
payment in the books of accounts
72.09Commissioner Pending before Commissioner
301.07High
(HC)
17.75 CEGAT
Pending before CEGAT
11.21Commissioner Pending before Commissioner.
The Company has made a
provision for payment of Rs. 7.54
million in our books of accounts
4155.13
Apart from the above stated cases there are other cases pending against the Company at various
forums of appropriate jurisdiction.
- 179 -
Income Tax Liabilities of the Company.
The contingent liability of the Company relating to income tax is Rs. 6626 million, as on January
31, 2003 (Rs.6592 million as on Sep 30, 2002). Against this, the company has paid an amount
of Rs. 1433 million (Rs.933 million till Sep 30, 2002) under protest.
The Company filed a return of income for assessment year 1999-00 declaring a total income of
Rs.6674 million and tax (including interest) of Rs.2,358 million. The income tax department
assessed the income at Rs.18935 million and tax at Rs.9139 million. Against this, the company
filed an appeal before Commissioner (Appeals) as well as a rectification application before the
assessing officer for rectifying the arithmetical errors. Subsequently, the income tax department
passed a rectification order and reduced the total income to Rs.16063 million and tax to Rs.7877
million. The company filed further rectification application as there were arithmetical errors
mainly in interest computed under section 234B of the IT Act of Rs.504 million. A contingent
liability of Rs.5015 million exists with respect to assessment year 1999-00. Against this, the
company has paid under protest / department have adjusted Rs. 619 million (119 million till Sep
30, 2002). Presently, the appeal is pending before the Commissioner (Appeals).
The Company filed a return of total income for assessment year 1998-99 of Rs. 9785 millions
and tax of Rs.3438 million. The income tax department assessed the income at Rs.11653 million
and tax at Rs.4538 million. The company then preferred an appeal before Commissioner
(Appeals), against whose an appeal was preferred before the appellate tribunal. A contingent
liability of Rs.1090 million exists with respect to assessment year 1998-99. Against this, the
company has paid under protest / department have adjusted Rs. 473 million. Presently, the
appeal is pending before the Income Tax Appellate Tribunal.
The Company filed a return of total income for assessment year 1997-98 for Rs. 6684 million
and tax of Rs. 2904 million. The income tax department assessed the income at Rs.8205 million
and tax at Rs. 3952 million. Against this, the company preferred an appeal before Commissioner
(Appeals), who by an order reduced the total income to Rs. 6865 million and tax to Rs. 2995
million. The income was increased to Rs.6917 million and tax to Rs.3023 million through a
rectification order. The company has created a provision for tax of Rs.2949 million in its P&L
Account. Thus, a contingent liability of Rs.74 million (Rs.40 million as on Sep 30, 2002) exists
with respect to assessment year 1997-98. Against this, the company has paid under protest /
department have adjusted Rs.87 million. Presently, the appeal is pending before the Income Tax
Appellate Tribunal.
The Company filed a return of income for assessment year 1996-97 for Rs. 4906 million and tax
of Rs. 2274 million. The income tax department assessed the income at Rs. 6191 million and tax
at Rs.3198 million. The company preferred an appeal before Commissioner (Appeals), who by an
order reduced the total income to Rs.5176 million and tax to Rs. 2406 million. The company has
created a provision for tax of Rs. 2281 millions in its P&L Account. Thus, a contingent liability of
Rs. 125 million exists with respect to assessment year 1996-97. Against this, the company has
paid under protest / department have adjusted Rs. 103 million. Presently, the appeal is pending
before the Income Tax Appellate Tribunal.
The company has filed return of income for assessment year 1995-1996 for Rs. 1111 million and
tax of Rs.512 million. The income tax department assessed the total income at Rs. 2311 million
and tax at Rs. 1439 million. An appeal was preferred before Commissioner (Appeals) who by an
order reduced the total income to Rs.1469 million and tax of Rs. 796 million. The company has
created a provision for tax of Rs. 512 million in its P&L Account. Thus, a contingent liability of Rs.
285 million exists with respect to assessment year 1995-96. Against this, the company has paid
under protest / department have adjusted Rs. 151 million. Presently, the appeal is pending
before the Income Tax Appellate Tribunal.
The company has filed a return of income for assessment year 1994-1995 for Rs.320 million and
tax of Rs. 166 million. The income tax department assessed the income as Rs 1213 million and
tax of Rs. 740 million. An appeal was preferred before Commissioner (Appeals) who by an order
- 180 -
reduced the total income to Rs.418 million and tax to Rs. 217 million. The company has created
a provision for tax of Rs. 180 million in its P&L Account. Thus, a contingent liability of Rs. 37
million exists with respect to assessment year 1994-95. Against this, the company has not paid
any amount under protest. Presently, the appeal is pending before the Income Tax Appellate
Tribunal.
Land Acquisition Cases
The GoI had acquired land under the Land Acquisition Act, 1894 for the purpose of factory land
for Maruti Limited. Some of the land oustees have filed suit for mandatory injunction in the Civil
Court, Gurgaon seeking employment on the basis of an agreement allegedly entered into
amongst Maruti, Gram Panchayat and Local Administration, Gurgaon.
However, no such
agreement was placed on record of the Court in support of their claim by any of the claimants.
Some of the claimants have placed a copy of minutes allegedly recorded on the conclusion of
alleged meeting as stated above.
Six (6) such suits are pending as of date against the Company out of which the City Court,
Gurgaon has decreed two such suits while taking the cognizance of the minutes of meeting and
directed the Company to provide employment to the claimants. Out of the two matters
hereinabove, the Company’s appeal in one matter is pending in the District Court whereas in the
other matter, the claimant did not join within one month as directed by the High Court,
Chandigarh and the matter stands closed.
In another three suits, the City Civil Court, Gurgaon dismissed the suits and no relief was
granted to the claimants. The said claimants have filed First Appeal before the District Judge,
Gurgaon, which is pending.
One such land acquisition matter is pending in the High Court, Chandigarh after the dismissal of
First Appeal by the District Judge in the favour of the Company.
Claims made by Maruti
The Company has provided us with a list of various claims, which the Company has initiated
against third parties. A list of such pending cases is given below:
Sl No.
1.
Ravi Sharma
2.
Classic Motors Limited
Party
3.
Union Motor Services Limited
4.
Arpita Automobiles Private Limited
5.
6.
Swastic Rubber Products Limited
Mahalaxmi Motors Limited
Claim (Rs.)
400,000
42,700,000
74,638,413
7,611,040
154,863
15,000,000
Sales Tax Cases
1.Imposition of sales tax by National Capital Territory of New Delhi.
The Company besides selling passenger vehicles to dealers also sold vehicles to certain
customers outside the state of Haryana directly from its factory at Gurgaon. The inter-state sales
tax payable was collected and deposited with the sales tax authorities at Gurgaon. As per sale
system for direct billing from factory, customers placed the orders and collected passenger
vehicles through dealers situated outside Haryana. The Delhi Sales Tax Department considered
such direct billing of vehicles delivered to customers through Maruti Sales & Service, Delhi, or
MSSD, a division of Maruti Udyog, as local sales in Delhi (and not an inter-state sales in Gurgaon
- 181 -
as treated by the Company). Thus, a demand of Rs. 46,676,834.00 was raised in February 1993
for deposit of local sales tax (for the assessment years 1988-89 to 1991-92). The assessment
orders were received in February 1993 and the appeal was filed in the same month. The
Company has obtained a stay from the Delhi High Court (in March 1994) against the additional
demand on conditional deposit of Rs. 400,000 for each assessment year. The case is pending for
hearing on merits before the Additional Commissioner, Sales Tax Department, Delhi.
2. Sales tax liability for the Assessment Year 1988-1989.
The Assessing Authority, or AA, Gurgaon, has imposed an additional duty of Rs. 2,426,524.00 on
the Company for the assessment year 1988-1989. The AA has treated the Omni vehicle as a
‘van’ and taxed the same at a rate higher than applicable to ‘motor cars’. The Sales Tax Tribunal
has remanded the matter to the AA.
3. Sales tax liability for the Assessment year 1985-1986.
In the course of business the company had transferred vehicles to its branches out side the
states and the Company had deposited the purchase tax on these transactions. The Excise and
Taxation Officer, Gurgaon vide letter dated August 10, 1989 has imposed interest and penalty
amounting to Rs. 1,211,327.00 on the Company for not depositing purchase tax within due
dates. The Sales Tax Tribunal has remanded the matter to the AA.
4. Contingent sales tax liability with respect to stockyard:
Contingent sales tax liability with respect to Bhopal Stockyard. The AA has imposed sales tax
and penalty for assessment year 1987-88 amounting to Rs. 1,742,764.00. The Company has
paid Rs. 174,500.00.
Contingent sales tax liability with respect to Gwalior Stockyard. The AA has imposed sales tax
and penalty assessment year 1987-88 amounting to Rs. 127,503.00. The Company has paid
Rs. 12,750.
Contingent sales tax liability with respect to Kotwan Stockyard. The AA has imposed sales tax
and penalty amounting to Rs. 340,000.00.
5. Excess adjustment of first point tax rebate of sales tax on sale of after-sales spare parts
during the year 2001-02 and period April 1, 2002 to December 31, 2002.
The AA, Gurgaon has issued two show causes notice dated February 27, 2003 to the Company
asking for payment of the short payment on account of excess adjustment of first point tax
rebate of sales tax on sale of after-sales spare parts during the year 2001-02 and period April 1,
2002 to December 31, 2002.
The Company had claimed adjustment of first point tax amounting to Rs. 76,043,114.38 for the
year 2001-02 and Rs. 59,260,407.66 for the period April 1, 2002 to December 31, 2002 under
Section 15-A of the Haryana General Sales Tax Act, 1973 on account of tax paid on purchase of
goods within the State.
The AA has stated that the adjustment of tax is admissible only in respect of goods purchased for
use in manufacturing. The AA claims that the Company in the process of manufacturing is using
only original equipment and that the spare parts are purchased by the spare parts division for
trading in spare parts and thus such purchases within the state are inadmissible for claiming
adjustment under Section 15 A of the Haryana General Sales Tax Act, 1973.
The Company is claming this rebate on the basis of a notification issued by the Government of
Haryana bearing No. S.O. 32/C.A. 74/1956/S.8/2001 dated 19th March 2001. The contingent
liability amount is Rs. 135,303,521.
- 182 -
AGAINST OUR JOINT VENTURES AND ASSOCIATES
Asahi India Glass Ltd. (“AIG”)
Contingent liabilities not provided for as on March 20, 2003]:
• Guarantee / Letter of Credit / Bill of exchange discounted – Rs. 123.06 million
• Disputed demand relating to pending Excise cases - Rs. 123.62 million
• Others – Rs. 10.27 million
• Estimated value of contracts remaining to be executed on capital account – Rs. 11.41
million
Outstanding litigation as on March 20, 2003
Civil cases
• A winding up petition has been filed by AIG against Pal Peugeot Ltd. in the Bombay High
Court involving the outstanding amount of Rs. 0.44 million due and payable by Pal
Peugeot Ltd. to AIG. This winding up petition has been accepted and clubbed for hearing
with other similar petitions filed against Pal Peugeot Ltd.
• A suit has been filed by Thawar Steel Traders in the Addl Civil Judge, Rewari, Haryana for
recovery of about Rs. 0.13 million , which AIG is disputing.
• An application has been filed in the Debt Recovery Tribunal, New Delhi, by Standard
Chartered Bank against Paras Ram and Pista Agarwal in respect of the shares of AIS
pledged with the said Bank. AIG has been made a party to this application for handing
over of dividend warrant and bonus shares pertaining to pledged shares.
Labour cases
• 1 case filed by Mr. Inderjit Yadav in Punjab & Haryana High Court, Chandigarh,
challenging his termination and praying for reinstatement with back wages.
• 2 cases filed by Mr. Karambir and Mr. Balwan Singh in Labour Tribunal, Gurgaon
challenging the termination of their respective services.
Income Tax
• 1 appeal pending before the Income Tax Appellate Tribunal involving Rs. 2.9 million.
Central Excise and Customs
• 1 Show Cause Notice pending before the Deputy Commissioner of Central Excise, Division
– II, GGN, involving an amount of Rs. 47.3 million
• 2 Show Cause Notices pending before the Additional Commissioner of Central Excise,
Gurgaon, involving the aggregate amount of Rs. 0.691million.
• 4 Show Cause Notices pending before the Commissioner of Central Excise, Delhi III
involving an aggregate amount of Rs. 49.83 million.
• 1 Show Cause Notice pending before the Superintendent of Customs (Drawback), Air
Cargo Unit, New Customs House, New Delhi, involving an amount of Rs. 1.2 million.
• 1 Writ Petition pending in the Delhi High Court involving an amount of about Rs. 347.00
million.
Bharat Seats Ltd (“BSL”)
Contingent liabilities not provided for as on March 13, 2003:
The aggregate of the demand based on the difference between the excise records maintained by
BSL and the balance sheet stock figures for the Financial Years ended March 31, 1997, March 31,
1998 and March 31, 1999 is about Rs. 10.16 million.
Outstanding litigation as on March 13, 2003:
Central Excise and Customs
• Demand of about Rs. 3195.00 million (including penalty of about Rs. 65 million), which
had once been decided in the favour of the Company by CEGAT, the Department had
- 183 -
•
•
sought the intervention of the Hon’ble Delhi High Court which had issued adjusted the
directions to CEGAT to clarify certain points of law arising out of that order. Matter is still
pending for final decision.
The Company has received a refund of customs duty of about Rs. 6.25 million from the
Assistant Commissioner (Refund), Customs House, Khandla, which had been adjusted
against “Loans and Advances” shown in previous years. However, subsequently a notice
was received to refund the same on the ground that it was erroneously being granted.
The Company has filed a suitable reply to the Customs Authorities and the matter for final
decision.
1 Show Cause Notice pending before the Commissioner of Central Excise, Delhi III,
Gurgaon involving an aggregate amount of about Rs. 10.1 million.
Denso India Ltd (“DIL”)
Outstanding litigation as on March 20, 2003:
Income Tax
• 1 appeal pending before the Income Tax Appellate Tribunal involving Rs. 0.1015 million.
• I appeal pending before Commissioner of Income Tax (Appeals) involving Rs. 0.493
million. (It is not clear from the new certificate whether this case is pending or disposed
or not. Please obtain a confirmation from the Company)
Sales Tax
• 1 demand remanded by the Appellate Deputy Commissioner to the Assistant
Commissioner for re-assessment on taxability on sale of assets, involving Rs. 0.411
million.
Central Excise and Customs
• 1 appeal pending before the Commissioner of Central Excise (Appeals) involving an
amount of Rs. 1.608 million.
Labour cases
1 case pending for reinstatement of employee.
Jay Bharat Maruti Ltd. (“JBML”)
Contingent liabilities not provided for as on March 20, 2003
Guarantees issued by the banks for letter of credit about Rs. 79.1 million
Outstanding litigation as on March 20, 2003:
Civil cases
• 1 Special Leave Petition pending before the Hon’ble Supreme Court challenging the
External Development Charges for Plant II for Change of Land Use involving the amount
of Rs. 10.63 million. 10 % of the charges deposited as per Supreme Court direction, but
not accepted by the Department.
Sales Tax
• 1 Writ Petition pending before the High Court of Punjab & Haryana against a demand
made by the Sales Tax Department, Haryana involving the amount of Rs. 18.08 million.
Central Excise and Customs
• 7 cases pending before the Commissioner of Central Excise, Delhi III, Gurgaon involving
an aggregate amount of Rs. 140.04 million with interest and penalty.
• . 2Appeals pending before Commissioner, Central Excise (Appeals), Gurgaon involving an
aggregate amount of Rs. 2.8 million with interest and penalty. These appeals are likely to
have adverse impact on the financial performance of Maruti.
- 184 -
Machino Plastics Ltd. (“MPL”)
Contingent liabilities not provided for as on February 28, 2003:
• Disputed demand under Employees State Insurance Act, 1948 involving an amount of
Rs.0.11 million (previous year about Rs.0.11 million) for which appeal is pending before
the relevant authorities.
• Sales tax sureties given for Machino Basell India Limited, a supplier and a related party
for about Rs. 22.92 million (previous year about Rs. 17.91 million).
• Future Commitment for lease agreements entered before April 1, 2001 for Rs. 240.2
million.
Outstanding litigation:
• 1 appeal pending before the relevant authority under Employees State Insurance Act,
1948 involving an amount of Rs.0.11 million.
Sona Koyo Steering Systems Ltd. (“SKSS”)
Contingent liabilities not provided for as on March 20, 2003:
Claims against the company not acknowledged as debt
On account of
a) Customs duty - about Rs. 0.90 million (Company to confirm)
b) Others - about Rs.4.87 million
In respect of matters in appeal
a) Income Tax - about Rs.42.86 million
Customer bills discounted - about Rs.28.88 million
Corporate Guarantee in respect of
a) Employee Loan - about Rs.2.35 million
Caparo Maruti Ltd (“CML”)
Contingent liabilities not provided for as on March 20, 2003
ESIC Demand - about Rs. 0.0083 million
Citicorp Maruti Finance Ltd (“CMFL”)
Contingent liabilities not provided for as on March 20, 2003
As on March 24, 2003, there are no contingent liabilities which are not provided for.
Outstanding litigation:
Criminal cases
• There are totally 442 criminal cases filed by CMFL under section 138 of the Negotiable
Instruments Act, 1981 in respect of bouncing of cheques against various parties, which
are pending at different stages.
• There is one Superdari case filed by CMFL against Hindustan Industrial Security.
• There are 29 criminal cases filed by CMFL under section 406 of the Indian Penal Code
against various parties, which are pending at different stages.
Civil cases
• There are 14 money recovery suits filed by CMFL against various parties in the Trial
Court at Tis Hazari, New Delhi involving an amount aggregating approximately to Rs.
1.9 million
- 185 -
•
There are 27 cases (7 cases relating to repossession, 6 relating to injunction, 1 relating
to employee and 6 counter claims) filed against CMFL in various courts for different
reliefs, which are pending.
Climate Systems India Ltd. (“CSIL”)
Contingent liabilities not for provided:
Bank guarantees to the Sales Tax Department about Rs. 10,000/Outstanding litigation:
Income Tax
• 4 Appeals pending before the Commissioner of Income Tax (Appeals) involving the
aggregate amount of about Rs. 5.60 million
• 1 appeal pending before the Income Tax Appellate Tribunal involving about Rs. 2.02
million
• 1 Appeal pending before the Sales Tax Authority involving the amount of about Rs. 0.30
million.
In the event of the above cases not being decided in favour of CSIL, the combined income tax
liability of CSIL shall be Rs. 2.8 million and sales tax liability shall be Rs. 0.3 million. These cases
then are likely to have adverse effect on the financial performance of CSIL
J J Impex (Delhi) Pvt. Ltd. (JJIDPL)
Outstanding litigation:
Civil case
• 1 case pending in the District Consumer Disputes Redressal Forum, New Delhi filed by Mr.
Vineet Kumar involving an amount of Rs. 0.2 million.
Krishna Maruti Ltd. (“KML”)
Contingent liabilities not provided for as on March 20, 2003:
Excise Duty about Rs.39.10 million
Customs Duty - about Rs. 7.43 million
Unexpired Letter of credit Rs. 26.9 million
Outstanding litigation:
Central Excise and Customs
• 4 Show Cause Notices pending before the Commissioner of Central Excise, Delhi III
involving an aggregate amount of Rs. 37.50 million with interest and penalty.
• 1 Show Cause Notice pending before the Deputy Commissioner of Central Excise, Division
– II, Gurgaon involving the amount of Rs. 0. 10 million with interest and penalty.
• 2 Appeals pending before Commissioner, Central Excise (Appeals) involving an aggregate
amount of Rs. 1.60 million.
• 3 Show Cause Notices pending before the Deputy Commissioner, Customs House, Kandla
involving an aggregate amount of Rs. 7.43 million.
Mark Auto Industries Ltd (“MAIL”)
Contingent liabilities not provided for as on March 20, 2003:
Bank Guarantee outstanding - about Rs. Rs. 17.02 million
Letter of credit issued – about Rs. Rs. 22.9 million
Unpaid liabilities on account of leased assets - about Rs. Rs. 97.6 million
Disputed demands related to Income Tax – about Rs. Rs. 4.44 million
Disputed demands related to Excise cases - about Rs. Rs. 4.62 million
- 186 -
Outstanding litigation as on March 20, 2003:
Income Tax
• 5 appeals pending before the Income Tax Appellate Tribunal involving the aggregate
amount of Rs. 4.74 million.
• 1 appeal pending before the Wealth Tax Appellate Tribunal involving the amount of Rs.
0.004 million.
Central Excise and Customs
• 1 Show Cause Notice pending before the Deputy Commissioner of Central Excise,
Gurgaon involving an amount of Rs. 0.22 million.
• 1 Show Cause Notice pending before the Commissioner of Central Excise, New Delhi
involving an amount of Rs. 6.30 million. If this notice is decided against MAIL, the same is
likely to have an adverse effect on the financial performance of Maruti.
• 2 Appeals pending before the Commissioner of Central Excise (Appeals), Collectorate No.
III, New Delhi, involving the aggregate amount of Rs. 39.70 million.
• 1 Appeal pending before the CEGAT, which if decided in favour of MAIL, would involve
refund of the duty paid by MAIL to the Customs department.
• 1 case pending with Deputy Commissioner Central Excise involving an amount of Rs. 0.2
million.
Civil Cases
• A Special Leave Petition has been filed in the Hon’ble Supreme Court against the Extra
Development Charges levied by the Director, Town & Country Planning, Haryana
amounting to Rs. 7.2 million on the Company’s property situated at Village Begampur
Khatola, Gurgaon, Haryana.
Criminal Cases
• A complaint was filed against Mr. K. M. Talwar, former Managing Director of the Company
under the provisions of section 630 (b) of the Companies Act, 1956 in the Court of Chief
Judicial Magistrate, Gurgaon, for recovery of the company’s assets worth Rs. 4.1 million
which are retained by him even after resigning from the company.
Legal Notices (Possible litigation in future):
• A legal notice dated 04.09.2002 was sent to Unitech limited for recovery of Rs. 9.5 million
out of a total amount of Rs. 10.9 million paid to Unitech Limited for 2430 square feet area of
office space, in Signature Tower, Gurgaon, after deducting earnest money of Rs. 1.45 million.
The only adverse effect on Maruti would be in respect of the case before the Commissioner,
Central Excise, New Delhi in respect of the amount of Rs. 6.3 million relating to 40% Cenvat
credit on FOC items invoices.
Maruti Countrywide Auto Financial Services Limited (“MCAFSL”)
Contingent liabilities not provided for as on April 1, 2003:
Bank Guarantees – Rs. 0.07 million
Claims not acknowledged as debts – Rs.0.21 million
Disputed tax liabilities – Rs.0.70 million
Outstanding litigation:
Criminal cases:
•
•
•
1 case (Vikas Motor Vs MCAFSL) pending before the MM, room No. 182, Tis Hazari Court,
Delhi, under section 138 of the Negotiable Instruments Act for an amount of Rs. 0.5 million.
1 Complaint under sections 406 and 409 of IPC, pending before the Consumer Redressal
Forum, Bandra amounting to Rs. 0.48 million.
1 case under section 506 (2) of IPC pending in the Metropolitan Court, Meghani Nagar.
- 187 -
•
1 case under sections 294(B), 506(1) and 34 IPC pending before the First Class Magistrate,
Court-II, Kochi
Consumer Cases:
• 6 cases pending before various consumer forums, involving an aggregate amount of Rs. 0.54
million.
Civil cases:
• 3 civil cases pending in various courts, involving an aggregate amount of Rs. 10 million.
Mark Exhaust Systems Ltd (“MESL”)
Contingent liabilities not provided for as on March 20, 2003
•
•
•
•
•
Bank Guarantees issued by Banks - about Rs. 26.34 million
Unexpired Letter of credit - about Rs. 22.33 million
Customs Duty on damaged goods in Kandla cyclone - about Rs. 3.42 million
Value of bond executed in favour of Commissioner of Customs in respect of license issued
under EPCG License - about Rs. 4.45 million and also furnished a bank guarantee of about
Rs.2.23 million to meet export obligations of Rs.45.90 million
Value of bond executed in favour of Commissioner of Customs in respect of Advance
License for intermediate Exports - about Rs. 7.86 million and also furnished a bank
guarantee of about Rs.5.53 million to meet export obligations of Rs.22.41 million, the
outstanding as on March 20, 2003 being Rs. 20.20 million.
Outstanding litigation:
Civil Cases
A Special Civil Application has been filed by MESL in the Hon’ble High Court of Gujarat at
Ahmedabad for expediting recovery of the claim amount for loss of some material belonging to
MESL in the Kandla cyclone, which claim the Insurance Company has accepted but not released
because the Customs Authority has not accepted the remission application.
AGAINST VENTURES PROMOTED BY SUZUKI IN INDIA
Subros Ltd
Contingent liabilities not provided for as on April 1, 2003
Bank Guarantees issued by Banks - about Rs. 30.33 million
Outstanding Letter of credit - about Rs. 380.6 million
Disputed demand under Income Tax Act - about Rs. 0.30 million
Disputed demand under Central Excise Act - about Rs. 252.87 million
Other claim including labour matters - about Rs.2.88 million
Outstanding litigation:
Labour Cases
9 labour cases filed in the Labour Court, Ghaziabad involving the approximate aggregate amount
of Rs. 0.93 million.
AGAINST SUZUKI
There are no contingent liabilities not provided for, outstanding litigation, disputes, non payment
of statutory dues, overdues to banks/ financial institutions, defaults against banks/ financial
institutions, defaults in dues towards instrument holders like debenture holders, fixed deposits,
and arrears on cumulative preference shares issued by the company, defaults in creation of full
- 188 -
security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any
other offences against Suzuki in India.
AGAINST OUR DIRECTORS
There is one case filed by a customer against Mr. Kinji Saito, Director (Marketing & Sales) and
the Company u/s 420 of the Indian Penal Code, 1860 alleging that the Company and its dealers
have failed to perform their obligations under the contract of sale of vehicle. The case has been
filed in Sabalgarh, Morena district.
- 189 -
DIVIDEND POLICY
The declaration and payment of dividends will be recommended by our Board of Directors and
our shareholders, in their discretion, and will depend on a number of factors, including but not
limited to our earnings, capital requirements and overall financial condition. The dividends paid
by our Company during the last five fiscal years have been presented below.
Face value of
equity shares
(in Rs. per
share)
Dividend (in
Rs. million)
Dividend rate
Dividend tax
FY2002
100
FY2001
100
FY2000
100
FY1999
100
FY1998
100
397
-
331
397
397
30%
-
2
25%
73
30%
44
30%
40
A stock split was approved at an extraordinary general meeting of our shareholders held on
March 25, 2003, resulting in each equity share of Rs. 100 being sub-divided into 20 equity
shares of Rs. 5 each and consequently the equity shares were sub-divided with effect from March
25, 2003.
However, the amounts paid as dividend in the past are not indicative of our dividend policy in the
future.
- 190 -
BASIS OF ISSUE PRICE
1. Adjusted Earning Per Share (EPS) (As per unconsolidated Indian Accounting Standards).
1
2
3
4
Year
ended
March
31,2000
Year
ended
March
31,2001
Year
ended
March
31,2002
Nine
month
ended
December
31,
2002
(Annualised)
Weighted Average
Pre-Split
Rupees
Weight
184.22
1
Post-Split
Rupees
Weight
9.21
1
(118.91)
2
(5.95)
2
66.92
3
3.35
3
56.64
4
2.83
4
37.37
1.87
Note 1: The shareholders in the Extra-Ordinary General Meeting held on March 25, 2003 have
approved the sub-division of equity shares of face value of Rs. 100 each into twenty equity
shares of face value of Rs. 5 each. Subsequent to this sub-division, the authorised equity share
capital of Rs. 1,550,000,000 has been divided into 310,000,000 equity shares of Rs. 5 each and
the issued, subscribed and paid up capital of Rs. 1,444,550,300 has been divided into
288,910,060 equity shares of Rs. 5 each. Accordingly, the ratios have been computed on the
basis of number of equity shares, both pre-split and post-split.
Note 2:
A. The Earning Per Share has been computed on the basis of adjusted profits & losses for the
respective year/ period drawn after considering the Impact of accounting policy changes and
prior period adjustments/ regroupings pertaining to earlier years.
B. The denominator considered for the purpose of calculating Earning Per Share is the weighted
average number of equity shares outstanding during the period.
2. Price/Earning (P/E) ratio in relation to Issue Price of Rs. [*]
a.
Based on nine months ended Dec 2002 EPS (annualized) of Rs. 56.64 (pre –split)
and Rs. 2.83 (post-split)– [*]
Industry P/E
b.
(i)
(ii)
(iii)
Highest
Lowest
Industry Composite
-
Source: Capital Market Volume
Category: Jan 20 – Feb 2, 2003
3. Average Return on Net Worth
1
2
3
4
Year ended March 31,2000
Year ended March 31,2001
Year ended March 31,2002
Nine month ended December
(Annualised)
Weighted Average
31,
2002
%
Weight
9.05
(6.22)
3.52
2.69
1
2
3
4
1.79
- 191 -
Note:
A. The Average Return on Net Worth has been computed on the basis of adjusted profits &
losses for the respective year/ period drawn after considering the Impact of accounting
policy changes and prior period adjustments/ regroupings pertaining to earlier years.
4. Minimum Return on Increased Net Worth required to maintain pre-issue EPS.
There is no change in net worth due to offer for sale.
5. Net Asset Value per Share, as on December 31, 2002
Pre-Split – Rupees 2,118.
Post –Split – Rupees
106.
Net Asset Value Per Share represents Shareholders' equity less miscellaneous expenses
as Divided by Weighted Average Number of Shares.
6. Net Asset Value per Share after issue.
There is no change in net worth due to offer for sale.
Issue Price Per Share: Rs. [*]
* Issue Price Per Share will be determined on conclusion of book building process.
- 192 -
DETAILS OF BORROWINGS IN OUR COMPANY
As on September 2002
S.
No
.
Nature of
borrowings/
debt
1.
11.20% secured
non-convertible
redeemable
debentures
(Series I)
2.
External
Commercial
Borrowing from
Bank of Tokyo Mitsubishi
3.
Sanctioned
Amount
USD
million
12.00% secured
redeemable
non-convertible
debentures
(Series II)1
50
Amount
outstanding
Date of
issue
Date of
maturity
Rs.2,000 mn
July
24,
2000
July
24,
2007 with
put
and
call option
on July 24,
2005
11.20%
USD10mn
February
16, 2001
6
month
USD Libor +
60
basis
points
USD20mn
February
27, 2001
February
16, 2004
Prepayment
option
at
end of 24
months
February
27, 2004
Prepayment
option
at
end of 24
months
December
4, 2005 –
30%
December
4, 2006 –
30%
December
4, 2007 –
40%
Rs.1,000 mn
4. Overdraft from Banks (as on September 30, 2002)2
Rs.174.0mn
a.
HDFC Bank
Rs.
500mn
for
secured
loans
Rs.250mn for
unsecured
loans
b.
UFJ Bank
Rs.300mn
Rs.36.5mn
1
December
4, 2000
Interest
rate
Security
Secured by
mortgage
on specific
buildings
and
plant
and
machinery
Negative
lien
on
specific
fixed assets
12.00%
Secured by
mortgage
on specific
buildings
and
plant
and
machinery
MIBOR + 75
bps
compounded
on a daily
basis
Secured by
pari-passu
first charge
on
the
stock, book
debts and
other
current
assets
Unsecured
Tenor linked
Prime
Lending Rate
We have entered into a Rupee-interest rate swap with a nominal value of Rs.1,000 million (to be amortized in line with the repayment
schedule presented above) with Citibank N.A. on November 13, 2001 whereby starting from December 4, 2002 and thereafter on
December 4 of every year until December 4, 2007:
We are liable to pay a floating rate of interest which is the Average 5 year GoI Treasury (as defined below) + 318 bps. Average 5 year GoI
Treasury will be reset annually and computed as simple average of the daily 5 year annualized yield for 10 business days preceding and
including the interest payment date.
We are entitled to receive the fixed rate of 12% every year.
2
As on date, in addition to the above, we also have approved sanctioned limits for secured working capital facilities from State Bank of
India (Rs.750mn), Corporation Bank (Rs.1000mn), Punjab National Bank (Rs.500mn), UTI Bank (Rs. 450 million), State Bank of
Travancore (Rs. 200 million), BNP Paribas (Rs. 200mn)
- 193 -
OTHER REGULATORY DISCLOSURES
STOCK MARKET DATA FOR OUR EQUITY SHARES
This being an initial public offering of our Company, the equity shares of our Company are not
listed on any stock exchange.
PARTICULARS REGARDING PUBLIC ISSUES DURING THE LAST FIVE YEARS
We have not made any public issue during the last five years.
COMPANIES UNDER THE SAME MANAGEMENT
There are no companies under the same management within the meaning of erstwhile Section
370 (1B) of the Companies Act 1956, other than the subsidiaries and group Companies, details
of which are provided in the section entitled “Group Companies” on page 134 of this Draft Red
Herring Prospectus.
MECHANISM FOR REDRESSAL OF INVESTOR GRIEVANCES
The agreement between the Registrar to the Offer, MCS Ltd. and us, will provide for retention of
records with the Registrar to the Offer for a period of at least one year from the last date of
dispatch of letters of allotment, demat credit, refund orders to enable the investors to approach
the Registrar to the Offer for redressal of their grievances.
All grievances relating to the Offer may be addressed to the Registrar to the Offer, giving full
details such as name, address of the applicant, number of shares applied for, amount paid on
application and the bank branch or collection center where the application was submitted.
DISPOSAL OF INVESTOR GRIEVANCES
We estimate that the average time required by us or the Registrar to the Offer for the redressal
of routine investor grievances shall be seven working days from the date of receipt of the
complaint. In case of non-routine complaints and complaints where external agencies are
involved, we will seek to redress these complaints as expeditiously as possible.
We have appointed Mr. S Ravi Aiyar as the Compliance Officer and he may be contacted in case
of any pre-Issue or post-Issue-related problems. He can be contacted at: Maruti Udyog Limited;
11th floor, Jeevan Prakash Building, 25 Kasturba Gandhi Marg, New Delhi – 110 001; Tel: +9111-2331 6831; Fax no.: +91-11-2371 3575, 23318754; e-mail: raviaiyar@maruti.co.in
- 194 -
UNCONSOLIDATED FINANCIAL STATEMENTS
FOR FIVE YEARS AND NINE MONTHS ENDING DECEMBER 31, 2002
Auditor’s Report
To The Board of Directors
Maruti Udyog Limited
Dear Sirs,
A.
We have examined the books and accounts of Maruti Udyog Ltd. (MUL) for the five
financial years ended March 31, 2002 being the last date to which the accounts of the
company have been made up and audited by us for presentation to the members. We
have also examined and found correct the accounts of MUL for the period from April 1,
2002 to December 31,2002 prepared and approved by the Board of Directors of the
company.
We have accepted the relevant accounts and statements in respect of Maruti Insurance
Brokers Limited, Maruti Insurance Distribution Services Limited and True Value Solutions
Limited, the three subsidiaries of the Company for the three months period ended March
31, 2002 audited and reported by M/s V.Sankar Aiyar & Co., the auditors of the
subsidiaries. We have also accepted the accounts of these companies for the period April
1, 2002 to December 31, 2002 prepared and approved by Board of Directors of the
respective companies and audited by the respective auditors.
In accordance with the requirements of:
(a)
Paragraph B (1) of Part II of Schedule II to the Companies Act, 1956
(b)
The Securities and Exchange Board of India (Disclosure and Investor Protection)
Guidelines 2000 issued by SEBI on January 19, 2000 in pursuance of Section 11 of
SEBI Act, 1992, “the SEBI Guidelines”.
(c)
Instructions dated March 5, 2003 received from the company, requesting us to carry
out work relating to the offer document being issued by the company in connection
with the offer of sale by the GoI of certain equity shares in the company (referred to
as the issue),
We report that the profits of the company for the above years are as set out below.
These profits (expressed in Millions of rupees) have been arrived at after charging all
expenses of management, including depreciation and after making such adjustments
(and regroupings) as in our opinion are appropriate and are subject to the notes given
below. Adjustments may be necessary to make the accounts for the period from April
1, 2002 to December 31, 2002, to comply with the requirements of the law relating to
accounts to be laid before the company in general meeting, but at the date of signing
this report, we are not aware of any material adjustments which would affect the
results of the accounts.
In accordance with para 6.18.3(ii) of the SEBI Guidelines, also attached are restated
summary financial statements of subsidiaries Maruti Insurance Brokers Limited, Maruti
Insurance Distribution Services Limited and True Value Solutions Limited of the
Company for the period ended December 31, 2002 and period ended March 31, 2002.
We have accepted the relevant restated summary financial statements in respect of
the above subsidiaries for the above periods, which were audited by other auditors as
mentioned therein. In respect of the relevant summary financial statements for the
period ended December 31, 2002, the respective auditors have reported that the said
financial statements are true and correct and the said restated financial statements
- 195 -
have been prepared in accordance with Part II of Schedule II of the Act and the SEBI
Guidelines. The financial statements of the Company’s subsidiaries have not been
consolidated into the attached summary statements of the Company and are enclosed
as Annexures – E, F and G to this report. In all the subsidiaries the beneficial
ownership entirely vests with the Company, the assets and liabilities and profit or loss
as applicable, of such subsidiaries in the aforementioned financial statements entirely
concern the members of the Company.
- 196 -
I. SUMMARY OF PROFIT AND LOSS ACCOUNT, AS RESTATED
For
the
period April
1, 2002 to
December
31, 2002
Income/ Revenue
Sales:
Of Products
manufactured by the
Company
Of Products traded in by
the Company
Other Income/ Revenue
Total
Expenditure
Consumption of Raw
Materials & Components
Cost of Spares/ Dies &
moulds sold
Consumption of Stores
Excise Duty
Employees
Remuneration &
Benefits
Manufacturing/
Administrative and
other expenses
Selling & Distribution
expenses
Financial expenses
Provision for
Contingencies
Depreciation
Deferred Revenue
Expenditure charged off
Less: Vehicles for own
use
(Accretion)/ Decretion
to Work-in-progress
and Finished Goods
Total
Net profit before
extraordinary items &
prior period
adjustments.
Add: Net prior period
adjustments
Profit/(Loss) before
tax
Less: Taxation –
Current
Less: Taxation –
Deferred
Financial
Year ended
March
31,
2002
Financial
Year ended
March
31,
2001
Financial
Year ended
March
31,
2000
(Rs. In Millions)
Financial
Financial
Year ended Year ended
March
31, March
31,
1999
1998 *
60,892
85,153
84,399
88,414
75,051
79,108
2,775
5,656
4,888
4,737
2,763
2,958
63,667
2,543
66,210
90,809
3,294
94,103
89,287
3,246
92,533
93,151
3,574
96,725
77,814
3,992
81,806
82,066
2,714
84,780
37,299
53,882
54,734
52,225
41,034
40,316
2,038
4,568
4,084
3,936
2,126
2,388
280
13,044
1,536
458
20,132
2,289
622
22,118
2,003
651
23,256
1,873
581
19,186
1,726
622
20,264
1,574
2,409
3,420
3,222
3,272
2,586
3,095
4,071
4,821
4,021
4,252
3,811
2,758
449
82
764
318
746
141
668
549
560
303
605
1,764
2,413
287
3,429
324
3,223
197
2,631
163
1,912
78
1,864
58
42
69
118
88
66
53
63,866
702
94,336
(1,419)
94,993
203
93,388
(513)
73,837
126
75,255
(160)
64,568
92,917
95,196
92,875
73,963
75,095
1,642
1,186
(2,663)
3,850
7,843
9,685
(15)
(3)
(29)
1
(2)
88
1,627
1,183
(2,692)
3,851
7,841
9,773
148
138
2
550
2,611
3,254
550
-
-
-
-
-
- 197 -
Net Profit/(Loss)
after tax as per
audited statement of
accounts (A)
Adjustment on account
of changes in
accounting policies
[Refer IV(ii)(1)]
Impact of material
adjustments and prior
period items [Refer
IV(ii)(1)]
Total Adjustments
(B)
Adjusted Profit/
(Loss) (A+B)
Transfer from
Investment allowance
reserve
Carry forward
Profit/(Loss) from
previous year
Add: Accounting policy
changes and prior
period adjustments
pertaining to previous
years **
Profit available for
appropriation
Less:
Debenture Redemption
Reserve
General Reserve
Proposed Dividend
Corporate Dividend Tax
Deferred Tax adjusted
in General Reserve ***
Profit/ (Loss)
transferred to
Balance Sheet
929
1,045
(2,694)
3,301
5,230
6,519
-
(362)
1,029
(753)
(31)
1,166
(324)
202
92
(111)
247
(137)
(324)
(160)
1,121
(864)
216
1,029
605
885
(1,573)
2,437
5,446
7,548
-
-
-
13
22
158
23,058
22,489
25,093
22,625
18,142
12,599
-
-
-
-
-
106
23,663
23,374
23,520
25,075
23,610
20,411
-
176
-
-
-
-
-
105
397
(362)
2
1,029
332
331
73
(754)
530
397
44
14
670
397
40
1,162
23,663
23,058
22,489
25,093
22,625
18,142
The accompanying significant accounting policies and notes are an integral part of this statement.
* The figures have been regrouped for the year ended March 31, 1998.
** Denotes the Impact of accounting policy changes (excluding deferred tax adjustments) and prior
period adjustments pertaining to earlier years.
*** As per Accounting Standard (AS 22) " Accounting for Taxes on Income" issued by the Institute of
Chartered Accountants of India, the company has adjusted net deferred tax liability till 31st March 2002
as a charge to General Reserve.
- 198 -
II. SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED
The assets and liabilities of the Company as at the end of each financial year i.e. March 31,
2002, 2001, 2000, 1999, 1998 audited by us and presented to the members and as at December
31, 2002 prepared and approved by the Board of Directors and examined and found correct by
us and after making such adjustments/ regroupings and subject to the notes appearing
hereinafter are as set out below:
December
31, 2002
A.
March
2002
31, March
2001
31, March
2000
(Rs. In Millions)
31, March 31, March
1999
31, 1998
Fixed assets:
Gross Block
45,224
43,847
38,667
34,999
23,636
18,172
Less: Accumulated
Depreciation
Net Block
21,925
19,546
16,196
13,242
10,618
8,717
23,299
90
24,301
724
22,471
3,684
21,757
2,342
13,018
1,105
9,455
835
23,389
25,025
26,155
24,099
14,123
10,290
Add: Capital Work in
Progress
Total
B.
Investments:
10,632
968
955
3,974
4,845
9,695
C.
Current Assets, Loans
& Advance:
Inventories
5,344
6,811
8,655
9,902
5,784
5,758
Sundry Debtors
5,960
8,393
6,755
4,663
2,766
2,614
229
719
876
317
8,169
1,335
Cash & Bank balances
Other Current Assets
Loans & Advances
Total
D. Liabilities &
Provisions:
Current Liabilities &
Provisions
Deferred Tax
(Asset)/Liability
Secured Loans
605
479
716
1,039
1,079
994
3,544
4,604
5,508
4,225
5,364
5,146
15,682
21,006
22,510
20,146
23,162
15,847
13,515
14,199
12,504
14,095
15,027
13,795
1,615
1,065
703
1,732
978
992
3,115
3,951
5,615
864
218
287
1,440
2,609
5,506
4,597
749
549
19,685
21,824
24,328
21,288
16,972
15,623
30,018
25,175
25,292
26,931
25,158
20,209
1,445
1,323
1,323
1,323
1,323
1,323
Capital Reserve
15
15
15
15
15
14
Share Premium
4,241
373
373
373
373
373
-
-
-
-
13
35
176
176
-
-
-
-
Unsecured Loans
Total
E.
F.
Net Worth (A+B+C-D)
Net Worth
Represented By
Share Capital
G. Reserves and Surplus
Investment Allowance
Reserve
Debenture Redemption
Reserve
General Reserve
Profit & Loss Account
Total
1,422
1,422
1,679
650
1,072
528
23,663
23,058
22,489
25,093
22,625
18,142
29,517
25,044
24,556
26,131
24,098
19,092
- 199 -
H. Miscellaneous
Expenditure to the
extent not written off
I. Net Worth (F+G-H)
944
1,192
587
523
263
206
30,018
25,175
25,292
26,931
25,158
20,209
The accompanying significant accounting policies and notes are an integral part of this
statement.
III. DIVIDENDS
We further report that the dividends (subject to deduction of tax at source) declared by Maruti
Udyog Limited in respect of five financial years ended March 31, 2002 are as under:
Financial
year ended
March 31,
2002
Financial
year ended
March
31,
2001
Financial
year ended
March
31,
2000
Financial
year ended
March
31,
1999
1323
30%
397
-
1323
2
1323
25%
331
73
1323
30%
397
44
Equity Share Capital
Rate of Dividend
Amount of Dividend
Dividend Tax
(Rs. In Millions)
Financial
year ended
March
31,
1998
1323
30%
397
40
IV. SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS
(i) SIGNIFICANT ACCOUNTING POLICIES
1) BASIS FOR PREPARATION OF ACCOUNTS
These Accounts have been prepared in accordance with historical cost convention, the applicable
accounting standards issued by the Institute of Chartered Accountants of India and the relevant
provisions of the Companies Act, 1956.
2) REVENUE RECOGNITION
Domestic and Export Sales are recognized on dispatch of goods from the factory/stock yard and
Port respectively.
3) FIXED ASSETS
Fixed Assets (except freehold land) are carried at cost of acquisition or construction or at
manufacturing cost (in case of own manufactured assets) in the year of capitalization less
accumulated depreciation.
In respect of the various project related activities, which are carried on concurrently with
production, expenses on administration and supervision incurred, the bifurcation of which
between production and construction activities is not ascertainable, are charged to revenue.
4) BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition, construction or production of
qualifying assets are capitalized till the month in which the asset is put to use as part of the cost
of that asset.
5) DEPRECIATION
a) Fixed Assets except for lease hold land are depreciated on straight line method on a pro-rata
basis from the month in which the asset is put to use, at the following rates:
- 200 -
i) Assets capitalized before 02.04.1987
Depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of the
Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the GoI.
ii) Assets capitalized on or after 02.04.1987
Depreciation has been provided at the rates prescribed in Schedule XIV to the Companies Act,
1956 except for certain fixed assets where based on management's estimate of the useful life of
the assets, higher depreciation has been provided at the following rates:
Plant and Machinery:
Single Shift
Double Shift
Triple Shift
Dies and Jigs
7.31%
11.88%
15.83%
19.00%
b) Leasehold land is amortized over the period of lease.
c) Plant and machinery the written down value of which at the beginning of the year is Rs.
5,000/- or less and other assets the written down value of which at the beginning of the year is
Rs. 1,000/- or less are depreciated at the rate of 100%.
d) In case the historical cost of an asset undergoes a change due to increase or decrease in longterm liability on account of foreign exchange fluctuation, change in duties etc., the depreciation
on revised unamortised depreciable amount is provided prospectively over the residual useful life
of the asset.
6) INVENTORIES
a) Inventories are valued at lower of cost, determined on weighted average basis, and net
realizable value.
b) Tools are written off over a period of three years except for tools valuing Rs. 5,000/- or less
individually which are charged off to revenue in the year of purchase.
c) Machinery spares (other than those supplied along with main plant and machinery, which are
capitalized and depreciated accordingly) are charged off to revenue on consumption except those
valuing Rs. 5,000/- or less individually, which are charged off to revenue in the year of purchase
and those whose value are not individually ascertainable are written off over a period of three
years.
7) INVESTMENTS
Current investments are valued at lower of cost and fair value. Long-term investments are
valued at cost except in case of permanent diminution in their value, wherein necessary
provision is made.
8) RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged off against the profit of the year
in which it is incurred except expenditure incurred on development and testing of components,
which are deferred over a period of three years. Capital expenditure on research and
development is shown as an addition to fixed assets and depreciated accordingly.
9) FOREIGN CURRENCY TRANSLATIONS
a. Foreign Currency transactions other than those covered by forward contracts are
recorded at the exchange rate prevailing at the date of transaction. Exchange
- 201 -
differences arising on settlement of transactions, except those relating to fixed assets,
are recognized as Income or expense in the year in which they arise. The cost of the
respective fixed assets are adjusted for exchange differences arising on repayment of
liabilities incurred for the purpose of acquiring such fixed assets.
b. At the balance sheet date all assets, other than fixed assets, and liabilities
denominated in foreign currency but not covered by forward contract are reported at
the exchange rate prevailing at the balance sheet date. The cost of the respective
fixed assets are adjusted for increase or decrease in liabilities incurred for the purpose
of acquiring such fixed assets due to application of exchange rate prevailing at the
balance sheet date.
c. Foreign currency transactions covered by forward contracts are recorded at the
exchange rate prevailing at the date of inception of forward contracts.
d. At the balance sheet date all assets and liabilities covered by forward contracts are
stated at the forward contract rates.
e. The difference between the forward rate and the exchange rate at the inception of a
forward contract is recognized as income or expense over the life of the contract
except in respect of liabilities incurred for acquiring fixed assets in which case such
difference is adjusted in the cost of the respective fixed assets.
f.
Profit or Loss arising on cancellation or renewal of a forward contract is recognized as
income or expense in the year in which such cancellation or renewal has been made
except in case of a forward contract relating to liabilities incurred for acquiring fixed
assets, where profit or loss is adjusted in the cost of the respective fixed assets.
10) RETIREMENT BENEFIT COSTS
Gratuity and leave encashment benefits on retirement are accounted for on the basis of actuarial
valuation made at the end of the year/ period.
11) DEFERRED REVENUE EXPENDITURE
Deferred Revenue Expenditure is written off over the period of its benefit.
12) CUSTOMS DUTY
Customs Duty paid on import of components specifically for export vehicles is debited to
Customs Duty Deposit Account and duty drawback recoverable on export of vehicles is credited
to this account. Other categories of duties available as drawback are debited to purchases and
credited to income on export of vehicles.
13) GOVERNMENT GRANTS
Government Grants are recognized in the profit and loss account in accordance with the related
scheme and in the year/ period in which these are accrued.
14) DEFERRED TAX
Tax expense for the year/ period, comprising current tax and deferred tax, is included in
determining the net profit/(loss) for the year/ period.
However, in the year of transition, the accumulated deferred tax liability at the beginning of the
year has been recognized with a corresponding charge to the General Reserve in accordance with
Accounting Standard 22 issued by the Institute of Chartered Accountants of India.
- 202 -
Deferred tax assets are recognized for all deductible timing differences and carried forward to the
extent it is probable that future taxable profit will be available against which such deferred tax
assets can be realized. Deferred tax assets are reviewed at each balance sheet date and written
down/ written up to reflect the amount that is reasonably/ virtually certain (as the case may be)
to be realized.
Deferred tax assets and liabilities are measured at the tax rates that have been enacted or
substantively enacted at the balance sheet date.
- 203 -
(ii) NOTES TO ACCOUNTS
1) Adjustments/ Regroupings
Impact of change in accounting policies and prior period items
(Rs in Million)
Particulars
For the
period April
1, 2002 to
December
31, 2002
Profit/ (Loss) after tax as per audited
statements of accounts
Adjustment on account of :
(I) Changes in Accounting Policies
a) Work in Progress valuation at lower of
cost or net realisable value and impact of
overhead valuation. (note1)
b) Deferred Tax Adjustments (note 2)
(A)
Financial Year
ended March
31, 2002
Financial Year
ended March
31, 2001
Financial Year
ended March
31, 2000
Financial Year
ended March
31, 1999
Financial Year
ended March
31, 1998
1,045
(2,694)
3,301
5,230
6,519
-
-
1
(70)
6
(362)
1,029
(754)
14
1,162
(362)
1,029
(753)
(56)
1,168
-
-
-
25
(362)
1,029
(753)
(31)
(2)
1,166
13
79
12
9
32
291
43
(155)
80
136
(7)
33
(36)
16
19
(2)
(8)
(1)
(12)
(110)
25
320
(118)
5
152
(60)
(180)
69
187
280
(33)
(187)
(110)
(27)
929
-
Total of Adjustments
-
Tax Impact of adjustments
-
Total of Adjustments – Net of tax
impact
(II) Prior Period Items
a) Salary & Wage Arrears / Liability
Adjustment
b)Retrospective amendments to prices of
raw materials and components (note 3)
c) Prior Period expenses
(B)
(104)
(389)
24
d) Prior Period incomes
(11)
(25)
(505)
181
e) Sales tax cases adjustment
f) Royalty adjustment
g) Provision for tax for earlier years
Total of Adjustments
Tax Impact of adjustments
- 204 -
Total of Adjustments – Net of tax
(C)
impact
Adjusted Profit / (Loss)
(A+B+C)
(III) Regroupings
a) Sales
b) Other Income
c) Cost of Spares/Dies and Moulds sold
d) Manufacturing, Administrative and Other
Expenses
e) Net Prior Period Adjustment
(324)
202
92
(111)
247
(137)
605
885
(1,573)
2,437
5,446
7,548
-
-
-
-
-
729
(686)
710
(710)
-
-
-
-
-
(43)
Notes:
1. Upto the year ended 31st March 1998 Work in Progress was valued at cost of direct materials. For the year ended 31st March 1999 the
Company valued Work in Progress at cost inclusive of allocable overheads. From the year 2000 the Company has further changed its
policy and valued Work in progress at lower of cost, determined on weighted average basis, and net realisable value.
2. The Company has accounted for Deferred Tax assets/ liability for earlier years in order to comply with provisions of Mandatory
Accounting Standard- 22 “Taxes on Income” issued by the Institute of Chartered Accountants of India.
3. The Company makes a provision at each period/year end for retrospective amendments to the price increase of raw materials and
components. These financial statements have been adjusted based upon the actual price increase of raw material and components
passed on to vendors with retrospective effect in subsequent periods.
2) Non Adjustments / Regroupings
a) The Company has provided for contingencies as per details indicated in Note 7 below. Some of these provisions have been written back in
subsequent periods, when it was certain that they were not required. No adjustment has been made in the financial statements of the relevant
years/ period, on account of non-availability of related information.
b) During the year ended March 31, 1998 and 1999 machinery spares purchased along with the fixed assets were charged off to revenue,
whereas in the subsequent accounting periods due to the amendment in the relevant Accounting Standard, these machinery spares were
capitalised. The details of machinery spares purchased along with the fixed assets during the year ended March 31, 1998 and 1999 are not
available and accordingly these have not been capitalised in the respective years.
c) The company for the years ended 31st March 1998 and 1999 followed the policy of valuing vehicle spares at weighted average cost whereas
in the subsequent accounting periods due to the amendment in the relevant Accounting Standard, it changed its policy and valued the above
Inventories at lower of cost, determined on weighted average basis, and net realisable value. The information relating to cost for the years
1998 and 1999 is not available.
- 205 -
3) Contingent Liabilities as at:
Particulars
December
31, 2002
1) Contingent Liabilities on account of
A) Claims against the Company not acknowledged as debts:
- Sales-tax demands
(Deposited under protest)
- Excise demands
(Deposited under protest)
(Company has related counter claims on third parties.)
- Customs demands
(Deposited under protest)
- Income-tax demands
(Deposited under protest)
- Other Disputed claims against the company lodged by various parties,
pending litigation.
B) Guarantees:
(i) Guarantee given by the Company to HDFC Limited against a term loan
of Rs.350 million given by HDFC Limited to Maruti Employees Cooperative House Building Society Limited, Bhondsi.
(Against it, the amount due at the year-end is)
(ii) Guarantee given to Finance Companies
- For term loan
- Lease finance given to various vendors of the company for purchase of
dies and moulds of certain models.
C) Co-lessee in agreements entered into between various vendors
of the company, as lessee, and Finance Companies as lessors for
leasing of dies and moulds of certain models.
D) Others
Compensation, in the event of the company not fulfilling its minimum
purchase obligation
For components, as per terms of an agreement entered into.
2) Outstanding commitments under Letters of Credit established
by the Company:
3) Estimated value of contracts on capital account, excluding
capital advances, remaining to be executed and not provided for
- 206 -
(Rs. In Million)
March 31, March 31,
2002
2001
March 31,
2000
March 31,
1999
March 31,
1998
189
(3)
4,703
(257)
90
6,993
(1,133)
717
53
(3)
8,508
(202)
10
6,592
(815)
621
64
(8)
5,933
(202)
9
1,611
(652)
616
66
(7)
963
(19)
(3)
10
1,450
(255)
480
68
(7)
1,594
(237)
(217)
10
1,238
(151)
449
75
(13)
1,498
(241)
(217)
10
986
(100)
414
350
350
350
350
350
350
(190)
(207)
(227)
(244)
(256)
(266)
60
74
-
-
-
-
437
523
-
-
-
-
2,645
3,384
3,545
1,639
-
-
-
-
76
199
445
-
26
677
1,476
3,255
2,963
2,313
215
845
1,268
2,018
2,931
4,620
4. Consumption for raw material, components, vehicle spares and consumables have
been derived from the opening stock, purchases and closing stock physically verified
by the management.
5. In the year 1999, the Company created a provision of Rs.850 million (included in
Consumption of Raw Materials and Components), on account of estimated reversal of
tax benefit, (inclusive of earlier years) on quantity differences on inputs. In
subsequent years, the company had made provisions for Rs.132 million, Rs.205
million, Rs.374 million (inclusive of Rs.164 million for earlier years) and Rs.200
million for the period ended 31st December 2002 and for the years ended 31st March
2002, 2001and 2000, respectively.
6. Manufacturing, Administrative and Other expenses for the period ended 31st
December 2002 and for the year ended 31st March 2002 include a provision of Rs.125
million inclusive of Rs.71 million for earlier years and Rs.60 million inclusive of Rs.51
million for earlier years for interest on estimated reversal of tax benefit, on quantity
differences (under reconciliation) on inputs.
7. The Company has made provision for contingencies on account of:
Particulars
Non fulfillment
of its future
years
export
obligation
against import
of
capital
goods
Unamortized
cost of assets
of
certain
models
of
vehicles
Compensation
for
non
fulfillment
of
purchase
obligation
Tax benefit on
quantity
differences
(under
reconciliation)
on inputs
Other Claims
Total
(Rs. In Millions)
Financial Financial
Year
Year
ended
ended
March
March
31, 1999
31, 1998
For
the
period
April
1,
2002
to
December
31, 2002
Financial
Year
ended
March
31, 2002
Financial
Year
ended
March
31, 2001
Financial
Year
ended
March
31, 2000
-
-
-
292
-
620
19
298
-
190
229
1068
1
10
137
63
-
-
-
-
-
-
70
-
62
10
4
4
4
76
82
318
141
549
303
1764
8. During the year ended 31st March, 2001, the Company, based on the technical and
management estimate revised depreciation rates, prospectively, from higher rates to
the depreciation rates prescribed under Schedule XIV of the Companies Act, 1956 on
the new plant and machinery and dies and jigs for new models. Accordingly, the
depreciation change and loss for the year was lower by Rs.667 million and the net
fixed assets were higher by the same amount.
- 207 -
9. During the year ended 31st March, 2002 the Company entered into a Constant
Maturity Interest Rate swap with a bank for it’s Rs.1,000 million Long term
Debentures under which the Bank will bear the fixed interest rate liability at the rate
of 12% p.a. till maturity and the Company will bear the floating interest burden at a
fixed spread over the 5 year Government Security yields.
10. The Company is entitled to sales tax benefit in accordance with the provisions of Rule
28C of Haryana General sales Tax Rules, 1975 for the period from 01st August, 2001
to 31st July, 2015. The ceiling amount of concession to be availed during entitlement
period is Rs.5,644 million.
11. The Company in the year 2001-02 had offered Voluntary Retirement Schemes to its
employees and made a payment of Rs.736 million. This amount is included under
miscellaneous expenses (to the extent not written off or adjusted) and is being
amortized over the estimated future pay back period of 36 months from the
conclusion of the scheme.
12. a) Land valuing Rs.4 million is not yet registered in the name of the Company. Part of
this land has been made available to Group Companies. Land registered in the name
of the Company includes that valuing Rs.44 million meant for Maruti Employees Cooperative House Building Society Limited, Bhondsi.
b) Building amounting to Rs.26 million is not yet registered in the name of the
Company.
c) Plant and Machinery includes pro-rata cost amounting to Rs.374 million of a Gas
Turbine jointly owned by the Company with its Group Companies and certain Other
Companies.
- 208 -
13) SECURED LOANS
Particulars
December 31, March 31, March
2002
2002
2001
(Rs. In Millions.)
31, March 31, March 31, March
2000
1999
1998
31,
LONG TERM LOANS
11.2% Non-Convertible
Debentures –Series I
(Secured by mortgage on
specific Buildings and Plant &
Machinery)
(Series- I Debentures are
redeemable at par on 24th
July 2007 with put / call
option on 24th July2005)
12% Non-Convertible
Debentures – Series II
(Secured by mortgage on
specific Buildings and Plant &
Machinery)
(Series- II Debentures are
redeemable at par 30% on
4th December 2005, 30% on
4th December 2006 and
balance 40% on 4th December
2007.)
Total
SHORT TERM LOANS
Cash Credit / Working
Capital Demand
Loans/Rupee Loans from
Banks
Packing Credit from banks
Post shipment credit from
Banks
Foreign Currency loans
from banks
(The above are secured by
pari passu first charge on the
stock, book debts and other
current assets.)
Overdraft from banks
(Secured against fixed
deposits)
Total
2,000
2,000
2,000
-
-
-
1,000
1,000
1,000
-
-
-
3,000
3,000
3,000
-
-
-
115
-
951
-
2,615
-
427
-
197
14
-
-
-
-
1
7
-
-
-
-
436
-
-
-
-
-
-
-
287
115
951
2,615
864
218
287
- 209 -
14) UNSECURED LOANS
Particulars
LONG TERM LOANS
Foreign Currency Loans
from Banks
(against negative lien on
specific fixed assets of the
Company)
SHORT TERM LOANS
Packing Credits from Banks
Post Shipment Credits from
Banks
Overdraft from Banks
Short Term Rupee Loans
from Banks
Foreign Currency Loans
- From Banks
- From Others
December
31, 2002
March
2002
31, March
2001
31, March
2000
31, March
1999
(Rs. In Millions.)
31, March
31,
1998
1,440
1,464
1,399
-
-
-
-
930
715
708
600
250
-
15
200
44
-
7
-
5
144
101
-
-
-
550
-
-
-
-
-
2798
-
3010
872
-
198
Notes:
1. Long term loan
(a) The Interest rate applicable to Long term foreign currency loan taken from bank is at
a spread of 0.60% per annum over 6 months Floating LIBOR (The LIBOR rate being
reset every 6 months).
(b) The above-mentioned loan is repayable in full as follows, the first tranche of USD 10
million on February 16, 2004 and the second tranche of USD 20 million on February 27,
2004.
2. Short term loans
(a) Interest on short term loans is payable in the range of 6%-9%, 5.41%-13.18%,
6.46%- 10%, 9%- 12.24% and 6.12%- 12% for the years ended 31st March, 2002,
2001, 2000, 1999 and 1998, respectively.
(b) All short-term loans outstanding at each balance sheet date are repayable within one
year from the balance sheet date.
(c) Short Term Foreign Currency Loans from others for the year ended 31st March, 1998
was guaranteed by GoI.
- 210 -
B. OTHER FINANCIAL INFORMATION
We have examined the following financial information relating to Maruti Udyog Limited
proposed to be included in the Offer Document, as approved by you and annexed to this
report.
i.
Summary of accounting ratios based on the adjusted profits relating to earnings per
share, net asset value and return on net worth is enclosed as Annexure A.
ii. Capitalisation statement as at 31st December 2002 of the Company is enclosed as
Annexure B.
iii. Statement of taxation is enclosed as Annexure C.
iv. Details of items of other income are enclosed as Annexure D.
In our opinion the financial information of the Company as stated to this report as
mentioned in paragraph (A) & (B) above read with respective significant accounting
policies, after making groupings and adjustments and subject to non adjustment of
certain matters as stated in notes to accounts, have been prepared in accordance with
Part II of Schedule II of the Act and the SEBI Guidelines.
This report is intended solely for your information and for inclusion in the Offer
Document in connection with the Offer for Sale of the Company and is not to be used,
referred to or distributed for any other purpose without our prior written consent.
Yours faithfully,
Sd/S. Berera
Partner
For and on behalf of
Price Waterhouse
Chartered Accountants
New Delhi
Date: 25/3/03
- 211 -
OTHER FINANCIAL INFORMATION
Summary of Accounting Ratios
Annexure – A
Key ratios
Financial
Financial
Financial
Financial
Financial
For the
period April Year ended Year ended Year ended Year ended Year ended
1, 2002 to March 31, March 31, March 31, March 31, March 31,
December
2002
2001
2000
1999
1998
31, 2002
Earning Per Share (Rs.)
Net Asset Value per
Share (Rs.)
42.68
66.92
(118.91)
184.22
411.68
570.56
2,118
1,903
1,912
2,036
1,902
1,528
Return on Net worth (%)
2.02
Weighted Average
Numbers of Equity Share
Outstanding during the
period/year
14,175,205
3.52
(6.22)
9.05
21.65
37.35
13,229,162
13,229,162
13,229,162
13,229,162
13,229,162
Formula:
Earnings Per Share (Rs.)
=
Net Profit after tax and before extraordinary items
Weighted Average Numbers of Equity Shares
Outstanding During the period/ year
Net Asset Value Per Share (Rs.)
=
Net worth excluding revaluation reserve
Weighted Average Numbers of Equity
Outstanding During the period/ year
Return on Net Worth (%)
=
Net profit before extraordinary items
adjusted tax
Net worth excluding revaluation reserve
but
Shares
after
Notes:
1.
2.
3.
Earnings per share and Return on net worth for the period ended 31st December,
2002 are for a period of nine month and therefore are not comparable with previous
year figures.
Above ratios are computed on the basis of stand-alone (unconsolidated) restated
financials of Maruti Udyog Limited.
Ratios have been computed on the basis of the adjusted profits/ losses for the
respective years/ period.
- 212 -
Summary of Accounting Ratios (Post Split)
The shareholders in the Extra-Ordinary General Meeting held on March 25, 2003 have
approved the sub-division of equity shares of face value of Rs. 100 each into twenty
equity shares of face value of Rs. 5 each. Subsequent to this sub-division, the authorised
equity share capital of Rs. 1,550,000,000 has been divided into 310,000,000 equity
shares of Rs. 5 each and the issued, subscribed and paid up capital of Rs. 1,444,550,300
has been divided into 288,910,060 equity shares of Rs. 5 each. Accordingly, the ratios
have been computed on the basis of number of equity shares post-split.
Post split
Key ratios
Earning Per
Share (Rs.)
Net Asset
Value per
Share (Rs.)
Return on Net
worth (%)
Weighted
Average
Numbers of
Equity Share
Outstanding
during the
period/year
Financial Financial Financial Financial Financial
For the
Year
Year
Year
Year
Year
period April
ended
ended
ended
ended
ended
1, 2002 to
December March 31, March 31, March 31, March 31, March 31,
1998
1999
2000
2001
2002
31, 2002
2.13
3.35
(5.95)
9.21
20.58
28.53
106
95
96
102
95
76
2.02
3.52
(6.22)
9.05
21.65
37.35
283,504,100 264,583,240 264,583,240 264,583,240 264,583,240 264,583,240
Formula:
Earnings Per Share (Rs.)
=
Net Profit after tax and before extraordinary items
Weighted Average Numbers of Equity Shares (post
split) outstanding During the period/ year
Net Asset Value Per Share (Rs.)
=
Net worth excluding revaluation reserve
Weighted Average Numbers of Equity Shares (post
split) Outstanding During the period/ year
Return on Net Worth (%)
=
Net profit before extraordinary items
adjusted tax
Net worth excluding revaluation reserve
but
after
Notes:
1.
2.
3.
Earnings per share and Return on net worth for the period ended 31st December,
2002 are for a period of nine month and therefore are not comparable with previous
year figures.
Above ratios are computed on the basis of stand-alone (unconsolidated) restated
financials of Maruti Udyog Limited.
Ratios have been computed on the basis of the adjusted profits/ losses for the
respective years/ period.
- 213 -
CAPITALISATION STATEMENT (POST ISSUE)
ANNEXURE - B
(Rs. In Millions)
As at
December 31,
2002 *
Particulars
Short Term Debt
Long Term Debt (A)
115
4,440
Total Debt
4,555
Share Holders Fund
Share Capital
Reserves after adjustments of miscellaneous expenditure, to the extent not
written off. #
Total Shareholders Fund (B)
1,445
28,573
30,018
Long Term Debt/ Total Shareholders Fund (A/B)
0.15
* The GoI is selling part of its stake in the Company and accordingly no money is
received by the Company from this offer. Therefore, there is no change in capitalisation
statement, pre and post issue.
# The above has been calculated after considering the adjustments.
- 214 -
STATEMENT OF TAX SHELTERS
Annexure – C
(Rs in Millions)
Financial Financial Financial Financial Financial
Year
Year
Year
Year
Year
ended
ended
ended
ended
ended
March 31, March 31, March 31, March 31, March
31, 1998
1999
2000
2001
2002
PARTICULARS
Profit/(Loss) before tax but
after
Extraordinary items as per
books (A)
Tax on actual rate on profits
Adjustments
Permanent Differences (B)
Interest on tax free securities
Dividend exempt u/s 10(33)
Penalties
Donations
Deduction U/S 80G
Deduction U/S 80IA
Deduction U/S 80HHC
Indexation difference on Long term
Capital Gain/Loss
Total Permanent Differences (B)
Timing Differences (C)
Difference between tax depreciation
and book depreciation
Capital Expenditure debited to profit
and loss account in books
Deduction U/s 35
Borrowing cost capitalised in the
books claimed as revenue expense
in Income Tax
Deferred Revenue Expenditure net
of claimed in Income Tax
Statutory duties claimed on paid
basis net of reversal of duties
claimed in Income Tax in earlier
years
Diff between interest accrued and
investment as per Income Tax
Diff between interest accrued and
interest received
Voluntary Retirement Scheme
Provision in diminution in value of
investment accounted for in the
books
Disallowance U/s 40A(7)
Disallowance U/s 35AB
Disallowance U/s 43B
Provisions for doubtful current
assets and Contingent liabilities
1,183
422
(2,692)
(1,065)
3,851
1,483
7,841
2,744
9,773
3,421
(26)
(39)
-
(49)
(37)
4
-
(176)
(451)
6
(6)
(74)
(113)
(192)
(75)
(441)
(445)
(163)
(45)
(940)
(814)
(5)
(70)
(186)
(268)
(106)
(920)
(72)
(1,225)
(221)
(2,183)
(1,603)
(1,773)
(1,140)
(302)
88
35
(169)
122
(194)
310
(98)
33
(172)
173
(45)
(136)
(143)
(8)
-
-
20
(64)
(260)
(57)
(21)
1,224
(287)
(796)
(36)
(421)
-
(212)
22
(59)
18
(36)
11
-
25
-
66
-
1
-
(10)
13
(120)
(87)
(169)
50
(17)
851
(24)
(2)
(349)
309
409
(315)
2,409
- 215 -
debited to P&L Account net of
w/back
Prior Period Expenses (net of
claimed in Income Tax Act)
1
Total Timing Differences (C)
(1,130)
Net Adjustments (B+C)
(1,200)
Tax Saving thereon
(428)
Profit/(Loss) as per Income Tax
Returns (D)= (A+B+C)
(17)
Brought Forward Losses
adjusted (E)
Taxable Income/(Loss) (D+E)
(17)
Taxable Income as per MAT
1,325
Tax as per Income tax as
returned
101
Interest u/s 234
Total Tax as per return
101
Carried Forward Business Loss
(40)
Carried Forward Depreciation Loss
(5,009)
Carried Forward Capital Loss
(227)
Total Carried Forward Loss as
per return
(5,276)
- 216 -
31
(2,287)
(2,555)
(1,011)
(35)
(1,740)
(2,660)
(1,024)
16
58
(1,167)
(409)
19
2,195
12
4
(5,247)
1,191
6,674
9,785
(5,247)
-
1,191
-
6,674
-
9,785
-
(40)
(4,998)
(221)
463
463
(12)
2,336
2
2,338
-
3,425
13
3,438
-
(5,259)
(12)
-
-
DETAILS OF OTHER INCOME
Annexure - D
(Rs. in Millions)
Particulars
Interest on:
(a) Inter Corporate
Deposits (includes
TDS)
(b) Fixed Deposits
with Banks
(c )Securities (includes
TDS)
(d)Others (includes
TDS)
Duty Drawback on
Exports
Sale of Scrap
Sale of Power
Workshop Receipts
Sales Tax Benefits
Miscellaneous
Receipts
Profit on sale of
Investments (Net)
Dividend
(a) Trade Investments
Long Term
(b) Others Long Term
(c )Others Current
Provisions no longer
required written back
Exchange Variation
Gain on Forward
Contracts
Recovery of Service
Charges
Less: Repair cost of
Damaged Vehicles
Total
For the
Financial Financial Financial Financial Financial
Year
Year
Year
period
Year
Year
April 1,
ended
ended
ended
ended
ended
2002 to March 31, March 31, March 31, March 31, March 31,
Nature of
December
2002
2001
2000
1999
1998
Income
31, 2002
-
-
-
98
387
392 Recurring
175
-
-
396
469
100 Recurring
19
25
51
242
482
256 Recurring
558
815
607
278
284
277 Recurring
210
601
16
160
142
819
357
25
161
163
804
337
24
255
635
202
23
217
415
272
20
265
425
171
17
-
-
-
Recurring
Recurring
Recurring
Recurring
- Recurring
355
390
356
350
293
343 Recurring
121
-
190
71
485
291 Recurring
27
3
37
2
31
6
17
58
-
-
-
24
90
337
14 Recurring
40 Recurring
- Recurring
256
436
591
476
520
-
-
-
-
-
15 Recurring
90
130
134
141
118
115 Recurring
(48)
(45)
(48)
(44)
(45)
(50)
2,543
3,294
3,246
3,574
3,992
2,714
-
- 217 -
-
43
Recurring
SUNDRY DEBTORS AS ON DECEMBER 31, 2002
(Rs. in Million)
A
Debts outstanding for a period
months:
Unsecured - Considered Good
- Considered Doubtful
Less: Provision for Doubtful Debts
B
exceeding
six
866
279
1,145
279
866
Other Debts:
Unsecured – Considered Good
5,094
Total
5,960
Out of the total debtors outstanding as at December 31, 2002, Rs.368 Million is
recoverable from the Promoter Group Companies.
Out of the total debtors outstanding as at December 31, 2002, Rs.132 Million is
recoverable from the Group Companies.
No amount is recoverable from the Promoters.
Note:
1. Promoters - Suzuki Motor Corporation.
2. Promoter Group Companies represents the Subsidiaries and Associates of Suzuki
Motor Corporation (excluding Suzuki Metal India Limited, Machino Plastics Limited,
Bharat Seats Limited and Krishna Maruti Limited which have been taken as Group
Companies of Maruti Udyog Limited) and Subros Limited, where Suzuki Motor
Corporation share holding is 13%.
3. Group Companies represents the Subsidiaries, Associates and Joint Ventures of
Maruti Udyog Limited.
- 218 -
VALUE OF QUOTED INVESTMENTS
The Book Value and Market Value of quoted investments of the Company as on
December 31,2002 is as below:
Name of the Company
A
EQUITY SHARES – LONG TERM
1
TRADE INVESTMENT
Asahi India Glass Limited
Bharat Seats Limited
Denso India Limited
Jay Bharat Maruti Limited
Machino Plastics Limited
Sona Koyo Steering Systems Limited
2
NON-TRADE INVESTMENT
LIC Housing Finance Limited
TOTAL
- 219 -
Number of
Shares/
Units
Book
Value
Mark
et
Value
(Rs. in
Millions)
8,880,000
465,000
2,862,758
1,585,000
941,700
690,000
2
5
73
16
5
10
305
8
74
41
16
38
573,600
34
37
145
519
LOANS AND ADVANCES AS ON DECEMBER 31, 2002
(Rs. in Million)
A
Loans
Secured - Considered Good
- Considered Doubtful
Less: Provision for Doubtful Loans
172
36
208
36
Unsecured
B
158
Advances recoverable in cash or in kind or for value to be
received:
Unsecured - Considered Good
- Considered Doubtful
Less: Provision for Doubtful Advances
C
Deposits - Considered Good unless otherwise stated
Balance with Customs, Port Trust and other Government
Authorities
Inter Corporate Deposits
Considered Doubtful
Less :Provision for Doubtful Deposits
Other Deposits
Total
A.
172
1,214
73
1,287
73
1,214
1,991
313
313
0
9
3,544
1. Out of the total Loans and Advances outstanding as at December 31, 2002, Rs.
107 Million is recoverable from the Promoter Group Companies.
2. Out of the total Loans and Advances outstanding as at December 31, 2002, Rs.
225 Million is recoverable from the Group Companies.
3. No amount is recoverable from the Promoters.
Note:
1. Promoters - Suzuki Motor Corporation.
2. Promoter Group Companies represents the Subsidiaries and Associate of Suzuki
Motor Corporation (excluding Suzuki Metal India Limited, Machino Plastics
Limited, Bharat Seats Limited and Krishna Maruti Limited which have been taken
as Group Companies of Maruti Udyog Limited) and Subros Limited, where Suzuki
Motor Corporation share holding is 13%.
3. Group Companies represents the Subsidiaries, Associates and Joint Ventures of
Maruti Udyog Limited.
B.
Loans and Advances recoverable as at December 31, 2002 from persons/
companies in which Directors of Maruti Udyog Limited are interested, as listed in
the register maintained under section 301 of the Companies Act, 1956 is Rs 208
million.
C.
Apart from the above, no other Loans and Advances have been made by MUL to
persons/companies related to SMC/any of the directors of MUL.
- 220 -
CASH FLOW STATEMENT PREPARED FROM THE RESTATED FINANCIAL
STATEMENTS FOR THE NINE MONTHS PERIOD ENDED DECEMBER 2002 AND FOR
THE YEAR ENDING MARCH 2002 AND MARCH 2001
Following is the Cash Flow Statement prepared under the indirect method as set out in
Indian Accounting Standard 3 on Cash Flow Statements issued by Institute of Chartered
Accountants of India.
(Rupees in Million)
For the Nine For the year
Months
ended
ended
31.03.02
31.12.02
A.
Cash flow from operating activities:
Net Profit/(loss) before tax
Adjustments for:
Depreciation
Interest Expense
Interest Income
Income from Investments – Dividends
(Profit) / Loss on sale of Fixed Assets
(Profit) / Loss on sale of Investments
Deferred revenue expenditure written off
Deferred Revenue Expenditure Incurred
Debts / Advances written off
Provision for Bad & Doubtful Debts and
Advances
Provision no longer required written back
Unrealised foreign exchange (gain) / Loss
Provision for Contingencies
Provision for MODVAT on Input difference
(under reconciliation) and interest thereon
Operating profit before working
capital changes
Adjustments for changes in working
capital :
(Increase)/Decrease in Sundry Debtors
(Increase)/Decrease in Other Receivables
(Increase)/Decrease in Inventories
Increase/(Decrease) in Trade and other
payables
Cash generated from operating
activities
Taxes (Paid) /Received (Net of TDS)
Net cash from operating activities
B.
Cash flow from Investing activities:
Purchase of fixed assets
Proceeds from Sale of fixed assets
Proceeds from Sale of Investments
Purchase of investments
Interest Received (Revenue)
Dividend Received
Net cash used in investing activities
- 221 -
For the year
ended
31.03.01
1,122
1,503
(2,540)
2,413
403
(752)
(30)
11
(121)
287
(39)
3
2
3,429
654
(840)
(39)
8
324
(929)
300
3,223
704
(658)
(37)
7
(190)
197
(261)
71
(127)
(34)
82
(436)
(2)
318
(591)
141
257
265
374
3,477
4,555
440
2,444
895
1,467
(594)
1,056
(1,841)
1,750
1,142
(1,246)
(2,092)
1,247
(892)
7,689
6,662
(2,543)
(49)
(123)
95
7,640
6,539
(2,448)
(780)
36
3,708
(13,251)
794
30
(9,463)
(2,229)
94
(13)
828
39
(1,281)
(6,036)
168
3,319
(110)
687
37
(1,935)
C.
Cash flow from financing activities:
Proceeds from fresh issue of Share Capital
(including Share Premium )
Proceeds from long term borrowings
(excludes Exchange Fluctuation)
Proceeds from short term borrowings
Repayment of short term borrowings
Interest Paid
Dividend Paid
D.
E.
3,990
-
-
-
-
4,356
115
(2,096)
(279)
(397)
415
(5,041)
(789)
-
1,261
(675)
-
Net cash from financing activities
1,333
(5,415)
4,942
Net Increase/(Decrease) in Cash &
Cash Equivalents (A+B+C)
(490)
(157)
559
Opening Balance of Cash and cash
equivalents
719
876
317
Closing Balance of Cash and cash
equivalents
229
719
876
153
76
438
281
365
511
Cash and cash equivalents comprise
Cash, Cheques & Drafts (in hand) and
Remittances in transit
Balance with Scheduled Banks in Current
Accounts
NOTES: 1. Previous year's figures have been regrouped wherever necessary to conform to the
current period's classification.
2. Figures in brackets represent cash outgo.
- 222 -
SEGMENT RESULTS PREPARED FROM THE RESTATED FINANCIAL STATEMENTS
The following table presents the Segment profit, assets and liabilities information relating
to the Business segment for the nine month ending 31st December 2002 and for the
year ending 31st Mar 2002. There are no reportable Secondary segments of the
company.
Information about business segment – Primary
April 2002- December 2002
2001-02
SEGMENT REVENUE
Motor Vehicle Others Total Motor Vehicle Others
Sales
Other income
Total Revenue
Segment results
Dividend and Interest Income
Interest Expense
Income Taxes
Net Profit
Other Information
Segment Assets
Unallocated Assets
Total Assets
Segment Liability
Unallocated Liability
Total Liability
Capital Expenditure
Depreciation
Deferred Revenue Expenditure
Total
63,667
2,173
65,840
1,310
0
44
44
18
63,667
2,217
66,884
1,328
197
403
517
605
90,809
3,253
94,062
2,164
0 90,809
14
3,267
14 94,076
(34) 2,130
27
654
618
885
39,846
60
46,707
11,515
53
822
2,412
287
2
1
0
39,906
9,797
49,703
11,568
8,117
19,685
824
2,413
287
8 46,715
284
46,999
6 11,755
10,069
21,824
4
2,401
0
3,429
0
324
11,749
2,397
3,429
324
Note:
a) The company is in the business of manufacture, purchase and sale of Motor Vehicles
and spare parts.
b) Others include businesses of pre-owned cars, fleet management and financing.
c) Dividend is on non-trade investment and interest income is on securities and fixed
deposits.
d) Unallocated assets represent non-trade investment. Unallocated liabilities represent
interest bearing liabilities and Income tax Liabilities.
e) Capital Expenditure represents additions to Fixed Assets.
- 223 -
MARUTI INSURANCE BROKERS LIMITED
Annexure E
I. SUMMARY OF PROFITS AND LOSS ACCOUNT, AS RESTATED
The profit/(losses) of Maruti Insurance Brokers Limited for the periods ended December
31, 2002 and March 31, 2002 after making such adjustments and regroupings and
subject to notes appearing hereinafter are as set out below:
(Rupees in 000's)
For the period
1st April 2002
to 31st
December
2002
Period ended 14th
January 2002 to
31st March 2002
A. Income
Commission
Other Income
Total A
B. Expenditure
Personnel
Remuneration to Dealers
Administrative & Other Expenses
Preliminary Expenses Written Off
Depreciation
Total B
C. Adjusted Profit before Taxation (A-B)
D. Provision for Taxation
E. Profit after Tax (C-D)
- 224 -
100,117
50
100,167
-
458
95,689
1,433
24
16
97,620
4
4
2,547
(4)
950
-
1,597
(4)
MARUTI INSURANCE BROKERS LIMITED
Annexure E
II. SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED:
The assets and liabilities of the company as on December 31, 2002 and March 31, 2002
after making such adjustments and regroupings and subject to notes appearing
hereinafter are as set out below:
(Rs. in 000's)
Fixed Assets
Gross Block
Less: Accumulated Depreciation
Net Block
(A)
Current Assets, Loans & Advances
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Total
(B)
Liabilities &Provisions
Unsecured Loans
Current Liabilities
Provisions
Total
(C)
Net Current Assets (D)= (B-C)
Net Worth
(A)+(D)
Represented By Share Capital
Issued, Subscribed and paid up.
50,000 Equity Shares of Rs. 10 each
Reserves & Surplus
Surplus in Profit & Loss Account
Less: Preliminary Expenses
Less: Loss for the year
Net Worth
- 225 -
As
at
31st
December 2002
As at 31st March
2002
343
16
327
-
19,282
687
13,409
33,378
500
500
500
30,257
950
31,707
123
123
1,671
---------1,998
----------
377
---------377
----------
500
500
1,593
95
---------1,998
----------
119
4
---------377
----------
MARUTI INSURANCE BROKERS LIMITED
Annexure E
III. SIGNIFICANT ACCOUNTING POLICIES AND NOTES
Significant Accounting Policies
1. Accounting Convention:
The financial statements are prepared under historical cost convention, on a going
concern basis and in accordance with applicable accounting standards issued by the
Institute of Chartered Accountants of India.
2. Revenue Recognition:
Agency commission is recognized based on the total net premium collected/handed
over to the Principal.
3. Fixed Assets:
Fixed Assets are shown at cost less accumulated depreciation.
4. Depreciation:
Depreciation is provided on straight-line method at the rates specified in Schedule XIV
of the Companies Act, 1956.
Depreciation on additions is charged for the whole month irrespective of the date of
addition.
5. Staff Benefits:
The Company makes regular contributions to duly constituted funds set up for
Provident Fund and Family Pension Fund.
6. Preliminary Expenses:
Preliminary Expenses are written off over a period of five years from the year in which
the company commenced business.
Notes :1. Other Income includes participation fees received from Insurance Companies.
2. Operating, Administrative and Other Expenses include Director's Remuneration
Rs. 3,94,090.
3. Taxation has been computed on the basis of the rates applicable for the year.
4. Authorized Share Capital of the company is Rs. 50 Lakhs divided into 5 Lakh
Equity Shares of Rs. 10 each.
5. Amount due from debtor is subject to confirmation.
IV. DIVIDENDS:
We further report that, the company has not declared any dividend since incorporation.
- 226 -
MARUTI INSURANCE DISTRIBUTION SERVICES LIMITED
Annexure F
I. SUMMARY OF PROFITS AND LOSS ACCOUNT, AS RESTATED
The profit/(losses) of Maruti Insurance Distribution Services Limited for the periods
ended December 31, 2002 and March 31, 2002 after making such adjustments and
regroupings and subject to notes appearing hereinafter are as set out below:
For the period 1st
April 2002 to 31st
December 2002
A. Income
Commission
Total A
28,989
(Rupees in 000's)
Period ended 14th
January 2002 to
31st March 2002
-
28,989
B. Expenditure
Remuneration to Dealers
Administrative & Other Expenses
Preliminary Expenses Written Off
Total B
28,236
425
24
28,685
4
4
C. Adjusted Profit before Taxation(A-B)
304
(4)
D. Provision for Taxation
E. Profit after Tax (C-D)
120
184
(4)
- 227 -
MARUTI INSURANCE DISTRIBUTION SERVICES LIMITED
Annexure F
II. SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED:
The assets and liabilities of the company as on December 31, 2002 and March 31, 2002
after making such adjustments and regroupings and subject to notes appearing
hereinafter are as set out below:
As at 31st December
2002
Current Assets, Loans & Advances
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Total
(A)
(Rs. in 000's)
As at 31st March
2002
6,495
893
2,668
10,056
500
500
500
8,851
120
9,471
123
123
585
---------585
----------
377
---------377
----------
500
500
180
95
----------
119
4
----------
585
----------
377
----------
Liabilities & Provisions
Unsecured Loans
Current Liabilities
Provisions
Total
(B)
Net Current Assets (C)=(A-B)
Net Worth=(C)
Represented By Share Capital
Issued, Subscribed and paid up.
50,000 Equity Shares of Rs. 10 each
Reserves & Surplus
Surplus in Profit & Loss Account
Less : Preliminary Expenses
Less : Loss for the year
Net Worth
- 228 -
MARUTI INSURANCE DISTRIBUTION SERVICES LIMITED
Annexure F
III. SIGNIFICANT ACCOUNTING POLICIES AND NOTES
Significant Accounting Policies
1. Accounting Convention:
The financial statements are prepared under historical cost convention, on a going
concern basis and in accordance with applicable accounting standards issued by the
Institute of Chartered Accountants of India.
2. Revenue Recognition:
Agency Commission is recognized based on the total net premium collected/handed
over to the principal.
3. Preliminary Expenses:
Preliminary Expenses are written off over a period of five years from the year in which
the Company commenced business.
Notes :1.
Amount due from debtor is subject to confirmation.
2.
Authorized Share Capital of the company is Rs. 50 Lakhs divided into 5 Lakh Equity
Shares of Rs. 10 each.
IV. DIVIDENDS:
We further report that, the company has not declared any dividend since incorporation.
- 229 -
TRUE VALUE SOLUTIONS LIMITED
Annexure G
I. SUMMARY OF PROFITS AND LOSS ACCOUNT, AS RESTATED
The profit/(losses) of True Value Solutions Limited for the periods ended December 31,
2002 and March 31, 2002 after making such adjustments and regroupings and subject to
notes appearing hereinafter are as set out below:
(Rupees in 000's)
For the period 1st
April 2002 to 31st
December 2002
Period ended 14th
January 2002
To 31st March 2002
A. Income
Consultancy Fees
Total A
5,479
5,479
-
B. Expenditure
Personnel
Administrative & Other Expenses
Preliminary Expenses Written Off
Total B
3,965
519
24
4,508
56
4
60
C. Adjusted Profit before Taxation(A-B)
971
(60)
D. Provision for Taxation
375
-
E. Profit after Tax (C-D)
596
(60)
- 230 -
TRUE VALUE SOLUTIONS LIMITED
Annexure G
II. SUMMARY OF ASSETS AND LIABILITIES, AS RESTATED:
The assets and liabilities of the company as on December 31, 2002 and March 31, 2002
after making such adjustments and regroupings and subject to notes appearing
hereinafter are as set out below:
(Rs. in 000's)
As at 31st
December 2002
As at 31st March
2002
Current Assets, Loans & Advances
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Total
(A)
1,502
242
366
2,110
500
500
Liabilities & Provisions
Current Liabilities
Provisions
Total
(B)
794
375
1,169
179
179
941
321
---------941
----------
---------321
----------
500
500
536
95
---------941
----------
119
60
---------321
----------
Net Current Assets (C)=(A-B)
Net Worth=(C)
Represented By Share Capital
Issued, Subscribed and paid up.
50,000 Equity Shares of Rs. 10 each
Reserves & Surplus
Surplus in Profit & Loss Account
Less : Preliminary Expenses
Less : Loss for the year
Net Worth
- 231 -
TRUE VALUE SOLUTIONS LIMITED
Annexure G
III. SIGNIFICANT ACCOUNTING POLICIES & NOTES
Significant Accounting Policies
1. Accounting Convention:
The financial statements are prepared under historical cost convention, on a going
concern basis and in accordance with applicable accounting standards issued by the
Institute of Chartered Accountants of India.
2. Revenue Recognition:
Consultancy Fees is accounted for on accrual basis based on the agreed rates with
the service user.
3. Staff Benefits:
The Company makes regular contributions to duly constituted funds set up for
Provident Fund and Family Pension Fund. Gratuity and leave encashment have been
provided for accrual basis.
4. Preliminary Expenses:
Preliminary Expenses are written off over a period of five years from the year in which
the business has commenced.
Notes :1. Taxation has been computed on the basis of the rates applicable for the year.
2. Authorized Share Capital of the company is Rs. 50 Lakhs divided into 5 Lakh Equity
Shares of Rs. 10 each.
IV. DIVIDENDS:
We further report that, the company has not declared any dividend since incorporation.
- 232 -
SUMMARY OF DIFFERENCES IN INDIAN GAAP AND US GAAP
1
Particulars
Contents of
financial
statements
Indian GAAP
Under
Indian
GAAP
–
companies are required to
present Balance sheets and
profit and loss accounts for
two years along with the
relevant accounting policies
and notes.
Additionally
all
listed
companies
(including
companies in the process of
getting listed), companies
with turnover exceeding
Rs.50 crores and insurance
companies are required to
present
cash
flow
statements. (Applicable for
financial years beginning on
April 1, 2001 for other than
listed companies).
2
Changes in
accounting
policies
- Accounting
treatment
3
Correction of
fundamental
errors
4
Principles of
Consolidation
Companies in the process
of listing are required to
present
five
years
of
adjusted
financial
information.
The effect of a change in
accounting policy must be
recorded in the income
statement of the period in
which the change is made
except
as
specified
in
certain standards where the
change
resulting
from
adoption of the standard
has to be adjusted against
opening retained earnings.
US GAAP
All companies are required to
present
balance
sheets,
statements
of
operations,
statements of cash-flows and
statements of changes in
stockholders equity for two
years along with the relevant
accounting policies and notes
to accounts.
Potential
registrants
are
required to present statements
of operations, statements of
cash flows and statements of
changes in stockholders equity
for three years. They need not
present the balance sheet for
the third year.
Generally include effect (net of
taxes) in the current year
income
statement
after
extraordinary items.
Disclose
pro
comparatives.
forma
Retrospective adjustments for
certain items.
The effect of correction of
errors must be included in
the current year income
statement with appropriate
disclosure.
Applicable to all Listed
Companies
from
01.04.2002.
Comparative figures for all
previous years affected by the
change must be restated.
Investment in associates
should be accounted for in
accordance with the equity
method of accounting.
Investment in Joint Ventures
generally accounted for under
the
Equity
Method
of
accounting.
Investment
in
Joint
Ventures accounted for as
Goodwill acquired in business
combinations after June 30,
- 233 -
Applicable to all Companies.
As under Indian GAAP.
Particulars
Indian GAAP
per
Proportionate
Consolidation Method.
Generally,
Goodwill
on
Consolidation is amortised
over a period of 3-5 years.
5
Intangible
assets
Capitalize intangible assets
if specific criteria are met
and amortize over useful
life, generally not exceeding
10 years.
The recoverable amount of
an
intangible asset that is not
available for use or is being
amortized over a period
exceeding 10 years should
be reviewed at least at
each
financial
year-end
even
if
there
is
no
indication that the asset is
impaired.
US GAAP
2001 shall not be amortized,
and goodwill arising from
acquisitions prior to this date is
no
longer
amortized
subsequent to December 31,
2001, but is subject to an
annual impairment test.
Capitalize purchased intangible
assets, if specific criteria are
met.
Goodwill and certain other
intangibles are not presumed
to be wasting assets.
Intangibles
that
have
an
indefinite
useful
life
are
required to be tested, at least
annually, for impairment.
Intangible assets that have
finite useful life are required to
be
amortized
over
their
estimated useful lives.
Amortization
should
be
based on the consumption
pattern of the asset or on a
straight line basis if a
pattern is not determinable.
6
7
Internally
generated
intangible
assets
Property,
plant and
equipment
Expenditure incurred on
research must be expensed
off as incurred.
Development costs can be
capitalized and amortized
only if stringent criteria are
met.
Fixed assets are recorded
at the historical costs or
revalued amounts.
On revaluation, an entire
class of assets is revalued,
or a selection of assets for
revaluation is made on a
systematic basis. There is
no
restriction
on
the
frequency
of
valuation.
However,
revaluation
should not exceed the
recoverable
amount
of
assets.
- 234 -
Research
and
development
costs must be expensed as
incurred.
Certain software and websitedevelopment
related
costs
must be capitalised.
Revaluations not permitted.
8
Depreciation
The
Companies
Act
prescribes the minimum
statutory
rates
for
minimum
depreciation
provision.
Assets are depreciated over
their
estimated
useful
economic lives.
Where applicable, higher
depreciation
based
on
useful life of the asset
should be provided.
Asset
lives
are
not
prescribed
by
the
Companies Act, but can be
derived
from
the
depreciation rates.
9
Impairment of
assets
Applicable for accounting
period
beginning
from
01.04.2004 onwards.
If impairment is indicated,
the assets must be written
down to higher of net
selling price and the value
in use based on discounted
cash flows.
The Impairment review is
based on undiscounted cash
flows at the lowest level of
independent cashflows. If the
undiscounted cash flows are
less than the carrying amount
the impairment loss must be
measured using discounted
cash flows.
10
Capitalization
of borrowing
costs
Applicable for accounting
periods
beginning
from
01.04.2000
onwards.
Permitted
for
qualifying
assets.
Compulsory when relates to
the construction of certain
qualifying assets.
11
Valuation of
Investments
Long-term investments are
carried
at
cost
(with
provision for other than
temporary diminution in
value). Current investments
are carried at lower of cost
or fair value determined on
individual
basis
or
by
category of investment but
not on overall (or global)
basis.
The valuation depends on the
classification
of
the
investments—if
held
to
maturity
then
carried
at
amortized cost, otherwise at
fair
value.
Unrealized
gains/losses
must
be
recognized
to
other
comprehensive income or (if
trading securities) to income
statement.
12
Deferred
income taxes
Deferred tax assets and
liabilities
should
be
recognized for all timing
differences
subject
to
consideration of prudence
in respect of deferred tax
assets.
Unrecognized deferred tax
assets are reassessed at
each balance sheet date
Deferred taxes are measured
using the full provision method,
driven
by
balance
sheet
temporary
differences.
Deferred
tax
assets
are
recognized
if
recovery
is
probable.
- 235 -
Deferred
tax
assets
and
liabilities are measured using
and are recognized to the
extent that it is certain that
such
previously
unrecognized deferred tax
assets will be realized.
enacted tax rates.
A
number
of
specific
differences in application.
Deferred tax assets and
liabilities
are
measured
using tax rates that have
been
enacted
or
substantively enacted by
the balance sheet date.
13
Derivatives
and
other
financial
instruments Measurement
of
derivative
instruments
and
hedging
activities
The Guidance Note on
Accounting for Equity Index
Options and Equity Stock
Options and the Guidance
Note on Accounting for
Equity Index Futures are
the pronouncements, which
address the accounting for
derivatives.
However, the accounting
treatment recommended in
these guidance notes are
applicable to all equity
index options irrespective
of
the
motive,
i.e.,
speculation, arbitrage or
hedging.
14
Extraordinary
and
exceptional
items
Extraordinary
items
are
limited to a few events
outside the control of the
company.
Extraordinary items should
be
disclosed
in
the
statement of profit and loss
as a part of net profit or
loss for the period. The
nature and the amount of
each extraordinary item
should
be
separately
disclosed in the statement
of profit and loss in a
manner that its impact on
current profit or loss can be
perceived.
Exceptional items usually
shown on the face of the
income statement or in the
notes.
- 236 -
Derivatives
and
hedge
instruments must be measured
at fair value. The changes in
fair value must be recognized
in the income statement,
except for effective cash flow
hedges where the changes in
face value must be deferred in
equity until effect of the
underlying
transaction
is
recognized
in the
income
statement.
(No
basis
adjustment
on
cash
flow
hedges of future)
Gains/losses
on
hedge
instruments used to hedge
forecast
transactions
are
included in the cost of the
asset/liability.
Extraordinary items limited to a
few events outside the control
of the company. Does not use
the term, but requires a
separate disclosure of items
that are of such size and
nature that require separate
disclosure
to
explain
the
performance of the entity.
Exceptional
items
usually
shown on the face of the
income statement or in the
notes.
15
Proposed
Dividend
Proposed
dividends
are
recognized in the financial
statements for the period to
which they relate. Any
proposed
dividends
declared after the balance
sheet date are adjusted in
the financial statements for
the relevant year even if
they
are
subject
to
shareholders approval
A dividend is recorded when it
has been declared and notice
given to the shareholders.
Stock
dividends
should
preferably be recorded as of
the time of declaration unless
there is a clear indication that
they will be rescinded
16
Off
Balance
Sheet Items
There
is
no
specific
guidance for the accounting
for off balance sheet items
under
Indian
GAAP.
Schedule
VI
of
the
Companies Act mandates
the disclosure of amounts
committed to be paid for
the acquisition of fixed
assets not provided for in
the books of accounts.
The SEC requires the disclosure
of
material
facts
and
circumstances
that
provide
investors
with
a
clear
understanding of a registrant's
material off- balance sheet
arrangements
and
their
material effects in the financial
statements.
Accounting
standards
require specific disclosures
for
commitments
and
contingent liabilities.
Further – standards have been
issued
recently
providing
additional guidelines for the
accounting and disclosures for
Guarantees, including indirect
guarantees of indebtedness of
others and for consolidation of
“variable interest entities”.
Additionally existing accounting
standards require disclosures
of commitments made by an
enterprise
17
Employee
Stock
Compensation
There
is
no
specific
guidance on accounting for
employee
stock
compensation under Indian
GAAP.
SEBI
has
issued
the
Employee
Stock
Option
Scheme
and
Employee
Stock Purchase Scheme
Guidelines, 1999, which are
effective
for
listed
companies for all stockoption schemes established
after 19 June 1999. In
accordance
with
these
- 237 -
Contingent Gains / losses must
be recognized or disclosed in
the accounts provided certain
conditions are met
Requires recognition of the cost
of shares/ options awarded to
employees, whether conditional
upon performance criteria or
not, over the period to which
the employee’s service relates.
Entities have a choise of
accounting
methods
for
determining
the
costs
of
benefits
arising
from
employees stock compensation
plans. They may either follow
an intrinsic value method or a
fair value method.
guidelines, the excess of
the
market
price
of
underlying equity shares as
of the date of grant of the
options over the exercise
price
of
the
options,
including
up-front
payments, if any, is to be
recognized and amortized
on a straight-line basis over
the vesting period
The general practice is to
consolidate trusts set up for
administration of employee
stock option plans.
Under
the
intrinsic
value
method, the compensation cost
is the difference between the
market price of the stock at the
measurement date and the
price to be contributed by the
employee (exercise price). The
measurement date could be
the date of grant or the date of
exercise depending upon terms
of the plan. This method is
widely used in practice.
The fair value method is based
on the fair value of the option
at the grant date. This is
estimated using an optionpricing model. If an entity
chooses to follow the intrinsic
value method, it must make
pro-forma disclosures of net
income and earnings per share
as if the fair value method had
been applied. All options given
to non-employees have to
follow the fair value method.
An ESOP trust’s assets and
liabilities are included in the
balance
sheet
of
the
sponsoring entity where the
arrangements are such that the
sponsoring entity has de facto
control and bears the benefits
and risks of the shares held by
the ESOP trust.
- 238 -
CONSOLIDATED FINANCIAL STATEMENTS AS PER AS 21
Report of the auditors’ to the Board of Directors of Maruti Udyog Limited.
1. We have audited the attached summary restated consolidated balance sheet of
Maruti Udyog Limited (the Company) and its subsidiary companies, True Value
Solutions Limited, Maruti Insurance Brokers Limited, Maruti Insurance Distribution
Services Limited (the Group) as at 31st December 2002 and 31st March 2002, and the
relative summary restated consolidated profit and loss account for the nine months
ended 31st December 2002 and for the year ended 31st March 2002 annexed thereto
both of which we have signed under reference to this report. These financial
statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with generally accepted auditing standards in
India. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are prepared, in all material
respects, in accordance with an identified financial reporting framework and are free
of material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We
believe that our audit and the reports of other auditors provide a reasonable basis for
our opinion.
3. We did not audit the financial statements of the subsidiary companies whose financial
statements reflect net assets of Rs 4 million and Rs 1 million as at 31st December
2002 and 31st March 2002, respectively and Net Profit after tax of Rs 2 million for the
nine months period ended 31st December 2002 and Net Loss of Rs 0.06 million for
the year ended 31st March 2002. These financial statements have been audited by
another audit firm whose reports have been forwarded to us, and our opinion, in so
far as it relates to the amounts included in respect of the subsidiaries, is based solely
on the reports of the other auditors.
4. We report that the summary restated consolidated financial statements have been
prepared by the company in accordance with the requirements of Accounting
Standard (AS) 21 ‘Consolidated Financial Statements’ issued by the Institute of
Chartered Accountants of India, on the basis of the separate audited financial
statements of the Company and its subsidiary companies included in the summary
restated consolidated financial statements.
5. Accounting of investment of the Company in its associates and joint
ventures in the summary restated consolidated financial statements is in
accordance with AS–13 “Accounting for Investments” and not as per AS-23
& AS –27 regarding “Accounting of Investment in Associates in Consolidated
Financial Statements” and “Financial Interest of reporting in Joint
Ventures”, respectively which became mandatory for the accounting period
starting from 1st April 2002 and for which the impact on the results of
operation for the nine months period ended 31st December 2002 and the net
assets as at that date is not ascertainable as the accounts of the Associates/
Joint Ventures have not been audited for the aforesaid period.
6. In our opinion, and on the basis of the information and explanations given to us and
on consideration of the separate audit reports on individual audited financial
statements of the Company and its aforesaid subsidiary companies, the summary
restated consolidated financial statements together with the notes thereon and
- 239 -
attached thereto, subject to para 5 above, give a true and fair view in conformity
with the accounting principles generally accepted in India:
a. In the case of the summary restated consolidated balance sheet, of the consolidated
state of affairs of Maruti Udyog Limited and its subsidiary companies as at 31st
December 2002 and 31st March 2002; and
b. In the case of the summary restated consolidated profit and loss account, of the
consolidated result of operations for the nine months period ended 31st December
2002 and year ended 31st March 2002.
c. This report is intended solely for your information and for inclusion in the offer
document being issued by the Company in connection with the offer for sale by the
GoI of certain equity shares in the Company and is not to be used, referred to or
distributed for any other purpose without our prior written consent.
Sd/S. Berera
Partner
For and on behalf of
Price Waterhouse
Chartered Accountants
Place: New Delhi
Date: March 25, 2003
- 240 -
I. SUMMARY RESTATED CONSOLIDATED PROFIT AND LOSS ACCOUNT
(Rs. In Millions)
For the period Financial Year
April 1, 2002 to ended March
December 31,
31, 2002
2002
Income
Sales:
Of Products manufactured by the Company
60,892
85,153
2,775
63,667
2,672
66,339
5,656
90,809
3,294
94,103
37,299
2,038
280
13,044
1,541
2,405
53,882
4,568
458
20,132
2,289
3,420
4,195
449
82
2,413
287
4,821
764
318
3,429
324
42
63,991
702
69
94,336
(1,419)
Total
64,693
Net profit before extraordinary items & prior period adjustments.
1,646
92,917
1,186
(15)
1,631
150
550
931
(3)
1,183
138
1,045
-
(362)
(324)
202
(324)
(160)
607
23,058
885
22,332
-
157
23,665
23,374
23,665
176
105
397
(362)
23,058
Of Products traded in by the Company
Other Income
Total
Expenditure
Consumption of Raw Materials & Components
Cost of Spares/ Dies & Moulds Sold
Consumption of Stores
Excise Duty
Employees Remuneration & benefits
Manufacturing/ Administrative and other expenses
Selling & Distribution expenses
Financial expenses
Provision for Contingencies
Depreciation
Deferred Revenue Expenditure charged off
Less: Vehicles for own use
(Accretion)/ Decretion to work-in-progress and finished goods
Add: Net prior period adjustments
Profit before tax
Less:Taxation – Current
Less:Taxation – Deferred
Net Profit after tax as per audited statement of accounts (A)
Adjustment on account of changes in accounting policies [Refer
III(B)(ii)(1)]
Impact of material adjustments and prior period items
[Refer III(B)(ii)(1)]
Total Adjustments (B)
Adjusted Profit (A+B)
Carry forward Profit from previous year
Add: Accounting policy changes and prior period adjustments
pertaining to previous years *
Profit available for appropriation
Less:
Debenture Redemption Reserve
General Reserve
Proposed Dividend
Deferred Tax adjusted in General Reserve**
Profit transferred to Balance Sheet
- 241 -
The accompanying significant accounting policies and notes are an integral part of this
statement.
* Denotes the Impact of accounting policy changes (excluding deferred tax) and prior
period adjustments pertaining to earlier years.
** As per Accounting Standard (AS 22) " Accounting for Taxes on Income" issued by the
Institute of Chartered Accountants of India, the company has adjusted net deferred tax
liability till 31st March 2002 as a charge to General Reserve.
This is the Profit and Loss Account referred to in our report of even date.
S.BERERA
Partner
For and on behalf of
PRICE WATERHOUSE
Chartered Accountants
New Delhi
JAGDISH KHATTAR
Managing Director
MOTOHIRO ATSUMI
Director (Finance)
S.RAVI AIYAR
Company Secretary &
Chief Legal Officer
Dated: March 25, 2003
- 242 -
II. SUMMARY RESTATED CONSOLIDATED BALANCE SHEET
(Rs. In Millions)
December 31,
2002
A.
B.
C.
Fixed assets:
Gross Block
Less: Accumulated Depreciation
Net Block
Add: Capital Work in Progress
Total
Investments:
Current Assets, Loans & Advances:
45,224
21,925
23,299
90
23,389
10,631
Inventories
5,344
Sundry Debtors
5,986
March 31,
2002
43,847
19,546
24,301
724
25,025
967
6,811
8,393
Cash & Bank Balances
231
Other Current Assets
605
720
479
Loans & Advances
D.
3,557
Total
Liabilities & Provisions:
Current Liabilities & Provisions
Deferred Tax (Asset)/ Liability
15,723
13,553
1,615
4,604
21,007
14,199
1,065
Secured Loans
3,115
Unsecured Loans
1,440
3,951
E.
F.
G.
H.
I.
Total
Net Worth (A+B+C-D)
Net Worth Represented By
Share Capital
Reserves and Surplus
Capital Reserve
Share Premium
Investment allowance Reserve
Debenture Redemption reserve
General Reserve
Profit & Loss Account
Total
Miscellaneous Expenditure to the extent not written
off
Net Worth (F+G-H)
19,723
30,020
2,609
21,824
25,175
1,445
1,323
15
4,241
176
1,422
23,665
29,519
944
15
373
176
1,422
23,058
25,044
1,192
30,020
25,175
The accompanying significant accounting policies and notes are an integral part of this
statement.
- 243 -
This is the Balance Sheet referred to in our report of even date.
S.BERERA
Partner
For and on behalf of
PRICE WATERHOUSE
Chartered Accountants
New Delhi
JAGDISH KHATTAR
Managing Director
MOTOHIRO ATSUMI
Director (Finance)
S.RAVI AIYAR
Company Secretary &
Chief Legal Officer
Dated: March 25, 2003
- 244 -
III. NOTES TO SUMMARY RESTATED CONSOLIDATED FINANCIAL STATEMENTS.
A.BACKGROUND:
Maruti Udyog Limited (MUL) has three wholly owned subsidiaries - Maruti Insurance
Brokers Limited (MIBL), Maruti Insurance Distribution Services Limited (MIDSL) and True
Value Solutions Limited (TVSL).
MIBL, MIDSL and TVSL were incorporated in India on January 14, 2002 as a wholly
owned subsidiary of MUL with an authorized capital of Rs. 5 million each. MIBL, MIDSL
and TVSL have obtained the certificate to commence business on May 1, 2002.
SIGNIFICANT ACOCUNTING POLICIES AND NOTES TO ACCOUNTS:
B. SIGNIFICANT ACCOUNTING POLICIES:
1. BASIS FOR PREPARATION OF SUMMARY RESTATED CONSOLIDATED
FINANCIAL STATEMENTS:
The consolidated financial statements include accounts of Maruti Udyog Limited (The
Company) and its subsidiary undertakings (The Group). Subsidiary undertakings are
those companies in which Maruti Udyog Limited, directly or indirectly, has an interest of
more than one half of voting power or otherwise has power to exercise control over the
operations. Subsidiaries are consolidated from the date on which effective control is
transferred to the Group till the date such control exists. All inter company transactions,
balances and unrealized surpluses and deficits on transactions between group companies
are eliminated. Consistency in adoption of accounting policies among all group
companies is ensured to the extent practicable.
Investments in Subsidiaries have been accounted for in accordance with Accounting
Standard 21 on Consolidated Financial Statements.
Investments in the Associates and Joint Ventures have been accounted in these
consolidated statements as per Accounting Standard 13 on Accounting for Investments
and not as per Accounting Standard 23 on Accounting for Investments in Associates in
Consolidated Financial Statements and Accounting Standard 27 on Financial Reporting of
Interests in Joint Ventures. The policy for accounting of other investments is described
under Para 7 below.
The consolidated financial statements have been prepared in accordance with historical
cost convention, the applicable accounting standards issued by the Institute of Chartered
Accountants of India and the relevant provisions of the Companies Act, 1956.
The consolidated financial statements are proposed to be included in the offer for sale
document proposed to be filed by the Company with the Securities and Exchange Board
of India.
2. REVENUE RECOGNITION:
Domestic and Export Sales are recognised on dispatch of goods from the factory/stock
yard and Port respectively.
Agency Commission is recognized based on the total net premium collected/handed over
to the Principal
- 245 -
3. FIXED ASSETS:
Fixed Assets (except freehold land) are carried at cost of acquisition or construction or at
manufacturing cost (in case of own manufactured assets) in the year of capitalisation
less accumulated depreciation.
In respect of the various project related activities, which are carried on concurrently with
production, expenses on administration and supervision incurred, the bifurcation of
which between production and construction activities is not ascertainable, are charged to
revenue.
4. BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition, construction or
production of qualifying assets are capitalised till the month in which the asset is put to
use as part of the cost of that asset.
5. DEPRECIATION
a)Fixed Assets except for lease hold land are depreciated on straight line method on a
pro-rata basis from the month in which the asset is put to use, at the following rates:
i) Assets capitalised before 02.04.1987
Depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of
the Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the GoI.
ii) Assets capitalised on or after 02.04.1987
Depreciation has been provided at the rates prescribed in Schedule XIV to the
Companies Act, 1956 except for certain fixed assets where based on management's
estimate of the useful life of the assets, higher depreciation has been provided at the
following rates:
Plant and Machinery:
Single Shift
7.31%
Double Shift 11.88%
Triple Shift
15.83%
Dies and Jigs
19.00%
b) Leasehold land is amortised over the period of lease.
c) Plant and machinery the written down value of which at the beginning of the year is
Rs. 5,000/- or less and other assets the written down value of which at the beginning of
the year is Rs. 1,000/- or less are depreciated at the rate of 100%.
d) In case the historical cost of an asset undergoes a change due to increase or decrease
in long term liability on account of foreign exchange fluctuation, change in duties etc.,
the depreciation on revised unamortised depreciable amount is provided prospectively
over the residual useful life of the asset.
6. INVENTORIES
a) Inventories are valued at lower of cost, determined on weighted average basis, and
net realisable value.
b) Tools are written off over a period of three years except for tools valuing Rs. 5,000/or less individually which are charged off to revenue in the year of purchase.
- 246 -
c) Machinery spares (other than those supplied alongwith main plant and machinery,
which are capitalized and depreciated accordingly) are charged off to revenue on
consumption except those valuing Rs. 5,000/- or less individually, which are charged off
to revenue in the year of purchase and those whose value are not individually
ascertainable are written off over a period of three years.
7. INVESTMENTS
Current investments are valued at lower of cost and fair value. Long-term investments
are valued at cost except in case of permanent diminution in their value, wherein
necessary provision is made.
8. RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged off against the profit of
the year in which it is incurred except expenditure incurred on development and testing
of components which are deferred over a period of three years. Capital expenditure on
research and development is shown as an addition to fixed assets and depreciated
accordingly.
9. FOREIGN CURRENCY TRANSLATIONS
a) Foreign Currency transactions other than those covered by forward contracts are
recorded at the exchange rate prevailing at the date of transaction. Exchange differences
arising on settlement of transactions, except those relating to fixed assets, are
recognised as Income or expense in the year in which they arise. The cost of the
respective fixed assets are adjusted for exchange differences arising on repayment of
liabilities incurred for the purpose of acquiring such fixed assets.
b) At the balance sheet date all assets, other than fixed assets, and liabilities
denominated in foreign currency but not covered by forward contract are reported at the
exchange rate prevailing at the balance sheet date. The cost of the respective fixed
assets are adjusted for increase or decrease in liabilities incurred for the purpose of
acquiring such fixed assets due to application of exchange rate prevailing at the balance
sheet date.
c) Foreign currency transactions covered by forward contracts are recorded at the
exchange rate prevailing at the date of inception of forward contracts.
d) At the balance sheet date all assets and liabilities covered by forward contracts are
stated at the forward contract rates.
e) The difference between the forward rate and the exchange rate at the inception of a
forward contract is recognised as income or expense over the life of the contract except
in respect of liabilities incurred for acquiring fixed assets in which case such difference is
adjusted in the cost of the respective fixed assets.
Profit or Loss arising on cancellation or renewal of a forward contract is recognised as
income or expense in the year in which such cancellation or renewal has been made
except in case of a forward contract relating to liabilities incurred for acquiring fixed
assets, where profit or loss is adjusted in the cost of the respective fixed assets.
10. RETIREMENT BEENFIT COSTS
Gratuity and leave encashment benefits on retirement are accounted for on the basis of
actuarial valuation made at the end of the period.
- 247 -
11. DEFERRED REVENUE EXPENDITURE
Deferred revenue expenditure is written off over the period of its benefit . Preliminary
expenses are written off over a period of five years.
12. CUSTOMS DUTY
Customs duty paid on import of components specifically for export vehicles is debited to
Customs Duty Deposit Account and Duty Draw Back recoverable on export of vehicles is
credited to this account. Other categories of duties available as drawback are debited to
purchases and credited to income on export of vehicles.
13. GOVERNMENT GRANTS
Government Grants are recognized in the profit and loss account in accordance with the
related scheme and in the period in which these are accrued.
14. DEFERRED TAX
Tax expense for the period, comprising current tax and deferred tax, is included in
determining the net profit/(loss) for the year.
However, in the year of transition, the accumulated deferred tax liability at the beginning
of the year has been recognized with a corresponding charge to the General Reserve in
accordance with Accounting Standard 22 issued by the Institute of Chartered
Accountants of India.
Deferred tax assets are recognized for all deductible timing differences and
forward to the extent it is probable that future taxable profit will be available
which such deferred tax assets can be realized. Deferred tax assets are reviewed
balance sheet date and written down/ written up to reflect the amount
reasonably/ virtually certain (as the case may be) to be realized.
carried
against
at each
that is
Deferred tax assets and liabilities are measured at the tax rates that have been enacted
or substantively enacted at the balance sheet date.
(ii) NOTES TO ACCOUNTS:
1.
Adjustments:
Impact of change in accounting policies and prior period items:
(A)
(Rs. In Millions)
For the period Financial Year
April 1, 2002 to ended March
December 31,
31, 2002
2002
931
1,045
(B)
-
(362)
(362)
(362)
(104)
13
(389)
291
24
(7)
Particulars
Profit after tax as per audited
statements of accounts
Adjustment on account of:
(I) Changes in Accounting Policies
a) Deferred Tax Adjustments (note 1)
Total of Adjustments
Tax impact of adjustments
Total of adjustments – Net of tax
Impact
(II) Prior Period Items
a) Salary & Wage Arrears/ Liability
Adjustment
b) Retrospective amendments to prices of
raw materials and components (note 2)
c) Prior Period expenses
- 248 -
d) Prior Period incomes
e) Royalty Adjustment
Total of Adjustments
Tax impact of adjustments
Total of adjustments – Net of tax
(C)
Impact
Adjusted Profit
(A+B+C)
(11)
(25)
(505)
181
(324)
(2)
25
320
(118)
202
607
885
Notes:
1. The Company has accounted for Deferred Tax assets/ liability for earlier years in
order to comply with provisions of Mandatory Accounting Standard- 22 “Taxes on
Income” issued by the Institute of Chartered Accountants of India.
2. The Company makes a provision at each period/year end for retrospective
amendments to the price increase of raw materials and components. These
financial statements have been adjusted based upon the actual price increase of
raw material and components passed on to vendors with retrospective effect in
subsequent periods.
2.
Non Adjustments
The Company has provided for contingencies as per details indicated in Note 7
below. Some of these provisions have been written back in subsequent periods,
when it was certain that they were not required. No adjustment has been made in
the financial statements of the relevant years/ period, on account of nonavailability of related information.
- 249 -
3.
Contingent Liabilities as at:
(Rs. In Millions)
Particulars
1) Contingent Liabilities on account of :
A)
Claims
against
the
Company
not
acknowledged as debts:
- Sales-tax demands
(Deposited under protest)
- Excise demands
(Deposited under protest)
- Customs demands
(Deposited under protest)
- Income-tax demands
(Deposited under protest)
- Other Disputed claims against the company
lodged by various parties, pending litigation.
B) Guarantees:
(i) Guarantee given by the Company to HDFC
Limited against a term loan of Rs.350 million given
by HDFC Limited to Maruti Employees Co-operative
House Building Society Limited, Bhondsi.
(Against it, the amount due at the year-end is)
(ii) Guarantee given to Finance Companies
- For term loan
- Lease finance given to various vendors of the
company for purchase of dies and moulds of
certain models.
C) Co-lessee in agreements entered into
between various vendors of the company, as
lessee, and Finance Companies as lessor’s for
leasing of dies and moulds of certain models.
2) Outstanding commitments under Letters of
Credit established by the Company:
3) Estimated value of contracts on capital
account,
excluding
capital
advances,
remaining to be executed and not provided
for
December 31,
2002
March 31,
2002
189
(3)
4703
(257)
90
6,993
(1,133)
717
53
(3)
8,508
(202)
10
6,592
(815)
621
350
350
(190)
(207)
60
74
437
523
2,645
3,384
26
677
215
845
4. Consumption for Raw Material, components, vehicle spares and consumables have
been derived from the opening stock, purchases and closing stock physically verified by
the management.
5. The Company made provisions for Rs.132 million and Rs.205 million for period ended
31st December 2002 and for the year ended 31st March 2002, respectively on account of
estimated reversal of tax benefit, (inclusive of earlier years) on quantity differences on
inputs (included in Consumption of Raw Materials and Components).
6. Manufacturing, Administrative and Other expenses for period ended 31st December
2002 and for the year ended 31st March 2002 include a provision of Rs.125 million
inclusive of Rs.71 million for earlier years and Rs.60 million inclusive of Rs.51 million for
earlier years for interest on estimated reversal of tax benefit, on quantity differences
(under reconciliation) on inputs.
- 250 -
7. The Company has made provision for contingencies on account of:
(Rs. In Millions)
Particulars
For the period
Financial
April 1, 2002 to
Year ended
December 31,
March 31,
2002
2002
Unamortized cost of assets of certain
19
298
models of vehicles
Compensation for non fulfillment of
1
10
purchase obligation
Other Claims
62
10
Total
82
318
8. During the year ended 31st March, 2002 the Company entered into a Constant
Maturity Interest Rate swap with a bank for its’ Rs.1,000 million long term Debentures
under which the Bank will bear the fixed interest rate liability at the rate of 12% p.a. till
maturity and the Company will bear the floating interest burden at a fixed spread over
the 5 year Government Security yields.
9. The Company is entitled to sales tax benefit in accordance with the provisions of Rule
28C of Haryana General sales Tax Rules, 1975 for the period from 01st August 2001 to
31st July 2015. The ceiling amount of concession to be availed during entitlement period
is Rs.5, 644 million.
10. In the year 2001-02, the Company offered Voluntary Retirement Schemes to its
employees and made a payment of Rs.736 million. This amount is included under
miscellaneous expenses (to the extent not written off or adjusted) and is being
amortized over the estimated future pay back period of 36 months from the conclusion
of the scheme.
11. a) Land valuing Rs.4 million is not yet registered in the name of the Company. Part
of this land has been made available to Group Companies. Land registered in the name
of the Company includes that valuing Rs.44 million meant for Maruti Employees Cooperative House Building Society Limited, Bhondsi.
b) Building amounting to Rs.26 million is not yet registered in the name of Company.
c) Plant and Machinery includes pro-rata cost amounting to Rs.374 million of a Gas
Turbine jointly owned by the Company with its Group Companies and certain Other
Companies.
12. No provision has been made for deferred tax asset/ liability for subsidiary
companies, as it does not have any material impact on the results of operations for the
period ended 31st December, 2002 and for the year ended 31st March, 2002 and on net
assets as at 31st December, 2002 and as at 31st March, 2002.
13. Investments in the Associates and Joint Ventures have been accounted in these
consolidated statements as per Accounting Standard 13 on Accounting for Investments
and not as per Accounting Standard 23 on Accounting for Investments in Associates in
Consolidated Financial Statements and Accounting Standard 27 on Financial Reporting of
Interests in Joint Ventures which has become mandatory for accounting period starting
w.e.f. 01st April 2002. The Company’s management does not expect the impact of above
mentioned non-compliance with AS-23 and AS-27 to be material on the results of
operations for the period ended 31st December 2002 and on net assets as at 31st
December 2002.
- 251 -
CONSOLIDATED FINANCIAL STATEMENTS AS PER AS 21, AS 23 AND AS 27
Report of the auditors’ to the Board of Directors of Maruti Udyog Limited.
1. We have audited the attached summary restated consolidated balance sheet of
Maruti Udyog Limited (the Company), its subsidiary companies, joint ventures
and associates (the Group) as at 31st December 2002 and the relative summary
restated consolidated profit and loss account for the nine months ended on that
date annexed thereto both of which we have signed under reference to this
report. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
2. We conducted our audit in accordance with generally accepted auditing standards
in India. Those standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are prepared, in all
material respects, in accordance with an identified financial reporting framework
and are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit and the reports of
other auditors provide a reasonable basis for our opinion.
3. a) We did not audit the financial statements of the subsidiary companies, True
Value Solutions Limited, Maruti Insurance Brokers Limited and Maruti Insurance
Distribution Services Limited as at 31st December 2002. These financial
statements of subsidiary companies have been audited by another audit firm
whose reports have been forwarded to us, and in our opinion, in so far as it
relates to the amounts included in respect of the subsidiary companies, is based
solely on the reports of the other auditors.
b) The financial statements of joint venture and associate companies
used for preparation of the summary restated consolidated financial
statements are not restated and are unaudited. Accordingly, we have
relied on the financial statements as submitted by the joint ventures and
associates to the company.
c) The financial statements of subsidiary companies and joint ventures reflect net
assets of Rs. 4 million and Rs. 90 million respectively, as at 31st December, 2002
and Net Profit after tax of Rs. 2 million and Rs. 5 million respectively, for the nine
months period ended 31st December, 2002. The financial statements of associates
reflect a Net Profit after tax of Rs. 4 million for the nine months period ended 31st
December 2002.
4. We report that the summary restated consolidated financial statements have
been prepared by the company in accordance with the requirements of
Accounting Standard (AS) 21 ‘Consolidated Financial Statements’, AS-23
‘Accounting for Investments in Associates in Consolidated Financial Statements’
and AS 27 ‘Financial Reporting of Interest in Joint Venture’ issued by the
Institute of Chartered Accountants of India, on the basis of the separate audited
financial statements of the Company and its subsidiary companies and unaudited
financial statements of the joint ventures and associates included in the summary
restated consolidated financial statements.
- 252 -
5. The financial statements of the associate companies have not been
prepared on a consolidated basis as per AS 21 and AS 23 where
applicable. The impact that such consolidation may have on the financial
statements of such associate companies is not ascertainable.
6. In our opinion, and on the basis of the information and explanations given to us
and on consideration of the separate audit reports on individual audited financial
statements of the Company and its aforesaid subsidiary companies and the
unaudited financial statements of the joint venture and associate companies, the
summary restated consolidated financial statements together with the notes
thereon and attached thereto, subject to paras 3b) and 5 above, give a true
and fair view in conformity with the accounting principles generally accepted in
India:
a. In the case of the summary restated consolidated balance sheet, of the
consolidated state of affairs of Maruti Udyog Limited and its Group as at
31st December 2002; and
b. In the case of the summary restated consolidated profit and loss account,
of the consolidated result of operations for the nine months period ended
31st December 2002.
7. This report is intended solely for your information and for inclusion in the offer
document being issued by the Company in connection with the offer for sale by
the GoI of certain equity shares in the Company and is not to be used, referred to
or distributed for any other purpose without our prior written consent.
Sd/S. Berera
Partner
For and on behalf of
Price Waterhouse
Chartered Accountants
Place: New Delhi
Date: March 25, 2003
- 253 -
I. SUMMARY RESTATED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR 01st APRIL
2002 TO 31st DECEMBER 2002
(Rs. In Millions)
AMOUNT
Income
Sales:
Of Products manufactured by the Company (includes Joint Venture share of
Rs. 302 million)
Of Products traded in by the Company (includes Joint Venture share of Rs.
49 million)
Other Income (includes Joint Venture share of Rs. 12 million)
Total
Expenditure
Consumption of Raw Materials & Components (includes Joint Venture share
of Rs. 216 million)
Cost of Spares/ Dies & Moulds Sold
Consumption of Stores
Excise Duty (includes Joint Venture share of Rs. 46 million)
Employees Remuneration & benefits (includes Joint Venture share of Rs. 16
million)
Manufacturing/ Administrative and other expenses (includes Joint Venture
share of Rs. 33 million)
Selling & Distribution expenses (includes Joint Venture share of Rs. 4 million)
Financial expenses (includes Joint Venture share of Rs. 17 million)
Provision for Contingencies
Depreciation (includes Joint Venture share of Rs. 21 million)
Deferred Revenue Expenditure charged off
Less: Vehicles for own use
(Accretion)/ Decretion to work-in-progress and finished goods
Total
Net profit before extraordinary items & prior period adjustments.
Add: Net prior period adjustments
Add: Share in Profit of Associates
Profit before tax
Less: Taxation – Current (includes Joint Venture share of Rs 1
million)
Less: Taxation – Deferred (includes Joint Venture share of Rs 2
million)
Net Profit after tax as per audited statement of accounts (A)
Impact of material adjustments and prior period items [Refer III(B)(ii)(1)]
Total Adjustments (B)
Adjusted Profit (A+B)
Carry forward Profit from previous year
Add: Accounting policy changes and prior period adjustments pertaining to
previous years *
- 254 -
60,583
3,435
64,018
2,657
66,675
37,514
2,038
280
13,090
1,556
2,438
4,199
466
82
2,434
287
42
64,342
705
65,047
1,628
(15)
31
1,644
151
552
941
(324)
(324)
617
23,073
359
Profit available for appropriation
General Reserve
Proposed Dividend
Profit transferred to balance sheet
24,049
24,049
The accompanying significant accounting policies and notes are an integral part of this
statement.
* denotes the Impact of accounting policy changes (excluding deferred tax adjustments)
and prior period adjustments pertaining to earlier years.
This is the Profit & Loss Account referred to in our report of even date.
S.BERERA
Partner
For and on behalf of
PRICE WATERHOUSE
Chartered Accountants
New Delhi
JAGDISH KHATTAR
Managing Director
MOTOHIRO ATSUMI
Director (Finance)
S.RAVI AIYAR
Company Secretary &
Chief Legal Officer
Dated: March 25, 2003
- 255 -
II. SUMMARY RESTATED
DECEMBER 2002
CONSOLIDATED
BALANCE
SHEET
AS
ON
31st
(Rs. In Millions)
AMOUNT
A.
B.
C.
D.
Fixed assets:
Gross Block (includes Joint Venture share of Rs. 317 million)
Less: Accumulated Depreciation (includes Joint Venture share of
Rs. 66 million)
Net Block
Add: Capital Work in Progress (includes Joint Venture share of Rs.
22 million)
Total
Investments:
Current Assets, Loans & Advances:
Inventories (includes Joint Venture share of Rs. 32 million)
Sundry Debtors (includes Joint Venture share of Rs. 15 million)
Cash & Bank Balances (includes Joint Venture share of Rs. 14
million)
Other Current Assets (includes Joint Venture share of Rs 2 million)
Loans & Advances (includes Joint Venture share of Rs. 14 million)
Total
Liabilities & Provisions:
Current Liabilities & Provisions (includes Joint Venture share of Rs.
79 million)
Deferred Tax (Asset)/ Liability (includes Joint Venture share of Rs.
11 million)
Secured Loans (includes Joint Venture share of Rs. 136 million)
45,542
21,991
23,551
112
23,663
10,949
5,374
6,001
245
607
3,571
15,798
13,622
1,626
3,251
Unsecured Loans (includes Joint Venture share of Rs. 34 million)
E.
F.
G.
1,474
19,973
30,437
Total
Net Worth (A+B+C-D)
Net Worth Represented By
Share Capital
Reserves and Surplus
Capital Reserve
1,445
44
Share Premium
4,245
Debenture Redemption reserve
176
General Reserve
1,422
Profit & Loss Account
H.
I.
Total
Miscellaneous Expenditure to the extent not written off
Net Worth (F+G-H)
- 256 -
24,049
29,936
944
30,437
The accompanying significant accounting policies and notes are an integral part of this
statement.
This is the Balance Sheet referred to in our report of even date.
S.BERERA
Partner
For and on behalf of
PRICE WATERHOUSE
Chartered Accountants
New Delhi
JAGDISH KHATTAR
Managing Director
MOTOHIRO ATSUMI
Director (Finance)
S.RAVI AIYAR
Company Secretary &
Chief Legal Officer
Dated: March 25, 2003
- 257 -
III. NOTES TO SUMMARY RESTATED CONSOLIDATED FINANCIAL STATEMENTS.
A. BACKGROUND:
1. Maruti Udyog Limited (The Company) has three wholly owned subsidiaries, two joint
venture companies and thirteen associate companies (The Group) as follows:
Sl.
No
.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Name of Company
Relationship
Maruti Insurance Brokers Limited
Maruti
Insurance
Distribution
Services Limited
True Value Solutions Limited
J.J Impex (Delhi) Private Limited
Mark Exhaust Systems Limited
Suzuki Metal India Limited
Climate Systems India Limited
Mark Auto Industries Limited
Jay Bharat Maruti Limited
Maruti Countrywide Auto Financial
Services Limited
Citicorp Maruti Finance Limited
Caparo Maruti Limited
Machino Plastics Limited
Bharat Seats Limited
Krishna Maruti Limited
Asahi India Glass Limited
Denso India Limited
Nippon Thermostat (India) Limited
Sona
Koyo
Steering
Systems
Limited
Subsidiary
Subsidiary
Percentage of
ownership
interest
100.00
100.00
Subsidiary
Joint Venture
Joint Venture
Associate
Associate
Associate
Associate
Associate
100.00
47.50
42.50
49.00
39.00
33.89
29.28
26.00
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
26.00
20.00
15.32
14.81
13.14
12.00
10.27
10.00
7.85
2. Maruti Insurance Brokers Limited, Maruti Insurance Distribution Services Limited, True
Value Solutions Limited, Mark Exhaust Systems Limited and J.J Impex (Delhi) Private
Limited were incorporated in India.
B. SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS:
(i) SIGNIFICANT ACCOUNTING POLICIES:
1. BASIS FOR PREPARATION
FINANCIAL STATEMENTS:
OF
SUMMARY
RESTATED
CONSOLIDATED
The consolidated financial statements include accounts of Maruti Udyog Limited and its
subsidiaries, joint ventures and associate undertakings.
Subsidiary undertakings are those companies in which Maruti Udyog Limited, directly or
indirectly, has an interest of more than one half of voting power or otherwise has power
to exercise control over the operations. Investments in Subsidiaries have been
accounted for in accordance with Accounting Standard 21 on Consolidated Financial
Statements. Subsidiaries are consolidated from the date on which effective control is
transferred to the Group till the date such control exists. All inter company transactions,
balances and unrealized surpluses and deficits on transactions between the company and
its subsidiaries are eliminated.
- 258 -
Investments in joint venture undertakings over which the company exercises joint
control are accounted for using proportionate consolidation as per Accounting Standard
27 on Financial Reporting of Interests in Joint Ventures. Investment in associates (entity
over which the company exercises significant influence, which is neither a subsidiary nor
a joint venture) are accounted for using the equity method as per Accounting Standard
23 on Accounting for Investments in Associates in Consolidated Financial Statements. All
unrealized surpluses and deficits on transactions between the group companies are
eliminated.
The policy for accounting of other investments is described under Para 7 below.
Accounting policies between group companies are consistent to the extent practicable.
Appropriate disclosure is made of significant deviations from the company accounting
policies, which have not been adjusted.
The consolidated financial statements have been prepared in accordance with historical
cost convention, the applicable accounting standards issued by the Institute of Chartered
Accountants of India and the relevant provisions of the Companies Act, 1956.
The consolidated financial statements are proposed to be included in the offer for sale
document proposed to be filed by the Company with the Securities and Exchange Board
of India (‘SEBI’).
2. REVENUE RECOGNITION:
Domestic and Export Sales are recognised on dispatch of goods from the factory/stock
yard and Port respectively.
Finance charges on hire purchase business/ lease rental income are recognized on the
basis of implicit rate of return on the value of asset hired out/leased.
Agency Commission is recognized based on the total net premium collected/handed over
to the Principal.
3.FIXED ASSETS:
Fixed Assets (except freehold land) are carried at cost of acquisition or construction or at
manufacturing cost (in case of own manufactured assets) in the year of capitalisation
less accumulated depreciation.
In respect of the various project related activities, which are carried on concurrently with
production, expenses on administration and supervision incurred, the bifurcation of
which between production and construction activities is not ascertainable, are charged to
revenue.
4. BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition, construction or
production of qualifying assets are capitalised till the month in which the asset is put to
use as part of the cost of that asset.
5. DEPRECIATION (Refer Section III (B) (ii) (14)(b))
a) Fixed Assets except for lease hold land are depreciated on straight line method on a
pro-rata basis from the month in which the asset is put to use, at the following rates:
i) Assets capitalised before 02.04.1987
- 259 -
Depreciation has been provided at the rates computed in terms of Section 205 (2) (b) of
the Companies Act, 1956, in terms of Circular No. 1/86 dated 21.05.86 of the GoI.
ii) Assets capitalised on or after 02.04.1987
Depreciation has been provided at the rates prescribed in Schedule XIV to the
Companies Act, 1956 except for certain fixed assets where based on management's
estimate of the useful life of the assets, higher depreciation has been provided at the
following rates:
Plant and Machinery:
Single Shift
7.31%
Double Shift
11.88%
Triple Shift
15.83%
Dies and Jigs
19.00%
iii) Depreciation has been provided on Straight Line Method at rate higher than Schedule
XIV for some associate companies as follows:
Assets
Depreciation rates
Office Buildings
2%
Factory Buildings
5%
Electrical Fittings
33.33%
Plant & Machinery
7.14% - 20.00%
Furniture & Fittings
15.00% - 20.00%
Vehicles
20%
Electronic Processing Equipment’s 20.00% - 33.33%
b) Leasehold land is amortised over the period of lease.
c) Plant and machinery the written down value of which at the beginning of the year is
Rs. 5,000/- or less and other assets the written down value of which at the beginning of
the year is Rs. 1,000/- or less are depreciated at the rate of 100%.
d) In case the historical cost of an asset undergoes a change due to increase or decrease
in long term liability on account of foreign exchange fluctuation, change in duties etc.,
the depreciation on revised unamortised depreciable amount is provided prospectively
over the residual useful life of the asset.
e) In case of certain associates, the depreciation is provided on a written down value
method.
6. GOODWILL
Goodwill arising on acquisition is amortized to expense on a straight line basis over the
period of estimated benefit but not exceeding three years.
7. INVENTORIES
a) Inventories are valued at lower of cost, determined on weighted average basis, and
net realisable value.
b) Tools are written off over a period of three years except for tools valuing Rs. 5,000/or less individually which are charged off to revenue in the year of purchase.
- 260 -
c) Machinery spares (other than those supplied alongwith main plant and machinery,
which are capitalized and depreciated accordingly) are charged off to revenue on
consumption except those valuing Rs. 5,000/- or less individually, which are charged off
to revenue in the year of purchase and those whose value are not individually
ascertainable are written off over a period of three years.
d) In case of certain associate and joint venture companies, raw material and work in
progress have been valued at cost, determined on FIFO basis.
8. INVESTMENTS
Current investments are valued at lower of cost and fair value. Long-term investments
are valued at cost except in case of permanent diminution in their value, wherein
necessary provision is made.
9. RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged off against the profit of
the year in which it is incurred except expenditure incurred on development and testing
of components which are deferred over a period of three years. Capital expenditure on
research and development is shown as an addition to fixed assets and depreciated
accordingly.
10. FOREIGN CURRENCY TRANSLATIONS
a) Foreign Currency transactions other than those covered by forward contracts are
recorded at the exchange rate prevailing at the date of transaction. Exchange differences
arising on settlement of transactions, except those relating to fixed assets, are
recognised as Income or expense in the year in which they arise. The cost of the
respective fixed assets are adjusted for exchange differences arising on repayment of
liabilities incurred for the purpose of acquiring such fixed assets.
b) At the balance sheet date all assets, other than fixed assets, and liabilities
denominated in foreign currency but not covered by forward contract are reported at the
exchange rate prevailing at the balance sheet date. The cost of the respective fixed
assets are adjusted for increase or decrease in liabilities incurred for the purpose of
acquiring such fixed assets due to application of exchange rate prevailing at the balance
sheet date.
c) Foreign currency transactions covered by forward contracts are recorded at the
exchange rate prevailing at the date of inception of forward contracts.
d) At the balance sheet date all assets and liabilities covered by forward contracts are
stated at the forward contract rates.
e) The difference between the forward rate and the exchange rate at the inception of a
forward contract is recognised as income or expense over the life of the contract except
in respect of liabilities incurred for acquiring fixed assets in which case such difference is
adjusted in the cost of the respective fixed assets.
f) Profit or Loss arising on cancellation or renewal of a forward contract is recognised as
income or expense in the year in which such cancellation or renewal has been made
except in case of a forward contract relating to liabilities incurred for acquiring fixed
assets, where profit or loss is adjusted in the cost of the respective fixed assets.
- 261 -
11. RETIREMENT BENEFIT COSTS (Refer Section III (B) (ii) (14)(c))
Gratuity and leave encashment benefits on retirement are accounted for on the basis of
actuarial valuation made at the end of the period.
In case of certain associate companies, provision for leave encashment has been made
on accrual basis.
In case of certain joint venture and associate companies, contributions towards gratuity
are charged to Profit & Loss Account on the basis of premium paid to the Life Insurance
Corporation of India.
12. DEFERRED REVENUE EXPENDITURE (Refer Section III (B) (ii) (14) (d))
Deferred Revenue Expenditure is written off over the period of its benefit.
Preliminary Expenses are written off over the period of its benefit.
Deferred Revenue Expenditure and Preliminary Expenses of joint venture and associate
companies have been charged to the Profit & Loss Account in the year of incurrence.
13. CUSTOMS DUTY
Customs duty paid on import of components specifically for export vehicles is debited to
Customs Duty Deposit Account and Duty Draw Back recoverable on export of vehicles is
credited to this account. Other categories of duties available as drawback are debited to
purchases and credited to income on export of vehicles.
14. GOVERNMENT GRANTS
Government Grants are recognized in the profit and loss account in accordance with the
related scheme and in the period in which these are accrued.
15. DEFERRED TAX (Refer Section III (B) (ii) (14) (a))
Tax expense for the period, comprising current tax and deferred tax, is included in
determining the net profit/(loss) for the year.
However, in the year of transition, the accumulated deferred tax liability at the beginning
of the year has been recognized with a corresponding charge to the General Reserve in
accordance with Accounting Standard 22 issued by the Institute of Chartered
Accountants of India.
Deferred tax assets are recognized for all deductible timing differences and
forward to the extent it is probable that future taxable profit will be available
which such deferred tax assets can be realized. Deferred tax assets are reviewed
balance sheet date and written down/ written up to reflect the amount
reasonably/ virtually certain (as the case may be) to be realized.
carried
against
at each
that is
Deferred tax assets and liabilities are measured at the tax rates that have been enacted
or substantively enacted at the balance sheet date.
Taxes have been accounted for as per the current tax method for the subsidiaries
Deferred tax has not been accounted for in case of subsidiaries.
- 262 -
(ii) NOTES TO ACCOUNTS
1.
Adjustments
Impact of material adjustments and prior period items
(Rs. In Millions)
Particulars
Profit after tax as per consolidated Profit
& Loss account
Adjustment on account of:
(I) Prior Period Items
a) Salary & Wage Arrears/ Liability Adjustment
b) Retrospective amendments to prices of raw
materials and components (note)
c) Prior Period expenses
d) Prior Period incomes
e) Royalty Adjustment
Total of Adjustments
Tax impact of adjustments
Total of adjustments – Net of tax Impact
Adjusted Profit
For the period
April 1, 2002 to
December 31,
2002
(A)
941
(104)
(389)
(B)
(A+B)
24
(11)
(25)
(505)
181
(324)
617
Note:
The company makes a provision at each period/year end for retrospective
amendments to the price increase of raw materials and components. The
consolidated financial statements have been adjusted based upon the actual price
increase of raw material and components passed on to vendors with retrospective
effect in subsequent periods.
•
The consolidated financial statements have been prepared based on audited
financial statements of subsidiaries. Financial statements of all associates and
joint ventures for the period ended 31st December 2002 are unaudited.
•
Reserves of the joint venture pertaining to period prior to April 1, 2002 have been
adjusted in the opening reserves of the company as on that date.
•
Non Adjustments
The company has provided for contingencies in period prior to 01st April 2002 to
31st December 2002. Some of these provisions have been written back in current
period, when it was certain that they were not required. No adjustment has been
made in the consolidated financial statements of the current period, on account of
non-availability of related information.
- 263 -
•
Contingent Liabilities as at December 31, 2002
Particulars
Maruti
Udyog
Limited
Subsidiaries
and
Associate
1) Contingent Liabilities on account of
A) Claims against the Group not
acknowledged as debts:
- Sales-tax demands
(Deposited under protest)
- Excise demands
(Deposited under protest)
- Customs demands
(Deposited under protest)
- Income-tax demands
(Deposited under protest)
- Others.
B) Guarantees:
(i) Guarantee given by the company to HDFC
Limited against a term loan of Rs.350 million
given by HDFC Limited to Maruti Employees
Co-operative House Building Society Limited,
Bhondsi.
(Against it, the amount due at the year-end
is)
(ii) Guarantee given to Finance Companies
- For term loan
- Lease finance given to various vendors of
the company for purchase of dies and moulds
of certain models.
(iii) Others
C) Co-lessee in agreements entered into
between
various
vendors
of
the
company,
as
lessee,
and
Finance
Companies as lessor’s for leasing of dies
and moulds of certain models.
2) Outstanding commitments under
Letters of Credit established by the
Group:
3) Estimated value of contracts on
capital
account,
excluding
capital
advances, remaining to be executed and
not provided for
Joint
Venture
(Rs. In Millions)
Group
195
(3)
4,777
(257)
90
(0)
7,003
(1133)
764
0
(0)
0
(0)
0
(0)
0
(0)
3
195
(3)
4,777
(257)
90
(0)
7,003
(1133)
767
350
0
350
(190)
0
(190)
60
0
60
437
0
437
30
20
50
2,645
0
2,645
74
0
74
251
4
255
6. Consumption of Raw Material, components, vehicle spares and consumables have
been derived from the opening stock, purchases and closing stock physically
verified by the management.
7. Provisions have been made for Rs. 132 million for period ended 31st December
2002 on account of estimated reversal of tax benefit (inclusive of earlier years)
on quantity differences on inputs (included in Consumption of Raw Materials and
Components)
- 264 -
8. Manufacturing, Administrative and Other expenses for period ended 31st
December 2002 include a provision of Rs. 125 million inclusive of Rs.71 million for
earlier years on account of interest on estimated reversal of tax benefit, on
quantity differences (under reconciliation) on inputs.
9. Provision for contingencies have been made on account of:
Particulars
Unamortized cost of assets of certain models of vehicles
Compensation for non-fulfillment of purchase obligations
Other Claims
Total
(Rs. In Millions)
For
the
period
April 1, 2002 to
December
31,
2002
19
1
62
82
10. During the year ended on 31st March 2002 the company has entered into a
Constant Maturity Interest Rate swap with a bank for its Rs.1,000 million Long
Term Debentures under which the Bank will bear the fixed interest rate at the
rate of 12% p.a. till maturity and the company will bear the floating interest
burden at a fixed spread over the 5 year Government Security yields.
11. The entitlement of sales tax benefit, in accordance with the provisions of Rule
28C of Haryana General Sales Tax Rules, 1975 for the period form 01st August
2001 to 31st July 2015 is subject to a ceiling of Rs.5,644 million.
12. In the year 2001-02, the company had offered Voluntary retirement Schemes to
its employees and made a payment of Rs.736 million. This amount is included
under miscellaneous expenses (to the extent not written off or adjusted) and is
being amortized over the estimated future payback period of 36 months from the
conclusion of the scheme.
13. a) Land valuing Rs. 4 million is not registered in the name of the company. Part
of this land has been made available to the group companies. Land registered in
the name of the company includes that valuing Rs. 44 million meant for Maruti
Employees Co-operative House Building Society Limited, Bhondsi.
b)Building amounting to Rs.26 million is not yet registered in the name of the
Company.
c) Plant and Machinery includes pro-rata cost amounting to Rs.374 million of a
Gas Turbine jointly owned by the company with its group companies and certain
other companies.
14. Differences between accounting policies of the company and other group companies:
a. No provision has been made for deferred tax asset/ liability for subsidiary
companies, as it does not have any material impact to the results of operations
for the nine months period ended 31st December 2002 and on net assets as at
31st December 2002.
b. In case of certain associate companies, for which Gross Block as on 31st
December 2002 aggregates to Rs.6,794 million, Net Block as on 31st December
2002 aggregates to Rs. 3,339 million and depreciation for current period is Rs.
- 265 -
357 million, depreciation has been provided on written down value method at
rates prescribed under Schedule XIV of Companies Act, 1956.
c. In case of certain associate companies, provision for leave encashment has been
made on accrual basis.
In case of certain associate and joint venture companies, contributions towards
gratuity is charged to Profit & Loss Account on the basis of premium paid to the
Life Insurance Corporation of India.
d. Deferred Revenue Expenditure and Preliminary Expenses of joint venture and
associate companies have been charged to the Profit & Loss Account in the year
of incurrence.
- 266 -
STATEMENT OF TAX BENEFITS
Auditor’s Certificate
We hereby certify that the enclosed annexure states the tax benefits available to Maruti
Udyog Limited (the “Company”) and its shareholders under the provisions of the Income
Tax Act, 1961 and other direct and indirect tax laws presently in force.
The contents of this annexure is based on information, explanations and representations
obtained from the Company and on the basis of our understanding of the business
activities and operations of the Company.
S.Berera
Partner
For and on behalf of
New Delhi
Price Waterhouse
April 23, 2003
Chartered Accountants
A. To the Company - Under the Income Tax Act, 1961
• Interest income accruing to the company on long-term finance [i.e. repayable
after minimum 5years] extended to enterprises engaged in the infrastructure
business (including telecommunication services) and approved by the Central
Government will be exempt from tax, subject to conditions prescribed by section
10(23G) of the Income Tax Act, 1961.
Long-term capital gains accruing to the company from sale of Debentures of
enterprises engaged in the infrastructure business (including telecommunication
services) will be exempt from tax, subject to conditions prescribed by section
10(23G) of the Income Tax Act, 1961.
• In accordance with and subject to the conditions specified in Section 80HHC of
the Income Tax Act, 1961, the company would be entitled to deduction of:
a. 50% for the Financial 2002-03
b. 30% for Financial year 2003-04; and
c. Nil for the Financial Year 2004-05 and onwards
of the profits derived from the export of goods, if any, for the relevant financial year.
In accordance with and subject to the conditions specified in Section 80 IA of the
Income Tax Act, 1961, the company is entitled to deduction of the entire profits
derived from its undertaking generating power (Gas Turbines) for a period of 10
consecutive years, falling within the first 15 years, beginning with the initial
assessment year it started generating power.
In accordance with and subject to the conditions specified in Section 80-IB of the
Income Tax Act, 1961, the company would be entitled to deduction of 30% of profits
derived from Industrial Undertaking (Plant II) at Gurgaon for a period of 10
consecutive years beginning with the initial assessment year it had started
production of vehicles.
Under section 80M of the Income Tax Act, 1961 and subject to the conditions
specified therein, dividend income of the company from other domestic companies
would not be liable to tax to the extent of dividend distributed by the company.
In accordance with and subject to the provisions of Section 35, the company would
be entitled to deduction in respect of expenditure laid out or expended on Scientific
Research related to the business.
- 267 -
B. To the Members of the Company - Under the Income Tax Act, 1961
B.1 Resident Members
Under section 80L of the Income Tax Act, 1961, dividend received by shareholders
being an individual or Hindu Undivided Family (HUF) from the company will not be
liable to tax up Rs.12,000/-.
Under section 80M of the Income Tax Act, 1961 and subject to the conditions
specified therein, dividend received by shareholders being Indian companies will not
be liable to tax to the extent dividend are paid by these Indian companies.
In terms of section 10(23D) of the Income Tax Act, 1961 all Mutual Funds set up by
Public Sector Banks or Public Financial Institutions or Mutual Funds registered under
the Securities and Exchange Board of India or authorized by the Reserve Bank of
India, subject to the conditions specified therein are eligible for exemption from
income tax on all their income, including income from investment in the shares of the
company.
Under section 54EC of the Income Tax Act, 1961 and subject to the conditions and to
the extent specified therein, long term capital gains arising on the transfer of shares
of the Company will be exempt from capital gains tax if the capital gain are invested
within a period of 6 months after the date of such transfer for a period of 3 years in
bonds issued by
• National Bank for Agriculture and Rural Development established under
section 3 National Bank for Agriculture and Rural Development Act, 1981;
• National Highway Authority of India constituted under section 3 of National
Highway Authority of India Act, 1988;
• Rural Electrification Corporation Limited, the company formed and registered
under the Companies Act, 1956;
• National Housing Bank established under section 3(1) of the National Housing
Bank Act, 1987; and
• Small Industries Development Bank of India established under section 3(1) of
the Small Industries Development Bank of India Act, 1989;
Under section 54ED of the Income Tax Act, 1961 and subject to the conditions and to
the extent specified therein, long term capital gains on the transfer of shares of the
Company, as and when it is listed, will be exempt from capital gains tax if the capital
gain are invested in shares of an Indian Company forming part of a eligible public
issue, within a period of 6 months after the date of such transfer.
Under section 54F of the Income Tax Act, 1961 long term capital gains arising to an
individual or Hindu Undivided Family (HUF) on transfer of shares of the company will
be exempt from capital gain tax subject to other conditions, if the sale proceeds from
such shares are used for purchase of residential house property within a period of
one year before and two year after the date on which the transfer took place or for
construction of residential house property within a period of three years after the
date of transfer.
Under section 112 of the Income Tax Act, 1961 and other relevant provisions of the
Act, Long term capital gains arising, i.e., if shares are held for a period exceeding 12
months, on transfer of shares in the Company, as and when it is listed, shall be taxed
at a rate of 20% (plus applicable surcharge) after indexation as provided in the
second proviso to section 48 or at 10% (plus applicable surcharge) without
indexation, at the option of the shareholder.
- 268 -
B.2 Non-Resident Indians/ Non Residents Members [Other than FIIs and
Foreign venture capital investors]
A non-resident Indian (i.e. an individual being a citizen of India or person of Indian
origin) has an option to be governed by the provisions of Chapter XII-A of the
Income Tax Act, 1961 viz. “Special Provisions Relating To Certain Incomes of NonResidents”.
Under section 115E of the Income Tax Act, 1961, where shares in the company are
subscribed for in convertible Foreign Exchange by a Non Resident Indian, dividends
therefrom is taxed at the flat rate of 20% and capital gains arising to the nonresident on transfer of shares held for a period exceeding 12 months shall be
concessionally taxed at the flat rate of 10%. (Without indexation benefit and
protection against foreign exchange fluctuation Plus applicable Surcharge).
Under provisions of section 115F of the Income Tax Act, 1961 long term capital gains
arising to a non-resident Indian from the transfer of shares of the company
subscribed to in convertible Foreign Exchange shall be exempt from Income tax, if
the net consideration is reinvested in specified assets within six months of the date of
transfer. If only part of the net consideration is so reinvested, the exemption shall
be proportionately reduced. The amount so exempted shall be chargeable to tax
subsequently, if the specified assets are transferred or converted within three years
from the date of their acquisition.
Under provisions of section 115G of the Income Tax Act, 1961 it shall not be
necessary for a Non-Resident Indian to furnish his return of income if his only source
of income is investment income or long term capital gains or both arising out of
assets acquired, purchased or subscribed in convertible foreign exchange and tax
deductible at source has been deducted therefrom.
Under section 115I of the Income Tax Act, 1961, a Non-Resident Indian may elect
not to be governed by the provisions of Chapter XII-A for any Assessment Year by
furnishing his Return of Income under section 139 of the Income Tax Act declaring
therein that the provisions of the chapter shall not apply to him for that assessment
year and if he does so the provisions of this chapter shall not apply to him instead
the other provisions of the Act shall apply.
Under section 115A of the Income Tax Act, 1961, dividend income received by nonresident shareholders will be liable to tax @ 20% (plus applicable surcharge).
Under the first proviso to section 48 of the Income Tax Act, 1961, in case of a nonresident, in computing the capital gains arising from transfer of shares of the
company acquired in convertible foreign exchange (as per exchange control
regulations) protection is provided from fluctuations in the value of rupee in terms of
foreign currency in which the original investment was made. Cost indexation benefits
will not be available in such a case.
Under section 54EC of the Income Tax Act, 1961 and subject to the conditions and to
the extent specified therein, long term capital gains arising on the transfer of shares
of the Company will be exempt from capital gains tax if the capital gain are invested
within a period of 6 months after the date of such transfer for a period of 3 years in
bonds issued by
• National Bank for Agriculture and Rural Development established under
section 3 National Bank for Agriculture and Rural Development Act, 1981;
• National Highway Authority of India constituted under section 3 of National
Highway Authority of India Act, 1988;
- 269 -
•
Rural Electrification Corporation Limited, the company formed and registered
under the Companies Act, 1956;
• National Housing Bank established under section 3(1) of the National Housing
Bank Act, 1987; and
• Small Industries Development Bank of India established under section 3(1) of
the Small Industries Development Bank of India Act, 1989;
Under section 54ED of the Income Tax Act, 1961 and subject to the conditions and to
the extent specified therein, long term capital gains on the transfer of shares of the
Company, as and when it is listed, will be exempt from capital gains tax if the capital
gain are invested in shares of an Indian Company forming part of a eligible public
issue, within a period of 6 months after the date of such transfer.
Under section 54F of the Income Tax Act, 1961 long term capital gains arising to an
individual or Hindu Undivided Family (HUF) on transfer of shares of the company will
be exempt from capital gain tax subject to other conditions, if the sale proceeds from
such shares are used for purchase of residential house property within a period of
one year before and two year after the date on which the transfer took place or for
construction of residential house property within a period of three years after the
date of transfer.
Under section 112 of the Income Tax Act, 1961 and other relevant provisions of the
Act, Long term capital gains arising on transfer of shares in the Company, as and
when it is listed, i.e. if shares are held for a period exceeding 12 months shall be
taxed at a rate of 20% (plus applicable surcharge) [after indexation as provided in
the second proviso to section 48; indexation not available if investments made in
foreign currency as per the first proviso of Section 48 stated above] or at 10% (plus
applicable surcharge) [without indexation], at the option of the shareholder.
B.3 Foreign Institutional Investors (FIIs)
The income by way of short term capital gains or long term capital gains realized by
FIIs on sale of shares in the company would be taxed at the following rates as per
section 115AD of the Income Tax Act, 1961.
Short term capital gains – 30% (Plus applicable surcharge)
Long term capital gains – 10% (without cost indexation Plus applicable surcharge)
(Shares held in a company would be considered as a long term capital asset
provided they are held for a period exceeding 12 months.)
Also the dividend from the shares of the company is taxable at a flat rate of 20%
without the benefit of indexation and protection from foreign exchange protection
Plus applicable surcharge)
Under section 54EC of the Income Tax Act, 1961 and subject to the conditions and to
the extent specified therein, long term capital gains arising on the transfer of shares
of the Company will be exempt from capital gains tax if the capital gain are invested
within a period of 6 months after the date of such transfer for a period of 3 years in
bonds issued by: • National Bank for Agriculture and Rural Development established under
section 3 National Bank for Agriculture and Rural Development Act, 1981;
• National Highway Authority of India constituted under section 3 of National
Highway Authority of India Act, 1988;
• Rural Electrification Corporation Limited, the company formed and registered
under the Companies Act, 1956;
• National Housing Bank established under section 3(1) of the National Housing
Bank Act, 1987; and
• Small Industries Development Bank of India established under section 3(1) of
the Small Industries Development Bank of India Act, 1989;
- 270 -
Under section 54ED of the Income Tax Act, 1961 and subject to the conditions and to
the extent specified therein, long term capital gains on the transfer of shares of the
Company, as and when it is listed, will be exempt from capital gains tax if the capital
gain are invested in shares of an Indian Company forming part of a eligible public
issue, within a period of 6 months after the date of such transfer.
B.4 Venture Capital Companies/ Funds
In terms of section 10(23FB) of the Income Tax Act, 1961 all Venture capital
companies/ funds registered with Securities and Exchange Board of India, subject to
the conditions specified, are eligible for exemption from income tax on all their
income, including income from sale of shares of the company.
C.
Benefits to Members of the Company under the Wealth Tax Act, 1957
Shares of the company held by the shareholder will not be treated as an asset within
the meaning of section 2(ea) of Wealth Tax Act, 1957, hence Wealth Tax Act will not
be applicable.
D.Benefits to Members of the Company under the Gift Tax Act, 1958
Gift of shares of the company made on or after October 1, 1998 would not be liable
to Gift tax.
Notes
All the above benefits are as per the current tax law. These do not contain any
statement on the impact, which the current budget proposals made in the Finance
Bill 2003, may have on the concessions/ taxation of the company and its
shareholders.
The stated benefits will be available only to the sole/first named holder in case the
shares are held by joint holders.
In respect of non-residents, the tax rates and the consequent taxation mentioned
above shall be further subject to any benefits available under the Double Taxation
Avoidance Agreements, if any, between India and the country in which the nonresident has fiscal domicile.
In view of the individual nature of tax consequences, each investor is advised to
consult his/her own tax advisor with respect to specific tax consequences of his/her
participation in the scheme.
E.Benefits to the Company under the Sales Tax
The Haryana State sales tax law has been replaced by State VAT law with effect from
April 1st 2003. The VAT law of Haryana State contemplates the continuation of the
sales tax benefits enjoyed by the company, in an altered form. The Company is
entitled to sales tax benefit in accordance with the provision of Rule 28C of erstwhile
Haryana General Sales Tax Rules, 1975 for the period from 1st August 2001 to 31st
July 2015. The ceiling amount of concession to be availed during the entitlement
period is Rs 5,643.5 million.
- 271 -
TERMS OF THE OFFER
The equity shares being offered are subject to the provisions of the Companies Act, our
Memorandum and Articles, conditions of the FIPB and RBI approvals, the terms of this
Draft Red Herring Prospectus, Bid cum Application Form, the Revision Form, the CAN and
other terms and conditions as may be incorporated in the Share Certificates/ Letters of
Allotment and other documents/ certificates that may be executed in respect of the
Offer. The equity shares shall also be subject to laws as applicable, guidelines,
notifications and regulations relating to the issue of capital and listing of securities issued
from time to time by SEBI, GoI, Stock Exchanges, RBI, RoC and/ or other authorities, as
in force on the date of the Offer and to the extent applicable. The equity shares being
offered are also subject to the conditions in the RJVA.
AUTHORITY FOR THE OFFER
In terms of the RJVA, the Selling Shareholder has the option to sell approximately
72,243,380 equity shares of Rs.5/- each (approximately 3,612,169 equity shares of
Rs.100/- each as per the RJVA) or more by way of an initial public offer. For details on
the RJVA, please see the section titled “Our Promoters”.
As per the letter no. 2[16]/2000–PE-VI, dated February 7, 2003, from the Ministry of
Heavy Industries and Public Enterprises, Department of Heavy Industry, GoI, the Cabinet
Committee of Disinvestment has approved the disinvestment in Maruti by GoI by way of
Offer for sale of its shareholding in the domestic market. Pursuant to the decision taken
by the Cabinet Committee, the Ministry of Heavy Industry and Public Enterprises, acting
for and on behalf of the President of India, has been authorized to offer upto 72,243,380
equity shares of Rs.5/- each (3,612,169 equity shares of Rs.100/- each as per the said
letter) and such additional number of equity shares as may be permitted to be offered
for allotment against over-subscription.
SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for
retention of over-subscription over and above the limit of 10% allowed for the purposes
of rounding off only, under clause 6.4.2(f) of SEBI Guidelines.
Our Company has also consented to the Offer through Board Resolution dated March 25,
2003.
RANKING OF EQUITY SHARES
The equity shares being offered shall be subject to the provisions of our Memorandum
and Articles and shall rank pari-passu with the existing equity shares of our Company,
including rights in respect of dividends.
FACE VALUE AND OFFER PRICE
The equity shares with a face value of Rs. 5/- each are being offered in the Offer at a
total price of Rs. ___ per share. At any given point of time there shall be only one
denomination for the equity shares.
RIGHTS OF THE EQUITY SHAREHOLDER
Subject to applicable laws, the equity shareholders shall have the following rights:
• Right to receive dividend, if declared;
• Right to attend general meetings and exercise voting powers, unless prohibited by
law;
• Right to vote on a poll either in person or by proxy;
• Right to receive offers for rights shares and be allotted bonus shares, if announced;
• Right to receive surplus on liquidation;
• The right of free transferability; and
• Such other rights, as may be available to a shareholder of a listed public company
under the Companies Act and Memorandum and Articles.
- 272 -
For a detailed description of the main provisions of our Articles dealing with voting
rights, dividend, forfeiture and lien, restrictions on transfer and transmission and/or
consolidation/ splitting, refer to the section on “Main Provisions of Articles of Association
of the Company” on page 304 in this Draft Red Herring Prospectus.
MARKET LOT
In terms of Section 68B of the Companies Act, the equity shares in this Offer shall be
transferred only in dematerialized form. In terms of existing SEBI Guidelines, the trading
of our equity shares shall only be in dematerialized form.
Since trading of our equity shares is in dematerialized form, the tradable lot is one
equity share. Transfer of the equity shares upon allocation will be done only in electronic
form in lots of [•] equity shares.
JURISDICTION
Exclusive jurisdiction for the purpose of this Offer is with competent courts/ authorities in
New Delhi, India.
NOMINATION FACILITY TO INVESTOR
In accordance with Section 109A of the Companies Act, the sole or first bidder, along
with other joint bidder, may nominate any one person in whom, in the event of the
death of sole bidder or in case of joint bidders, death of all the bidders, as the case may
be, the equity shares allotted, if any, shall vest. A person, being a nominee, entitled to
the equity shares by reason of the death of the original holder(s), shall in accordance
with Section 109A of the Companies Act, be entitled to the same advantages to which he
or she would be entitled if he or she were the registered holder of the equity share(s).
Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the
prescribed manner, any person to become entitled to equity share(s) in the event of his
or her death during the minority. A nomination shall stand rescinded upon a sale of
equity share(s) by the person nominating. A buyer will be entitled to make a fresh
nomination in the manner prescribed. Fresh nomination can be made only on the
prescribed form available on request at the Registered Office of our Company or to the
Registrar and Transfer Agents of our Company.
In accordance with Section 109B of the Companies Act, any person who becomes a
nominee by virtue of the provisions of Section 109A of the Companies Act, shall upon the
production of such evidence as may be required by the Board, elect either:
a.) to register himself or herself as the holder of the equity shares; or
b.) to make such transfer of the equity shares, as the deceased holder could have made.
Further, the Board may at any time give notice requiring any nominee to choose either
to be registered himself or herself or to transfer the equity shares, and if the notice is
not complied with within a period of ninety days, the Board may thereafter withhold
payment of all dividends, bonuses or other moneys payable in respect of the equity
shares, until the requirements of the notice have been complied with.
Since the transfer of equity shares in the Offer will be made only in
dematerialized form, there is no need to make a separate nomination with us.
Nominations registered with respective depository participant of the applicant
would prevail. If the investors require to change the nomination, they are
requested to inform their respective depository participant.
APPLICATION BY NON RESIDENTS/NRIS/ FIIS
Our Company has received approval from GoI, Ministry of Finance and Company Affairs
(Department of Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated
- 273 -
April 16, 2003 for the transfer of equity shares in this Offer to eligible non-resident
investors, NRIs and FIIs. In terms of the approval of GoI, OCBs have not been permitted
to participate in the Offer. Our Company has received approval from the RBI for (a)
transfer of equity shares in the Offer for Sale to Non Residents, NRIs and FIIs pursuant
to its letter No. ________________ dated ________________. Subject to obtaining
such approvals, it will not be necessary for the investors to seek separate permission
from the FIPB/RBI for this specific purpose. However it is to be distinctly understood that
there is no reservation for Non Residents, NRIs and FIIs and all Non Residents, NRI and
FII applicants will be treated on the same basis with other categories for the purpose of
allocation. The Transfer of equity shares to Non Residents shall be subject to the
conditions as may be prescribed by GoI or RBI while granting such approvals.
- 274 -
OFFER STRUCTURE
The present Offer, for cash at a premium of Rs. [•] per equity share of Rs. 5/aggregating total consideration of Rs. [•] million is being made through a 100% book
building process.
QIBs
Wholesale Bidders
Retail
of
Up to 43,345,900
equity
shares
or
Offer
size
less
allocation
to
Wholesale
Bidders
and Retail Bidders
Minimum
of
10,836,500
equity
shares or Offer size
less
allocation
to
QIBs
and
Retail
Portion
Minimum
of
18,060,900
equity
shares or Offer Size
less
allocation
to
QIBs and Wholesale
Portion
Percentage
of Offer Size
available for
allocation
Up to 60% or Offer
size less allocation to
Non – Institutional
Portion and Retail
Portion
Discretionary
Minimum 15% or
Offer
size
less
allocation to QIBs
and Retail Portion
Proportionate
Minimum 25% or
Offer
Size
less
allocation to QIBs
and
Wholesale
Portion
Proportionate
Minimum Bid
____ equity shares
and
thereafter
in
multiples
of
___equity shares
___equity
shares
and
thereafter
in
multiples
of
___equity shares
___equity
shares
and
thereafter
in
multiples
of
___equity shares
Maximum
Bid
Not exceeding
size of the Offer
Not exceeding
size of the Offer
1,000 equity shares
Allotment
Mode
Compulsory
in
Dematerialised form
Compulsory
in
Dematerialised form
Compulsory
in
Dematerialised form
Trading Lot
One
One
One
Market lot
___
___
___
Who
Apply
Public
financial
institutions,
as
specified in section
4A of the Companies
Act,
scheduled
commercial
banks,
mutual
funds,
foreign institutional
investors registered
with SEBI, multilateral and bi-lateral
development
financial institutions,
venture capital funds
Resident
Indian
individuals, HUF (in
the name of Karta),
companies,
corporate
bodies,
NRIs, societies and
trusts
Individuals (including
NRIs
and
HUFs)
applying for up to
1,000 equity shares
Number
equity
shares
Basis
of
Allocation or
Allotment if
respective
category is
oversubscrib
ed
can
the
- 275 -
the
registered with SEBI,
foreign
venture
capital
investors
registered with SEBI
and state industrial
development
corporations
Terms
Payment
of
Full Bid Amount on
Bidding
unless
waived
by
the
members
of
the
Syndicate
Margin Amount at
the
time
of
submission of Bid
cum
Application
Form
to
the
members
of
the
Syndicate
Margin Amount at
the
time
of
submission of Bid
cum
Application
Form
to
the
members
of
the
Syndicate
Subject to valid bids being received at or above the Offer Price. Undersubscription, if
any, in any of the categories, would be allowed to be met with spill over from any of the
other categories, at the discretion of the Selling Shareholder, BRLM and the Co-BRLMs.
SUZUKI’S STAND-BY SUPPORT
As per clause 6.1 (b) of the RJVA dated May 15, 2002, “Suzuki agrees that in the event
the book building exercise is undertaken and the offer process initiated, Suzuki shall
bridge any shortfall between the Shares offered for sale and the bids received. For this
purpose it is agreed that where the floor price, in the public offer, is Rs. 2300 and there
is a shortfall in the demand through the bids received, Suzuki shall, and Suzuki
undertakes to, as of no later than the date and time of the closure of the issue, submit a
bid to the extent of the said shortfall at the said price of Rs. 2300 per Share, in
accordance with all relevant approvals”, GoI and Suzuki will implement the above clause
through the following steps:
(a)
In terms of Article 6.1(b) of the RJVA, Suzuki to deliver a bid to GoI for the entire
Offer size as of no later than the date and time of the closure of the Bidding
Period (“Suzuki Bid”), subject to provision of clause (d) below;
(b)
In terms of the RJVA, Suzuki Bid to be irrevocable;
(c)
Suzuki Bid shall be delivered to GoI containing all details required from nonresident investors in the bid form, to enable transfer of equity shares;
(d)
After the pricing for the Offer and the approval of the basis of allocation by the
Stock Exchanges, the difference between the total number of shares offered to the
public i.e. 72,243,300 equity shares having face value of Rs. 5 each, and the
actual allocation in the Offer shall represent the Stand-by Support to be provided
by Suzuki;
(e)
After the Government accepts the Suzuki Bid, Suzuki shall deposit the
consideration, as determined through clause (d) above, in the designated bank
account by way of inward remittance of foreign exchange. The remittance shall
be as per applicable laws to receive equity shares on a repatriable basis. After
realisation of the consideration in the designated bank account, equity shares
shall be transferred to Suzuki.
Further, as per SEBI letter dated April 16, 2003 addressed to the Secretary, Ministry of
Disinvestment, GoI:
- 276 -
(a) the shares acquired by Suzuki in the offer, in accordance with the stand by
support, would not attract the lock-in provisions of SEBI Guidelines.
(b) In case the public holding in the company falls below 25%, on account of
Suzuki meeting the shortfall in the issue, the company would be required
to provide an undertaking to the stock exchange(s), at the time of
finalizing the basis of allotment, stating that the company would increase
the percentage of public holding to the required minimum threshold level
with the specified time.
RETENTION OF OVERSUBRCRIPTION
SEBI vide its letter RM/21334/2003 dated October 29, 2002 has granted its approval for
retention of over-subscription over and above the limit of 10% allowed for the purposes
of rounding off only, under clause 6.4.2 (f) of SEBI Guidelines. Hence the size of the
Offer may be enhanced to the extent of upto 10% of the Offer i.e. by upto 7,224,300
equity shares of Rs.5/- each, in case the selling shareholder decides to retain any oversubscription. In such a case, the size of the Offer may increase upto 79,467,600 equity
shares of Rs.5/- each.
OFFER PROCEDURE
Book Building Procedure
The Offer is being made through the 100% book building scheme wherein up to 60% of
the Offer shall be available for allocation on a discretionary basis to Qualified
Institutional Buyers. Further, not less than 15% of the Offer shall be available for
allocation on a proportionate basis to Wholesale Bidders and the not less than 25% of
the Offer shall be available for allocation on a proportionate basis to Retail Bidders,
subject to valid bids being received at or above the Offer Price. Bidders are required to
submit their Bids through the members of the Syndicate. The Selling Shareholder and
our Company in consultation with the BRLM and Co-BRLMs reserves the right to reject
any Bid procured by any or all members of the Syndicate without assigning any reason
therefore in case of QIBs. In case of Wholesale Bidders and Retail Bidders, the Selling
Shareholder and our Company would have a right to reject the Bids only on technical
grounds.
Investors should note that equity shares would be transferred to all successful allottees
only in dematerialised form.
Bid cum Application Form
Bidders shall only use the specified Bid cum Application Form bearing the stamp of a
member of the Syndicate for the purpose of making a Bid in terms of this Draft Red
Herring Prospectus. The Bidder shall have the option to make a maximum of three Bids
in the Bid cum Application Form and such options shall not be considered as multiple
bids. Upon the allocation of equity shares, dispatch of the CAN and filing of the
Prospectus with the RoC, the Bid cum Application Form shall be considered as the
Application Form. Upon completing and submitting the Bid cum Application Form to a
member of the Syndicate, the Bidder is deemed to have authorised our Company to
make the necessary changes in this Draft Red Herring Prospectus and the Bid cum
Application Form as would be required for filing the Prospectus with the RoC and as
would be required by the RoC after such filing, without prior or subsequent notice of
such changes to the Bidder.
- 277 -
The prescribed colour of the Bid cum Application Form for various categories, is as
follows:
Category
Indian Public or NRIs applying on a nonrepatriation basis
Non-residents including NRIs or FIIs applying
on a repatriation basis
Colour of Bid cum
Application Form
White
Blue
Who can Bid
•
•
•
•
•
•
•
•
•
•
•
Indian nationals resident in India who are majors, in single or joint names (not more
than three);
Hindu undivided families or HUFs, in the individual name of the Karta. The Bidder
should specify that the Bid is being made in the name of the HUF in the Bid cum
Application Form as follows: “Name of Sole or First bidder: XYZ Hindu Undivided
Family applying through XYZ, where XYZ is the name of the Karta”. Bids by HUFs
would be considered at par with those from individuals;
Companies, corporate bodies and societies registered under the applicable laws in
India and authorised to invest in equity shares;
Indian mutual funds registered with SEBI;
Indian financial institutions, commercial banks, regional rural banks, co-operative
banks (subject to RBI permission, as applicable);
Venture capital funds registered with SEBI;
Foreign venture capital investors registered with SEBI;
State Industrial Development Corporations;
Trusts registered under the Societies Registration Act, 1860, as amended, or under
any other law relating to Trusts and who are authorised under their constitution to
hold and invest in equity shares;
Non-residents including NRIs and FIIs on a repatriation basis or a non-repatriation
basis subject to applicable laws; and
Scientific and/ or industrial research organisations authorised to invest in equity
shares.
Note: The BRLM, Co-BRLMs, Syndicate Members and any associate of the BRLM, CoBRLMs, and Syndicate Members (except asset management companies on behalf of
mutual funds, Indian financial institutions and public sector banks) cannot participate in
that portion of the Offer where allocation is discretionary. Further, the BRLM or CoBRLMs shall not be entitled to subscribe to this Offer in any manner except towards
fulfilling underwriting obligation. Additionally, in accordance with the RJVA, no single
bidder will be allocated equity shares that would result in their holding exceeding 5% of
the total equity share capital of our Company.
Bidders are advised to ensure that any single Bid from them does not exceed the
investment limits or maximum number of equity shares that can be held by them under
the relevant regulations or statutory guidelines.
As per the current regulations, the following restrictions are applicable for investments
by mutual funds:
No mutual fund scheme shall invest more than 10% of its net asset value in the equity
shares or equity related instruments of any company provided that the limit of 10% shall
not be applicable for investments in index funds or sector or industry specific funds. No
mutual fund under all its schemes should own more than 10% of any company’s paid-up
capital carrying voting rights.
- 278 -
The offer of equity shares to a single FII should not exceed 10% of the post-offer paidup capital of the company (i.e 10% of 288,910,060 equity shares of Rs. 5/- each). In
respect of an FII investing in our equity shares on behalf of its sub-accounts, the
investment on behalf of each sub-account shall not exceed 10% of our total issued
capital or 5% of our total issued capital in case such sub-account is a foreign corporate
or an individual. As of now, the aggregate FII holding in the Company cannot exceed
24% of our total issued capital.
The above information is given for the benefit of the Bidders. Our Company, the BRLM
and the Co-BRLMs are not liable for any amendments or modification or changes in
applicable laws or regulations, which may happen after the date of this Draft Red Herring
Prospectus. Bidders are advised to make their independent investigations and ensure
that their number of equity shares bid for do not exceed the applicable limits under laws
or regulations.
Maximum and Minimum Bid Size
(a) For Retail Bidders: The Bid must be for a minimum of ___ equity shares and in
multiples of ___ equity shares thereafter up to a maximum of 1,000 equity shares. In
case the Bid is for more than 1,000 equity shares, the same would be considered for
allocation under the Wholesale Bidders category.
(b) For other (Wholesale Bidders and QIBs) Bidders: The Bid must be for a
minimum of ___ equity shares and in multiples of ___ equity shares thereafter. A Bid
cannot be submitted for more than the size of the Offer. However, the maximum Bid by
a QIB investor should not exceed the investment limits prescribed for them by the
regulatory or statutory authorities governing them.
Bidding Process
1.
Our Company has filed the Red Herring Prospectus with the RoC.
2.
The members of the Syndicate will circulate copies of the Draft Red Herring
Prospectus along with the Bid cum Application Form to potential investors.
3.
Any investor who would like to obtain the Draft Red Herring Prospectus along
with the Bid cum Application Form can obtain the same from our corporate office
or from any of the BRLM or Co-BRLMs or Syndicate Members.
4.
Our Company, the BRLM and the Co-BRLMs shall declare the Bid/Offer Opening
Date, Bid/Offer Closing Date and Floor Price and publish the same in two widely
circulated newspapers (one each in English and Hindi). This advertisement shall
contain the salient features of the Draft Red Herring Prospectus as specified
under Form 2A of the Companies Act, the method and process of bidding and the
names and addresses of the BRLM, Co-BRLMs and Syndicate Members. The
BRLM, Co-BRLMs and Syndicate Members shall start accepting Bids from the
Bidders from the Bid/Offer Opening Date.
5.
Investors who are interested in subscribing for our Company’s equity shares
should approach any of the BRLM or Co-BRLMs or Syndicate Members or their
authorised agent(s) to register their Bid.
6.
The Bids should be submitted on the prescribed Bid cum Application Form only.
Bid cum Application Forms should bear the stamp of the BRLM or Co-BRLMs or
Syndicate Members. Bid cum Application Forms which do not bear the stamp of
the BRLM or Co-BRLMs or Syndicate Members will be rejected.
- 279 -
Bidding
1.
Each Bid cum Application Form will give the Bidder the choice to bid for up to
three optional prices (for details refer to the paragraph entitled “Bids at Different
Price Levels” on page 280 of this Draft Red Herring Prospectus below) and specify
the demand (i.e. the number of equity shares bid for). The price and demand
options submitted by the Bidder in the Bid cum Application Form will be treated
as optional demands from the Bidder and will not be cumulated. After
determination of the Offer Price, the maximum number of equity shares bid for
by a Bidder at or above the Offer Price will be considered for allocation and the
rest of the Bid(s), irrespective of the bid price, will become automatically invalid.
2.
The Bidder cannot bid on another Bid cum Application Form after Bids on one Bid
cum Application Form have been submitted to any member of the Syndicate.
Submission of a second Bid cum Application Form to either the same or to
another member of the Syndicate will be treated as multiple bidding and is liable
to be rejected either before entering the Bid into the electronic bidding system,
or at any point of time prior to the transfer of equity shares in this Offer.
3.
The BRLM, Co-BRLMs and Syndicate Members will enter each option into the
electronic bidding system as a separate Bid and generate a Transaction
Registration Slip (TRS), for each price and demand option and give the same to
the Bidder. Therefore, a Bidder can receive up to three TRSs for each Bid cum
Application Form.
4.
Along with the Bid cum Application Form, all Bidders will make payment in the
manner described under the paragraph "Terms of Payment" on page 281 of the
draft Red Herring Prospectus.
Bids at Different Price Levels
The Floor Price has been fixed at Rs. ___ per Equity Share of Rs. 5/- each for reference
purposes of the Bidders. The Floor Price is only indicative. The Selling Shareholder in
consultation with our Company, the BRLM and Co-BRLMs can finalise the Offer Price at or
above the Floor Price in accordance with this clause without the prior approval of, or
intimation, to the Bidders.
The Bidder can bid at any price at or above the Floor Price. The Bidder has to bid for the
desired number of equity shares at a specific price. Bidding at “Cut-off Price” is
prohibited for QIB or Wholesale Bidders and such Bids from QIBs or Wholesale
Bidders shall be rejected. Retail Bidders may bid at “Cut – off Price”.
The Bidder can bid at any price in multiples of Re. 1 only, at or above the Floor Price.
Escrow Mechanism
The Selling Shareholder, our Company and the members of the Syndicate shall open
Escrow Accounts with one or more Escrow Collection Banks in whose favour the Bidders
shall make out the cheque or demand draft in respect of the Bid and/or revision.
Cheques or demand drafts received from Bidders in a certain category would be
deposited in the Escrow Account for the Offer. The Escrow Collection Banks will act in
terms of this Draft Red Herring Prospectus and the Escrow Agreement. The monies in the
Escrow Account for the Offer shall be maintained by the Escrow Collection Bank(s) for
and on behalf of the Bidders. The Escrow Collection Bank(s) shall not exercise any lien
whatsoever over the monies deposited therein and shall hold the monies therein in trust
for the Bidders. On the Designated Date, the Escrow Collection Banks shall transfer the
monies from the Escrow Account to the Public Offer Account with the Bankers to the
- 280 -
Offer. Payments of refund to the Bidders shall also be made from the Escrow Collection
Banks, as per the terms of the Escrow Agreement and this draft Red Herring Prospectus.
The Bidders should note that the escrow mechanism is not prescribed by SEBI and has
been established as an arrangement between the Selling Shareholder, our Company, the
members of the Syndicate, the Escrow Collection Bank(s) and the Registrar to the Offer
to facilitate collections from the Bidders.
Terms of Payment and Payment into the Escrow Collection Account
Each Bidder shall, with the submission of the Bid cum Application Form draw a cheque,
demand draft or Stockinvest for the maximum amount of the Bid in favour of the Escrow
Account of the Escrow Collection Bank (for details refer to the paragraph “Payment
Instructions”) and submit the same to the member of the Syndicate with whom the Bid
is being deposited. Bid cum Application Forms accompanied by cash shall not be
accepted. The maximum bid price has to be paid at the time of submission of the Bid
cum Application Form based on the highest bidding option of the Bidder.
The members of the Syndicate shall deposit the cheque, demand draft or Stockinvest
with the Escrow Collection Bank. The Escrow Collection Bank will hold all monies
collected for the benefit of the Bidders till such time as the Designated Date. On the
Designated Date, the Escrow Collection Bank shall transfer the funds in respect of those
Bidders whose Bids have been accepted from the Escrow Account for the Offer, as per
the terms of the Escrow Agreement, into the Public Offer Account with the Bankers to
the Offer. The balance amounts after the transfer to the Public Offer Account, lying
credited with the Escrow Collection Banks shall be held for the benefit of the Bidders who
are entitled to refunds. On the Designated Date and no later than 15 days from the
Bid/Offer Closing Date, the Escrow Collection Bank shall also refund all amounts payable
to unsuccessful Bidders and also the excess amount paid on bidding, if any, after
adjustment for allocation, to the Bidders.
The members of the Syndicate may, at their discretion, waive requirement of payment
by Wholesale Bidders or QIB Bidders, at the time of the submission of the Bid cum
Application Form. Where such payment at the time of submission of the Bid cum
Application Form is waived at the discretion of the members of the Syndicate, the Offer
Price shall be payable for the allocated equity shares no later than the date specified in
the CAN, which shall be a minimum period of two days from date of communication of
the allocation list to the members of the Syndicate by the BRLM and Co-BRLMs. If the
payment is not made favouring the Escrow Account within the time stipulated above, the
Bid of the Bidder is liable to be cancelled. However, if the members of the Syndicate do
not waive such payment, the full amount of payment has to be made at the time of
submission of the Bid Form.
Where the Bidder has been allocated lesser number of equity shares than they had bid
for, the excess amount paid on bidding, if any, after adjustment for allocation, will be
refunded to such Bidder within 15 days from the Bid/Offer Closing Date.
Electronic Registration of Bids
1.
The members of the Syndicate will register the Bids using the on-line facilities of
NSE and BSE. There will be at least one on-line connectivity with each city where
a Stock Exchange Centre is located in India, where the Bids are accepted.
2.
NSE and BSE will offer a screen-based facility for registering Bids for the Offer.
This facility will be available on the terminals of the members of the Syndicate
and their authorised agents during the Bidding Period. Members of the Syndicate
can also set up facilities for off-line electronic registration of Bids subject to the
- 281 -
condition that they will subsequently download the off-line data file into the online facilities for book building on an hourly basis. On the Bid Closing Date, we
will upload the bids till such time as permitted by the Stock Exchanges.
3.
The aggregate demand and price for bids registered on each of the electronic
facilities of NSE and BSE will be downloaded on an hourly basis and consolidated.
A graphical representation of consolidated demand and price would be made
available at the bidding centres during the bidding period.
4.
At the time of registering each Bid, the members of the Syndicate shall enter the
following details of the investor in the on-line system:
o
o
o
o
o
o
o
5.
Name of the investor
Investor Category – Individual, Corporate, NRI, FII, or Mutual Funds etc.
Numbers of equity shares bid for
Bid price
Bid cum Application Form number
Whether payment is made upon submission of Bid cum Application Form
Depository Participant Identification no. and Client Identification no. of the
demat account of the Bidder.
A system generated TRS will be given to the Bidder as a proof of the registration
of each of the bidding options. It is the Bidder’s responsibility to obtain the
TRS from the members of the Syndicate. The registration of the Bid by the
member of the Syndicate does not guarantee that the equity shares shall be
allocated either by the Selling Shareholder or the members of the Syndicate or
us.
Such TRS will be non-negotiable and by itself will not create any obligation of any
kind.
6.
It is to be distinctly understood that the permission given by NSE to use their
network and software of the online IPO system should not in any way be deemed
or construed that the compliance with various statutory and other requirements
by the Selling Shareholder, our Company, BRLM or Co-BRLMs are cleared or
approved by NSE; nor does it in any manner warrant, certify or endorse the
correctness or completeness of any of the compliance with the statutory and
other requirements nor does it take any responsibility for the financial or other
soundness of our Company, promoters, management or any scheme or our
project.
7.
It is also to be distinctly understood that the approval given by NSE should not in
any way be deemed or construed that the Draft Red Herring Prospectus has been
cleared or approved by NSE; nor does it in any manner warrant, certify or
endorse the correctness or completeness of any of the contents of this Draft Red
Herring Prospectus; nor does it warrant that the equity shares will be listed or
will continue to be listed on the NSE.
Build Up of the Book and Revision of Bids
1.
Bids registered by various Bidders through the members of the Syndicate shall be
electronically transmitted to the NSE or BSE mainframe on an on-line basis. Data
would be uploaded on an hourly basis.
2.
The book gets built up at various price levels. This information will be available
with the BRLM and Co-BRLMs on an regular basis.
- 282 -
3.
During the Bidding Period, any Bidder who has registered an interest in the
equity shares at a particular price level is free to revise the Bid to a higher price
level (upward revision) as well as to lower price level subject to the Floor Price
(downward revision) using the printed Revision Form which is a part of the Bid
cum Application Form.
4.
Revisions can be made in both the desired number of equity shares and the bid
price by using the Revision Form. The Bidder must complete the details of all the
options in the Bid cum Application Form or earlier Revision Form and revisions for
all the options as per the Bid cum Application Form or earlier Revision Form. For
example, if a Bidder has bid for three options in the Bid cum Application Form or
the earlier Revision Form and is changing only one of the options in the Revision
Form, the Bidder must still fill the details of the other two options, that are not
being revised, in the Revision Form unchanged. Incomplete or inaccurate
Revision Forms will not be accepted by the members of the Syndicate.
5.
The Bidder can make this revision any number of times during the Bidding
Period. However, for any revision(s) in the earlier Bid, the Bidders will have to
use the services of the same member of the Syndicate through whom the original
Bid was placed. Bidders are advised to retain copies of the blank Revision Form.
6.
Any revision of the Bid shall be accompanied by payment in the form of cheque
or demand draft or Stockinvest for the incremental amount, if any, to be paid on
account of the upward revision of the Bid. The excess amount, if any, resulting
from downward revision of the Bid would be returned to the Bidder at the time of
refund in accordance with the terms of this Draft Red Herring Prospectus. In case
of QIBs, the members of the Syndicate may at their sole discretion waive the
payment requirement at the time of one or more revisions by the Bidders.
7.
When a Bidder revises a Bid, the Bidder shall surrender the earlier TRS and get a
revised TRS from the members of the Syndicate. It is the responsibility of the
Bidder to request for and obtain the revised TRS, which will act as proof of
having revised the Bid.
8.
In case of discrepancy of data between the electronic book and the physical
book, the decision of the BRLM and Co-BRLMs based on the physical records of
the Bid cum Application Form shall be final and binding on all concerned.
Price Discovery and Allocation
1.
After the Bid/Offer Closing Date, the BRLM and Co-BRLMs shall analyse the
demand generated at various price levels and discuss pricing strategy with the
Selling Shareholder and our Company.
2.
The Selling Shareholder will in consultation with our Company, the BRLM and CoBRLMs, finalise the “Offer Price”. The Selling Shareholder and our Company will
in consultation with the BRLM and Co-BRLMs finalize the number of equity shares
to be transferred and the allocation to successful QIB Bidders. The allocation will
be decided based on the quality of the Bidder determined broadly by the size,
price and date of the Bid.
3.
The allocation for QIBs of 60% of the Offer Size would be discretionary. The
allocation to Wholesale Bidders and Retail Bidders of not less than 15% and not
less than 25% of the Offer Size respectively would be on proportionate basis, in
consultation with the _________________________, subject to valid Bids being
received at or above the Offer Price.
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4.
Undersubscription, if any, in any category, would be allowed to be met with spill
over from any of the other categories, at the sole discretion of the Selling
Shareholder, BRLM and Co-BRLM(s).
5.
Allocation to Non Residents, NRIs or FIIs applying on repatriation basis will be
subject to the terms and conditions stipulated by the FIPB and RBI while granting
permission for Offer of equity shares to them.
6.
The BRLM and Co-BRLMs, in consultation with the Selling Shareholder and our
Company, shall notify the Syndicate Members of the Offer Price and allocations to
their respective Bidders where the full Bid Amount has not been collected from
the Bidders.
7.
The Selling Shareholder, in consultation with our Company, reserve the right to
cancel the Offer any time after the Bid/Offer Opening Date.
Signing of Underwriting Agreement and RoC Filing
1.
The Selling Shareholder, our Company, the BRLM, the Co-BRLMs and the
Syndicate Members shall enter into an Underwriting Agreement on reaching
agreement upon the Offer Price and allocation(s) to the Bidders.
2.
After the Underwriting Agreement is signed between the Selling Shareholder, our
Company, the BRLM, the Co-BRLMs and the Syndicate Members, we will file the
Red Herring Prospectus with RoC, which then would be termed ‘Prospectus’. The
Prospectus would have details of the Offer Price, size of the Offer, underwriting
arrangements and would be complete in all material respects.
Advertisement regarding Offer Price and Prospectus
A statutory advertisement will be issued by us after the filing of the Prospectus with the
RoC. This advertisement, in addition to the information that has to be set out in the
statutory advertisement, shall indicate the Offer Price along with a table showing the
number of equity shares and the amount payable by an investor. Any material updates
between the Draft Red Herring Prospectus and the Prospectus will be included in such
statutory advertisement.
Issuance of Confirmation of Allocation Note
1.
The BRLM or Co-BRLMs or Registrar to the Offer shall send to the members of the
Syndicate a list of their Bidders who have been allocated equity shares in the
Offer.
2.
The BRLM, Co-BRLMs or Syndicate Members would then send the CAN to their
Bidders who have been allocated equity shares in the Offer. The despatch of a
CAN shall be deemed a valid, binding and irrevocable contract for the Bidder to
pay the entire Offer Price for all the equity shares allocated to such Bidder. Those
Bidders who have not paid into the Escrow Account for the Offer at the time of
bidding shall pay in full the amount payable into the Escrow Account for the Offer
by the Pay-in Date specified in the CAN.
3.
Bidders who have been allocated equity shares and who have already paid into
the Escrow Account for the Offer at the time of bidding shall directly receive the
CAN from the Registrar to the Offer subject, however, to realisation of their
cheque or demand draft paid into the Escrow Account for the Offer. The despatch
of a CAN shall be a deemed a valid, binding and irrevocable contract for the
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Bidder to pay the entire Offer Price for all the equity shares transferred to such
Bidder.
Designated Date and Transfer in the Offer
After the funds are transferred from the Escrow Account for the Offer to the Public Offer
Account on the Designated Date, the Selling Shareholder and our Company would ensure
the transfer of equity shares to the allottees within two days of the allotment.
All allottees will receive credit for the equity shares directly in their depository account.
Equity shares will be transferred only in the dematerialised form to the
allottees. Allottees will have the option to re-materialise the equity shares so
transferred, if they so desire, as per the provisions of the Companies Act and the
Depositories Act.
The Selling Shareholder and we will ensure the transfer of equity shares within 15 days
of closure of the bidding and also ensure that credit is given to the allottees’ depository
accounts within two working days from the date of allotment.
GENERAL INSTRUCTIONS
Do's:
• Check if you are eligible to apply;
• Read all the instructions carefully and complete the Resident Bid cum Application
Form (white in colour) or Non-Resident Bid cum Application Form (blue in colour), as
the case may be;
• Ensure that the details about Depository Participant and Beneficiary Account are
correct as there will be no transfer of equity shares in physical form;
• Ensure that the Bids are submitted at the bidding centres only on forms bearing the
stamp of a member of the Syndicate;
• Ensure that you have collected a TRS for all your Bid options; and
• Submit revised Bids to the same member of the Syndicate through whom the
Original Bid was placed and obtain a revised TRS.
Don'ts:
• Do not Bid for lower than the minimum Bid size or less than the Floor Price;
• Do not Bid on another Bid cum Application Form after you have submitted the Bid to
the members of the Syndicate;
• Do not pay the Bid amount in cash;
• Do not send Bid cum Application Forms by post; instead hand them over to a
member of the Syndicate only;
• Do not Bid at cut off price (for wholesale and institutional bidders);
• Do not fill up the Bid cum Application Form for an amount that exceeds the
investment limit or maximum number of equity shares that can be held by him under
the applicable laws or regulations or maximum amount permissible under the
applicable regulations.
INSTRUCTIONS FOR COMPLETING THE BID CUM APPLICATION FORM
Bidders can obtain Bid cum Application Forms and / or Revision Forms from the BRLM or
Co-BRLMs or Syndicate Members.
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Bids and Revision of Bids
Bids and revision of Bids must be:
1.
2.
3.
4.
5.
6.
Made only in the prescribed Bid cum Application Form or Revision Form, as
applicable (white colour for Resident Indians and NRI applying on nonrepatriation basis and blue colour for NRI or FII applying on repatriation basis).
Completed in full, in BLOCK LETTERS in ENGLISH and in accordance with the
instructions contained herein, in the Bid cum Application Form or in the Revision
Form. Incomplete Bid cum Application Forms or Revision Forms are liable to be
rejected.
For the Retail Bidders, the Bids must be for a minimum of ____ equity shares
and in multiples of ____ thereafter subject to a maximum of 1000 equity shares.
For Wholesale and QIB Bidders, Bids must be for a minimum of ____ equity
shares and in multiples of ____ equity shares thereafter. Bids cannot be made
for more than the size of the Offer. Bidders are advised to ensure that a single
Bid from them should not exceed the investment limits or maximum number of
shares that can be held by them under the applicable laws or regulations.
In single name or in joint names (not more than three).
Thumb impressions and signatures other than in the languages specified in the
Eight Schedule in the Constitution of India must be attested by a Magistrate or a
Notary Public or a Special Executive Magistrate under official seal.
Bidder’s Bank Details
The name of the sole or first Bidder’s bank, branch, type of account and account
numbers must be mandatorily completed in the Bid cum Application Form. This is
required for the Bidder’s own safety so that these details can be printed on the refund
orders. Bid cum Application Forms without these details are liable to be rejected.
Bidders Depository Account Details
Equity shares shall be transferred only in dematerialised form. All Bidders should
mention their Depository Participant’s name, Depository Participant-Identification
number and Beneficiary Account Number in the Bid cum Application Form. Please ensure
that in case of joint names, the names stated in the Bid cum Application Form should be
in the same order as the names stated in the Bidders’ depository account.
Bids under Power of Attorney
In case of Bids made pursuant to a Power of Attorney or by limited companies, corporate
bodies, registered societies, a certified copy of the Power of Attorney or the relevant
resolution or authority, as the case may be, along with a certified copy of the
memorandum and articles of association and/or bye laws must be lodged alongwith the
Bid cum Application Form. Failing this, we reserve the right to accept or reject any Bid in
whole or in part, in either case, without assigning any reason therefore.
In case of Bids made pursuant to a Power of Attorney by FIIs, a certified copy of the
Power of Attorney or the relevant resolution or authority, as the case may be, along with
a certified copy of their SEBI registration certificate must be lodged alongwith the Bid
cum Application Form. Failing this, our Company reserves the right to accept or reject
any Bid in whole or in part, in either case, without assigning any reason therefore.
We, in our absolute discretion, reserve the right to relax the above condition of
simultaneous lodging of the Power of Attorney along with the Bid cum Application form,
subject to such terms and conditions as we may deem fit.
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Bids by NRIs
NRI Bidders to comply with the following:
1.
2.
Individual NRI Bidders can obtain the Bid cum Application Forms from our
corporate office at Maruti 11th Floor, Jeevan Prakash Building, 25, Kasturba
Gandhi Marg, New Delhi, India, or BRLM or Co-BRLMs or the Registrar to the
Offer.
NRI Bidders may please note that only such Bids as are accompanied by payment
in free foreign exchange shall be considered for allotment. NRIs who intend to
make payment through Non-Resident Ordinary (NRO) accounts shall use the Bid
Cum Application form meant for Resident Indians.
Bids by Non Residents, NRIs or FIIs on a repatriation basis
Bids and revision to Bids must be made:
1.
2.
3.
4.
On the Bid cum Application Form or the Revision Form, as applicable, (blue in
colour), and completed in full in BLOCK LETTERS in ENGLISH in accordance with
the instructions contained therein.
In a single name or joint names (not more than three).
By NRIs - For a minimum of [] equity shares and in multiples of [] thereafter
subject to a maximum of [] equity shares. Bids for more than 1000 equity shares
would be considered under Non Institutional Category for the purposes of
allocation; By FIIs – for a minimum of ____ equity shares and in multiples of
___ thereafter subject to a maximum of [] equity shares; for further details see
“Offer Procedure - Maximum and Minimum Bid Size”.
In the names of individuals, societies and other corporate bodies owned
predominantly (at least 60%) by NRIs, or in the names of FIIs but not in the
names of minors, firms or partnerships, foreign nationals or their nominees. Bids
by societies, overseas limited companies and other corporate bodies owned
predominantly (at least 60%) by Non Resident Indians must be accompanied by
a certificate in the prescribed form OAC or OAC1 from Overseas Auditor or
Chartered Accountant or Certified Public Accountant.
Refunds, dividends and other distributions, if any, will be payable in Indian Rupees only
and net of bank charges and / or commission. In case of Bidders who remit money
through Indian Rupee drafts purchased abroad, such payments in Indian Rupees will be
converted into US Dollars or any other freely convertible currency as may be permitted
by the RBI at the rate of exchange prevailing at the time of remittance and will be
dispatched by registered post or if the Bidders so desire, will be credited to their NRE
accounts, details of which should be furnished in the space provided for this purpose in
the Bid cum Application Form. We will not be responsible for loss, if any, incurred by the
Bidder on account of conversion of foreign currency.
PAYMENT INSTRUCTIONS
The Selling Shareholder, our Company, the BRLM, the Co-BRLMs and the Syndicate
Members shall open an Escrow Account for the Offer with the Escrow Collection Banks for
the collection of the Bid Amounts payable upon submission of the Bid cum Application
Form and for amounts payable pursuant to allocation in the Offer.
Each Bidder shall draw a cheque or demand draft for the amount payable on the Bid
and/or on allocation as per the following terms:
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Payment into Escrow Account for the Offer:
1.
2.
3.
4.
5.
6.
7.
8.
The Bidders who have paid the Bid Amount on application shall draw a payment
instrument for the Bid Amount in favour of the Escrow Account for the Offer and
submit the same to the members of the Syndicate alongwith the Bid cum
Application Form.
In case the payment of the Bid Amount has been waived by a member of the
Syndicate during the Bidding Period, on receipt of the CAN, an amount equal to
Offer Price multiplied by the equity shares allocated to the Bidder, shall be paid
by the Bidders into the Escrow Account for the Offer within the period specified in
the CAN which shall be a minimum period of two days from the date of
communication of the allocation list to the members of the Syndicate by the
BRLM or Co-BRLMs.
The payment instruments for payment into the Escrow Account for the Offer
should be drawn in favour of:
1. In case of Resident Bidders: "Escrow Account- Maruti Public Offer"
2. In case of Non Resident Bidders: "Escrow Account- Maruti Public OfferNR"
In case of Bids by Non Residents/NRIs applying on repatriation basis, the
payments must be made through Indian Rupee drafts purchased abroad or
cheques or bank drafts or Stockinvests, for the amount payable on application
remitted through normal banking channels or out of funds held in Non-Resident
External (NRE) Accounts or Foreign Currency Non-Resident (FCNR) Accounts,
maintained with banks authorised to deal in foreign exchange in India, along with
documentary evidence in support of the remittance. Payment will not be accepted
out of Non-Resident Ordinary (NRO) Account of Non-Resident Subscribers
applying on a repatriation basis. Payment by drafts should be accompanied by
Bank Certificate confirming that the draft has been issued by debiting to NRE or
FCNR Account.
In case of Bids by FIIs, the payment should be made out of funds held in Special
Rupee Account along with documentary evidence in support of the remittance.
Payment by drafts should be accompanied by Bank Certificate confirming that the
draft has been issued by debiting to Special Rupee Account.
Where a Bidder has been allocated a lesser number of equity shares than the
Bidder has Bid for, the excess amount, if any, paid on bidding, after adjustment
towards the amount payable on the equity shares allocated, will be refunded to
the Bidder from the Escrow Account for the Offer.
On the Designated Date, the Escrow Collection Banks shall transfer the funds
from the Escrow Account for the Offer as per the terms of the Escrow Agreement
into the Public Offer Account with the Bankers to the Offer.
On the Designated Date and no later than 15 days from the Bid/Offer Closing
Date, the Escrow Collection Bank shall also refund all amounts payable to
unsuccessful Bidders and also the excess amount paid on bidding, if any, after
adjustment for allocation, to the Bidders.
Payment by Stockinvest
In terms of the Reserve Bank of India Circular No. DBOD No. FSC. BC.100/24.47.001/94
dated September 2, 1994, a Bidder, being an individual or mutual fund, has the option
to use the Stockinvest instrument in lieu of cheques or bank drafts for payment of bid
money, subject to applicable laws or regulations. Stockbrokers, corporate bodies, banks
and financial institutions are not allowed to apply through Stockinvests.
In respect of individual Bidders, banks have imposed a ceiling of Rs. 50,000 per
individual per Stockinvest.
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Stockinvest instruments are payable at par at all the branches of the issuing bank and as
such, outstation Stockinvest instruments can be attached to the Bid cum Application
Form or Revision Form. The bidder may approach the banks concerned for obtaining
Stockinvest and detailed instructions for the same. Service charges, if any, for issuing
the Stockinvest must be borne by the Bidder.
The Bidder has to fill in the following particulars:
•
Title of the Account as mentioned in the Bid cum Application Form;
•
Number of equity shares bid for;
•
The maximum amount payable as per the options in the Bid cum Application Form or
Revision Form; and
•
Name and address of the Bidder.
The Bidder should thereafter sign the instrument. It should also bear the stamp of the
bank issuing the instrument and should be crossed “A/c Payee Only” and made payable
only to “Maruti Udyog Limited”. The Bidder should not complete the portion to be
completed by the Registrar (right-hand portion of the instrument).
The Bidder should use the Stockinvest and the name of the Bidder or one of the Bidders
should be indicated as the first Bidder in the Bid cum Application Form or Revision Form.
Thus, if the signature of the Bidder on the Stockinvest and the signature of the first
Bidder in the Bid cum Application Form or Revision Form do not tally, the Bid would be
treated as having been accompanied by a third party Stockinvest and is liable to be
rejected.
The Stockinvest instrument should be used by the Investor within 10 days from the date
of Offer of the instrument, failing which such bids are liable to be rejected. For the
purpose of calculating the 10 days, the last date for use of the Stockinvest for submitting
the Bid cum Application Form or Revision Form to the members of the Syndicate is
indicated on the face of the Stockinvest with a notation “to be used before _______”.
The Registrar to the Offer will complete the right-hand side of the Stockinvest indicating
the equity shares transferred to the Bidder, calculated as follows:
• In case of full allotment, the number of equity shares on the right-hand side will be
the same as that on the left-hand side of the instrument;
• In case of partial allotment, the number filled up by Registrar to the Offer on the
right-hand side of the instrument will be less than the number filled up by the Bidder
on the left- hand side; and
• In case the allotment is Nil, the number filled up by the Registrar to the Offer on the
right-hand side of the instrument will be Nil.
No refund order will be issued to the Bidders using Stockinvest for payment of the
money due while submitting the Bid cum Application Form or Revision Form. In case of
non-allotment of equity shares, the cancelled Stockinvest instruments will be returned to
the bidder, within 15 days of the Offer Closing Date by registered post or speed post.
The Bidder will have to approach the issuing bank branch for lifting the lien.
Registrar to the Offer has been authorised by our Company, to sign on their behalf to
realise the proceeds of the Stockinvest from the issuing bank or to affix non-allotment
advice on the instrument, or to cancel the Stockinvest(s) of the non-allottees. Such
cancelled Stockinvest(s) shall be sent back by the Registrar directly to the investors.
Stockinvest will be realised through [names of banks].
All other conditions mentioned for making a Bid through cheque or bank draft will also
apply to Bids made using Stockinvest.
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Note: (1) The above information is given for the benefit of investors and the Selling
Shareholder and we are not liable for any modification of the terms of Stockinvest or
procedure thereof by the issuing bank. For further instructions, please read the Bid cum
Application Form carefully. (2) Bidders are required to mention the number of application
form on the reverse of the payment instruments to avoid misuse of instruments
submitted along with the Bid cum Application Form.
SUBMISSION OF BID CUM APPLICATION FORM
All Bid cum Application Forms or Revision Forms duly completed and accompanied by
account payee cheques or drafts or Stockinvest shall be submitted to the members of
the Syndicate at the time of submission of the Bid cum Application Form unless waived
by a member of the Syndicate at its sole discretion.
The collection center of the BRLM, Co-BRLMs or Syndicate Members will acknowledge
the receipt of the Bid cum Application Forms or Revision Forms by stamping and
returning to the Bidder the acknowledgement slip. This acknowledgement slip will serve
as the duplicate of the Bid cum Application Form for the records of the Bidder. No
separate receipts shall be issued for the money paid on the submission of Bid cum
Application Form or Revision Form.
OTHER INSTRUCTIONS
Joint Bids in the case of Individuals
Bids may be made in single or joint names (not more than three). In the case of joint
Bids, all payments will be made in favour of the Bidder whose name appears first in the
Bid cum Application Form or Revision Form (“First Bidder ”). All communications will be
addressed to the First Bidder and will be despatched to his or her address.
Multiple Bids
A Bidder should submit only one Bid (and not more than one) for the total number of
equity shares required. Two or more Bids will be deemed to be multiple Bids if the sole
or First Bidder is one and the same.
In case of a mutual fund, a separate Bid can be made in respect of each scheme of the
mutual fund registered with SEBI and such Bids in respect of more than one scheme of
the mutual fund will not be treated as multiple bids provided that the Bids clearly
indicate the scheme concerned for which the Bid has been made.
We reserve the right to reject, in our absolute discretion, all or any multiple Bids in all or
any categories.
‘PAN’ or ‘GIR’ Number
Where the maximum Bid for equity shares by a Bidder is for the total value of Rs. 50,000
or more, i.e. the actual numbers of equity shares Bid for multiplied by the Bid Amount is
Rs. 50,000 or more, the Bidder or, in the case of a Bid in joint names, each of the
Bidders should mention his or her Permanent Account Number (PAN) allotted under the
I.T. Act or where the same has not been allotted, the General Index Register (GIR)
Number and the Income-Tax Circle, Ward or District. In case neither the PAN nor the
GIR number has been allotted, the Bidders must mention “Not allotted” in the
appropriate place. Bid cum Application Forms without this information will be considered
incomplete and are liable to be rejected.
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OUR RIGHT TO REJECT BIDS
The Selling Shareholder, we and the members of the Syndicate reserve the right to
reject any Bid without assigning any reason therefore in case of QIBs. In case of
Wholesale Bidders and Retail Bidders, the Selling Shareholder and we would have the
right to reject bids based on technical grounds. Consequent refunds shall be made by
cheque or pay order or draft and will be sent to the bidder’s address at the Bidder’s risk.
GROUNDS FOR TECHNICAL REJECTIONS
Bidders are advised to note that Bids are liable to be rejected on technical grounds,
including the following:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
Amount paid does not tally with the highest value of equity shares bid for;
Bank account details (for refund) are not given;
Age of First Bidder not given;
Bid by minor;
PAN or GIR Number not given if Bid is for Rs. 50,000 or more;
Bids for lower number of equity shares than specified for that category of
investors;
Bids at a price less than the Floor Price;
Bids at cut-off price by a QIB or a Wholesale Bidder;
Bids for number of equity shares which are not multiples of ____ ;
Category not ticked;
Multiple bids as defined elsewhere;
In case of Bid under power of attorney or by limited companies, corporate, trust
etc., relevant documents are not submitted;
Bids accompanied by Stockinvest purchased 10 days prior to Bid/Offer Opening
Date;
Bids accompanied by Stockinvest of value exceeding Rs. 50,000 by individuals;
Bids accompanied by third party Stockinvest;
Right hand side of the Stockinvest has been completed;
Bids by Bidders other than individuals and mutual funds accompanied by
Stockinvest;
Bid cum Application Form does not have the stamp of the BRLM or Co-BRLMs or
Syndicate Members;
Bid cum Application Form does not have Bidders depository account details;
Bid cum Application Forms are not submitted by the Bidders within the time
prescribed as per the Bid cum Application Form, Bid/Offer Opening Date
advertisement and this Draft Red Herring Prospectus and as per the instructions
in this Draft Red Herring Prospectus and the Bid cum Application Form; or
Bids for amounts greater than the maximum permissible amounts prescribed by
the regulations see the details regarding the same at page 280 of this Draft Red
Herring Prospectus.
EQUITY SHARES IN DEMATERIALISED FORM WITH NSDL OR CDSL
In terms of Section 68B of the Companies Act, the equity shares in this Offer shall be
transferred only in dematerialized form, (i.e. not in the form of physical certificates but
be fungible and be represented by the statement issued through electronic mode).
In this context, two tripartite agreement have been signed between the Registrar, the
Depositories and us:
• An agreement dated [ ]between NSDL, us and [ ]; and
• An agreement dated [ ] between CDSL, us and [ ]
- 291 -
Bids from any investor without the following details of his or her depository account are
liable to be rejected.
1.
2.
3.
4.
5.
6.
7.
8.
A Bidder applying for equity shares must have at least one beneficiary account
with either of the Depository Participants of NSDL or CDSL prior to making the
Bid.
The Bidder must necessarily fill in the details (including the beneficiary account
number and Depository Participant’s Identification number) appearing in the Bid
cum Application Form or Revision Form.
Equity shares transferred to a Bidder will be credited in electronic form directly to
the beneficiary account (with the Depository Participant) of the Bidder
Names in the Bid cum Application Form or Revision Form should be identical to
those appearing in the account details in the Depository. In case of joint holders,
the names should necessarily be in the same sequence as they appear in the
depository account of the Bidder(s) .
If incomplete or incorrect details are given under the heading ‘Bidders Depository
Account Details’ in the Bid cum Application Form or Revision Form, it is liable to
be rejected.
The Bidder is responsible for the correctness of his or her demographic details
given in the Bid cum Application Form vis-à-vis those with his or her Depository
Participant.
It may be noted that equity shares in electronic form can be traded only on the
stock exchanges having electronic connectivity with NSDL or CDSL. All the stock
exchanges where our equity shares are proposed to be listed are connected to
NSDL and CDSL.
The trading of our equity shares would be in dematerialised form only for all
investors.
COMMUNICATIONS
All future communications in connection with Bids made in the Offer should be addressed
to the Registrar to the Offer quoting the full name of the sole or First Bidder, Bid cum
Application Form number, number of equity shares applied for, date of Bid form, name
and address of the member of the Syndicate where the Bid was submitted and cheque,
draft or Stockinvest number and issuing bank thereof.
UNDERTAKING BY THE SELLING SHAREHOLDERS AND OUR COMPANY
The Selling Shareholder and we undertake as follows:
•
•
•
•
•
that the complaints received in respect of this Offer shall be attended to by the
Selling Shareholder and us expeditiously and satisfactorily;
that we shall take all steps for the completion of the necessary formalities for
listing and commencement of trading at all the stock exchanges where the equity
shares are to be listed within seven working days of finalisation of the basis of
allotment;
that the funds required for despatch of refund orders or allotment advice by
registered post or speed post shall be made available to the Registrar to the Offer
by the Selling Shareholder;
that the refund orders or allotment advice to the NRIs or FIIs shall be dispatched
within specified time; and
that no further Offer of equity shares shall be made till the equity shares offered
through this Draft Red Herring Prospectus are listed or until the Bid moneys are
refunded on account of non-listing, under-subscription, etc.
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UTILISATION OF OFFER PROCEEDS
The Selling Shareholder certifies that all monies received out of the Offer shall be
transferred to a separate Bank account other than the bank account referred to in subsection (3) of Section 73 of the Companies Act.
The Selling Shareholder shall not have recourse to the Offer proceeds until approval for
trading of equity shares from all the stock exchanges where listing is sought is received.
PROCEDURE AND TIME SCHEDULE FOR TRANSFER OF EQUITY SHARES
The Selling Shareholder and we reserve at our absolute and uncontrolled discretion and
without assigning any reason thereof, the right to accept or reject any Bid in whole or in
part. In case a Bid is rejected in full, the whole of the Bid Amount will be refunded to the
Bidder within 15 days of the Bid/Offer Closing Date. In case a Bid is rejected in part, the
excess Bid Amount will be refunded to the Bidder within 15 days of the Bid/Offer Closing
Date. The Selling Shareholder and we will ensure the transfer of the equity shares within
15 days from the Bid/Offer Closing Date. The Selling Shareholder shall pay interest at
the rate of 15% per annum (for any delay beyond the periods as mentioned above), if
transfer is not made, refund orders, cancelled Stockinvests are not dispatched and/ or
demat credits are not made to investors within two working days from the date of
allotment.
DISPOSAL OF APPLICATIONS AND APPLICATION MONEY
The Selling Shareholder and we shall ensure dispatch of allotment advice, refund orders
or cancelled Stockinvests and giving of benefit to the Beneficiary Account with
Depository Participants and submission of the transfer and listing documents to the
Stock Exchanges within two working days of finalisation of the basis of allotment of
equity shares. The Selling Shareholder and we shall ensure the dispatch of refund
orders, if any, of value up to Rs. 1,500, “Under Certificate of Posting”, and dispatch of
refund orders above Rs. 1,500, if any, by Registered Post or Speed Post at the sole or
First Bidder's sole risk.
We shall use best efforts to ensure that all steps for completion of the necessary
formalities for listing and commencement of trading at all the Stock Exchanges where
the equity shares are proposed to be listed, are taken within seven working days of
finalisation of the basis of allotment.
In accordance with the Companies Act, the requirements of the stock exchanges and
SEBI Guidelines, the Selling Shareholder and we, further undertake that:
•
•
•
Transfer of equity shares shall be made only in dematerialised form within 15 days of
the Bid/Offer Closing Date;
The Selling Shareholder and we would ensure despatch of refund orders and
cancelled Stockinvests within 15 days of the Bid/Offer Closing Date; and
The Selling Shareholder shall pay interest at 15% per annum (for any delay beyond
the 15 day time period as mentioned above), if transfer is not made, refund orders
and cancelled Stockinvests are not dispatched and/or demat credits are not made to
investors within the 15 day time prescribed above.
The Selling Shareholder will provide adequate funds required for dispatch of refund
orders or allotment advice to the Registrar to the Offer.
Refunds will be made by cheques, pay orders or demand drafts drawn on a bank
appointed by us as a refund banker and payable at par at places where Bids are
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received. Bank charges, if any, for cashing such cheques, pay orders or demand drafts at
other centres will be payable by the Bidders.
Interest on Refund of excess Bid Amount
The Selling Shareholder shall pay interest at the rate of 15% per annum on the excess
Bid Amount received by us if refund orders are not dispatched within 15 days from the
Bid/Offer Closing Date as per the Guidelines issued by the GoI, Ministry of Finance
pursuant to their letter no. F-8/6/SE/79 dated July 21, 1983, as amended by their letter
no. F/14/SE/85 dated September 27, 1985, addressed to the stock exchanges, and as
further modified by SEBI's Clarification XXI dated October 27, 1997, with respect to the
SEBI Guidelines.
Disposal of Applications made by Stockinvest
The procedure for disposal of applications made by cash, cheque, pay order or demand
draft described above will apply mutatis-mutandis to applications accompanied by
Stockinvests, except for the following:
In case of non-allotment, the Registrar to the Offer will return the Stockinvest directly to
the Bidder with the stamp CANCELLED" and/or "NOT ALLOCATED" across the face of the
instrument within 15 days from the Bid/Offer Closing Date.
On allotment or partial allotment, the Registrar to the Offer shall fill in the amount
(which will be less than or equal to the amount filled in by the investor) before
presenting the Stockinvest to the respective issuing banker for payment to the extent of
allotment. The bank issuing the Stockinvest will lift the lien on the balance amount, if
any, of the deposit.
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RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES
Foreign investment in Indian securities is regulated through the industrial policy of GoI,
or the Industrial Policy and FEMA. While the industrial policy prescribes the limits and the
conditions subject to which foreign investment can be made in different sectors of the
Indian economy, FEMA regulates the precise manner in which such investment may be
made. Under the Industrial Policy, unless specifically restricted, foreign investment is
freely permitted in all sectors of Indian economy up to any extent and without any prior
approvals, but the foreign investor is required to follow certain prescribed procedures for
making such investment. As per current foreign investment policies, foreign investment
is allowed up to 100% in companies in the Automobile sector. The government bodies
responsible for granting foreign investment approvals are the Foreign Investment
Promotion Board of the GoI (“FIPB”) and the RBI. Under present regulations, the
maximum permissible FII investment in our Company is restricted to 24% of our total
issued capital. This can be raised to 100% by adoption of a special resolution by our
shareholders; however, as of the date hereof, no such resolution has been recommended
to our shareholders for adoption.
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STATUTORY AND OTHER INFORMATION
Consents
Consents in writing of: (a) the Directors, the Company Secretary, the Auditors, Legal
Advisors, Bankers to the Company and Bankers to the Offer; and (b) Book Running Lead
Manager to the Offer, Co-Book Running Lead Managers to the Offer, Escrow Collection
Bankers, Registrar to the Offer and Legal Advisors to the Underwriters, to act in their
respective capacities, have been obtained and filed along with a copy of the Prospectus
with the Registrar of Companies, NCT of Delhi and Haryana located at New Delhi, as
required under Section 60 and 60B of the Companies Act and such consents have not
been withdrawn up to the time of delivery of the offer document for registration.
Price Waterhouse, Chartered Accountants and our statutory auditors have given their
written consent to the inclusion of their report in the form and context in which it
appears in the Draft Red Herring Prospectus and such consent and report has not been
withdrawn up to the time of delivery of the Draft Red Herring Prospectus for registration
to the RoC.
Price Waterhouse, Chartered Accountants have given their written consent to the tax
benefits accruing to our Company and its members in the form and context in which it
appears in the Draft Red Herring Prospectus and has not withdrawn the same up to the
time of delivery of the Draft Red Herring Prospectus for registration to the RoC.
Minimum Subscription
This being an offer for sale, the requirement of minimum subscription is not a precondition for completion of the Offer and obtaining listing permissions.
Expert Opinion
Save as stated elsewhere in the Draft Red Herring Prospectus, we have not obtained any
expert opinions.
Changes in Auditors during the last three years
There have been no changes of the auditors in the last three years
Basis of Allotment or Allocation
1. For Retail Bidders
• Bids received from the Retail Bidders at or above the Offer Price shall be grouped
together to determine the total demand under this category. The allocation to all
the successful Retail Bidders will be made at the Offer Price.
• The Offer size less allocation to Non – Institutional Bidders and QIBs shall be
available for allocation to Retail Bidders who have bid in the Offer at a price,
which is equal to or greater than the Offer Price.
• If the aggregate demand in this category is less than or equal to 18,060,900
equity shares at or above the Offer Price, full allocation shall be made to the
Retail Bidders to the extent of their demand.
• If the aggregate demand in this category is greater than 18,060,900 equity
shares at or above the Offer Price, the allocation shall be made on a
proportionate basis up to a minimum of ___ equity shares. For the method of
proportionate basis of allotment, refer below.
2. For Wholesale Bidders
• Bids received from Wholesale Bidders at or above the Offer Price shall be grouped
together to determine the total demand under this category. The allocation to all
successful Wholesale Bidders will be made at the Offer Price.
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•
•
•
The Offer size less allocation to QIBs and Retail Portion shall be available for
allocation to Wholesale Bidders who have bid in the Offer at a price, which is
equal to or greater than the Offer Price.
If the aggregate demand in this category is less than or equal to _____ equity
shares at or above the Offer Price, full allocation shall be made to Wholesale
Bidders to the extent of their demand.
In case the aggregate demand in this category is greater than ____ equity shares
at or above the Offer Price, allocation shall be made on a proportionate basis up
to a minimum of ____ equity shares. For the method of proportionate basis of
allotment refer below.
The aggregate allocation to A and B shall not exceed ____ equity shares.
3. For QIBs
• Bids received from the QIBs at or above the Offer Price shall be grouped together
to determine the total demand under this category. The allocation to all the QIBs
will be made at the Offer Price.
• The Offer size less allocation to Non – Institutional Portion and Retail Portion shall
be available for allocation to QIBs who have bid in the Offer at a price, which is
equal to or greater than the Offer Price.
• The allocation would be broadly decided based on the quality of the Bidder
determined by the size, price and date of the Bid.
The Selling Shareholder and our Company, in consultation with the BRLMs and Co-BRLMs
would have the discretion for any allocation to QIBs.
Method of Proportionate Basis of Allotment
In the event the Offer is over-subscribed, the basis of allotment to Retail and Wholesale
Bidders shall be finalised by us in consultation with _________________________
________.The Executive Director or Managing Director of the ___ along with the
BRLM/Co-BRLMs and the Registrar to the Offer shall be responsible for ensuring that the
basis of allotment is finalised in a fair and proper manner.
The transfer shall be made in marketable lot, on a proportionate basis as explained
below:
a. Bidders will be categorised according to the number of equity shares applied for
b. The total number of equity shares to be transferred to each category as a whole
shall be arrived at on a proportionate basis, which is the total number of equity
shares, applied for in that category (number of bidders in the category multiplied
by the number of shares applied for) multiplied by the inverse of the oversubscription ratio.
c. Number of equity shares to be transferred to the successful Bidders will be
arrived at on a proportionate basis, which is total number of equity shares,
applied for by each Bidder in that category multiplied by the inverse of the oversubscription ratio.
d. In all Bids where the proportionate allotment is less than ___ equity shares per
Bidder, the transfer shall be made as follows:
• Each successful Bidder shall be transferred a minimum of ___ equity shares;
and
• The successful Bidders out of the total Bidders for a category shall be
determined by draw of lots in a manner such that the total number of equity
shares transferred in that category is equal to the number of equity shares
calculated in accordance with (b) above.
e. If the proportionate allotment to an Bidder works out to a number that is more
than ___ but is not a multiple of ___ (which is the marketable lot), the number in
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f.
excess of the multiple of ___ would be rounded off to the higher multiple of ___ if
that number is ___ or higher. If that number is lower than ___, it would be
rounded off to the lower multiple of __. All Bidders in such categories would be
transferred equity shares arrived at after such rounding off.
If the equity shares allocated on a proportionate basis to any category are more
than the equity shares transferred to the Bidders in that category, the remaining
equity shares available for transfer shall be first adjusted against any other
category, where the allotted shares are not sufficient for proportionate allotment
to the successful bidders in that category. The balance equity shares, if any,
remaining after such adjustment will be added to the category comprising Bidders
applying for minimum number of equity shares.
Expenses of the Offer
The expenses of the Offer payable by the Selling Shareholder inclusive of brokerage,
fees payable to the BRLM, Co-BRLM, Syndicate Members, other advisors to the Offer,
fees of Legal Advisors to the Offer and Auditors, stamp duty, printing, publication,
advertising and distribution expenses, bank charges, fees payable to the Registrar to the
Offer and other miscellaneous expenses is estimated to be approximately ___% of the
Offer size, and will be met out of the proceeds of the Offer. The listing fees will be paid
for by us.
Fees Payable to the BRLM
The total fees payable to the Book Running Lead Manager will be as per the Letter of
Appointment dated May 17, 2002 issued by GoI, a copy of which is available for
inspection at our Corporate Office.
Fees Payable to the Co-BRLMs
The total fees payable to the Co-BRLMs will be as per the Letters of Appointment dated
November 8, 2002 and December 26, 2002 issued by GoI, a copy of which is available
for inspection at our Corporate Office.
Fees Payable to the Registrar to the Offer
The fees payable to the Registrar to the Offer will be as per the the Letter of
Appointment dated March 17, 2003, a copy of which is available for inspection at our
Corporate Office.
Adequate funds will be provided to the Registrar to the Offer to enable them to send
refund orders or allotment advice by registered post.
Commission and Brokerage on Previous Issues
Except as stated elsewhere in the Draft Red Herring Prospectus, no sum has been paid
or is payable as commission or brokerage for subscribing to or procuring or agreeing to
procure subscription for any of our equity shares since our inception.
Previous Rights and Public Issues
We have made a rights issue of 1,219,512 equity shares of Rs. 100 each at a price of Rs.
3,280 per equity share, under which 1,216,341 equity shares were allotted on May 30,
2002 to the shareholders who subscribed to the rights issue, while the remaining 3,171
equity shares were not issued on account of non-subscription. Other than such rights
issue, we have not made any rights or public issue since its inception.
Outstanding Debentures or Bond Issues
As of December 31, 2002, we have Rs. 3,000 million of non-convertible debentures ,
which have been issued in 2000.
Outstanding Preference Shares
As of December 31, 2002, we did not have any outstanding preference shares.
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Capitalisation of Reserves or Profits
We have not capitalised our reserves or profits at any time.
Issues otherwise than for Cash
Except as stated above and in the section entitled “Capital Structure” on page 51 in the
Draft Red Herring Prospectus, we have not issued any equity shares for consideration
otherwise than for cash.
Option to Subscribe
Equity shares being offered through this draft Red Herring Prospectus can be applied for
in the dematerialized form only.
Purchase of Property
There is no property which we have purchased or acquired or proposes to purchase or
acquire which is to be paid for wholly or partly out of the proceeds of the present Offer
or the purchase or acquisition of which has not been completed on the date of this Draft
Red Herring Prospectus, other than property in respect of which:
•
•
•
The contracts for the purchase or acquisition were entered into in the ordinary
course of the business, and the contracts were not entered into in contemplation
of the Offer nor is the Offer contemplated in consequence of the contracts;
or the amount of the purchase money is not material.
Or the relevant disclosures in the Draft Red Herring Prospectus
Except as elsewhere stated in this Draft Red Herring Prospectus, we have not purchased
any property in which any of its promoters and/or Directors, have any direct or indirect
interest in any payment made thereof.
Remuneration of Managing Director/ Whole-Time Director
Mr. Jagdish Khattar, Managing Director
Mr. Khattar joined us on July 1, 1993 as Director (Marketing). He was the nominee of
the GoI.
Pursuant to the RJVA dated May 15, 2002, entered into between the GoI and Suzuki,
wherein Suzuki is entitled to appoint the managing director of Maruti, Suzuki nominated
Mr. Khattar as its nominee as the Managing Director of Maruti. In accordance with the
resolution adopted at the Extra-ordinary general meeting held on May 30, 2002 Mr.
Jagdish Khattar has been appointed as a Non Retiring Director and Managing Director
w.e.f May 30, 2002 for a period of three years, on the following terms, remuneration and
conditions as under:
1.Remuneration :
Basic Salary: Rs.300,000/- per month
Special Salary: Rs. 150,000/- per month
2. Performance linked bonus: Equivalent to a guaranteed minimum of four months’
basic salary and a maximum of ten months’ salary , to be paid annually, with the
authority of the Board.
3. Perquisites and allowances: Rs. 20,00,000 per annum
4. Minimum salary: In the event of loss or inadequacy of profits, subject to the
applicable laws, he shall be entitled to remuneration by way of basic and special
salary, performance linked bonus not exceeding four months’ basic salary,
perquisites and allowances as specified above.
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In accordance with the resolution adopted in the extra-ordinary general meeting on July
19, 2002, Mr. Khattar’s remuneration has been varied as under:
1. Basic salary : In the scale of Rs. 3,00,000/- to Rs. 4,50,000/- with authority to the
Board to revise his salary from time to time. The annual increments will be merit
based and take into account Maruti’s performance.
2. Perquisites and allowances: The aggregate perquisites and allowances will be Rs.
20,00,000/- per annum with authority to the Board to increase it from time to time
upto a maximum of Rs. 30,00,000/- per annum.
Agreement dated September 16, 2002, has been entered into between Maruti and Mr.
Khattar to record the above terms of his appointment.
Mr. Yuichi Nakamura, Joint Managing Director
Mr. Nakamura has been appointed as the Joint Managing Director w.e.f September 21,
2001.
In accordance with the resolution adopted at the annual general meeting held on
September 28, 2001 the following are the terms, remuneration and conditions of Mr.
Nakamura’s appointment:
1. Remuneration :
Basic Salary : Rs. 62,500/- per month
2. Commission : Equivalent to nine months’ salary , payable out of the net profits as
arrived at in accordance with sections 198 r/w 349 and 350 of the Companies Act,
1956.
3. Perquisites and allowances: As specified in the Despatch of Designees Agreement.
4. Compensatory Allowance: Rs. 60,000/- per month. In the event of loss or inadequacy
of profits in any financial year during the term of appointment, Mr. Nakamura shall
be paid remuneration as per schedule XIII of the Companies Act, 1956.
In accordance with the resolution adopted at the extra-ordinary general meeting held on
May 30, 2002, Mr. Nakamura’s remuneration was revised as under:
1.Remuneration :
Basic Salary : Rs. 2,50,000/- per month
Special Salary : Rs. 1,00,000 per month
2. Performance linked bonus: Equivalent to a guaranteed minimum of four months’
basic salary and a maximum of ten months’ salary, to be paid annually, with the
authority of the Board.
3. Perquisites and allowances: Rs. 24,00,000 per annum
4. Minimum salary: In the event of loss or inadequacy of profits, subject to the
applicable laws, he shall be entitled to remuneration by way of basic and special
salary, performance linked bonus not exceeding four months’ basic salary,
perquisites and allowances as specified above.
In accordance with the resolution adopted in the extra-ordinary general meeting on July
19, 2002, Mr. Nakamura’s remuneration has been varied as under:
1. Basic salary: In the scale of Rs. 2,50,000/- to Rs. 3,75,000/- with authority to the
Board to revise his salary from time to time. The annual increments will be merit
based and take into account the Maruti’s performance.
2. Perquisites and allowances: The aggregate perquisites and allowances will be Rs.
24,00,000/- per annum with authority to the Board to increase it from time to time
upto a maximum of Rs. 34,00,000/- per annum.
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Mr. Kinji Saito, Director (Marketing and Sales)
Mr. Saito has been appointed as the Director (Marketing and Sales) for a period a three
years w.e.f May 30, 2002.
In accordance with the resolution adopted at the extra-ordinary general meeting held on
May 30, 2002 the following are the terms, remuneration and conditions of Mr. Kinji
Saito appointment:
1.Remuneration :
Basic Salary : Rs. 2,25,000/- per month
Special Salary : Rs. 1,00,000 per month
2. Performance linked bonus: Equivalent to a guaranteed minimum of four months’
basic salary and a maximum of ten months’ salary , to be paid annually, with the
authority of the Board.
3. Perquisites and allowances: Rs. 22,00,000 per annum
Minimum salary: in the event of loss or inadequacy of profits, subject to the
applicable laws, he shall be entitled to remuneration by way of basic and special
salary, performance linked bonus not exceeding four months’ basic salary,
perquisites and allowances as specified above.
In accordance with the resolution adopted in the extra-ordinary general meeting on July
19, 2002, Mr. Saito’s remuneration has been varied as under:
1. Basic salary: In the scale of Rs. 2,25,000/- to Rs. 3,37,500/- with authority to the
Board to revise his salary from time to time. The annual increments will be merit
based and take into account the Maruti’s performance.
2. Perquisites and allowances: The aggregate perquisites and allowances will be Rs.
22,00,000/- per annum with authority to the Board to increase it from time to time
upto a maximum of Rs. 32,00,000/- per annum.
Mr. Shinichi Takeuchi, Director (Production)
Mr. Takeuchi has been appointed as the Director (Production) for a period a three years
w.e.f September 27, 2001.
In accordance with the resolution adopted at the annual general meeting held on
September 28, 2001, the following are the terms, remuneration and conditions of Mr.
Takeuchi’s appointment:
1. Remuneration :
Basic Salary : Rs. 62,500/- per month
2. Commission : Equivalent to nine months’ salary , payable out of the net profits as
arrived at in accordance with sections 198 r/w 349 and 350 of the Companies Act,
1956.
3. Perquisites and allowances: As specified in the Despatch of Designees Agreement
4. Compensatory Allowance :Rs. 60,000/- per month. In the event of loss or inadequacy
of profits in any financial year during the term of appointment, Mr. Nakamura shall
be paid remuneration as per schedule XIII of the Companies Act, 1956.
In accordance with the resolution adopted at the extra-ordinary general meeting held on
May 30, 2002, Mr. Takeuchi’s remuneration was revised as under:
1.Remuneration :
Basic Salary : Rs. 2, 25,000/- per month
Special Salary : Rs. 1,00,000 per month
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2. Performance linked bonus: Equivalent to a guaranteed minimum of four months’
basic salary and a maximum of ten months’ salary, to be paid annually, with the
authority of the Board.
3. Perquisites and allowances: Rs. 22,00,000 per annum
4. Minimum salary: In the event of loss or inadequacy of profits, subject to the
applicable laws, he shall be entitled to remuneration by way of basic and special
salary, performance linked bonus not exceeding four months’ basic salary,
perquisites and allowances as specified above.
In accordance with the resolution adopted in the extra-ordinary general meeting on July
19, 2002, Mr. Takeuchi’s remuneration has been varied as under:
1. Basic salary: In the scale of Rs. 2,25,000/- to Rs. 3,37,500/- with authority to the
Board to revise his salary from time to time. The annual increments will be merit
based and take into account the Maruti’s performance.
2. Perquisites and allowances: The aggregate perquisites and allowances will be Rs.
22,00,000/- per annum with authority to the Board to increase it from time to time
upto a maximum of Rs. 32,00,000/- per annum.
Mr. Motohiro Atsumi, Director (Finance)
Mr. Atsumi has been appointed as the director (finance) from 16th September 2002 to
May 29, 2005.
In accordance with the resolution adopted at the annual general meeting held on
September 20, 2002 the following are the terms, remuneration and conditions of Mr.
Atsumi appointment:
1. Remuneration :
Basic Salary : in the scale of Rs. 2,25,000/- per month to Rs. 3,37,500/- with
authority of the Board to revise from time to time.
Special Salary : Rs. 1,00,000 per month
2. Performance linked bonus: Equivalent to a guaranteed minimum of four months’
basic salary and a maximum of ten months’ salary , to be paid annually, with the
authority of the Board.
3. Perquisites and allowances: In the scale of Rs. 22,00,000 per annum to Rs.
32,00,000/- per annum with authority of the Board.
4. Minimum salary: in the event of loss or inadequacy of profits, subject to the
applicable laws, he shall be entitled to remuneration by way of basic and special
salary, performance linked bonus not exceeding four months’ basic salary,
perquisites and allowances as specified above.
Interest of Promoters and Directors
Except as stated in “Related Party Transactions” on page 158 of the Draft Red Herring
Prospectus, the promoters, the promoter group companies and other related parties do
not have any interest in our business except to the extent of investments made by them
in our Company and earning returns thereon.
We do not pay any remuneration to our Directors. We do not pay our Directors any
sitting fees. We do not reimburse sitting fees for travel. The Directors are paid for the
work done by them for our Company and are interested to the extent of such payment
for the services rendered by them for us. The Managing Director and the Whole time
Directors are interested to the extent of remuneration paid to them for services rendered
as our officers or employees.
The Directors may also be regarded as interested in the shares, if any, held by or that
may be subscribed by and allotted/ transferred to the companies, firms and trust, in
which they are interested as Directors, Members, partners and/ or trustees.
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All Directors may be deemed to be interested in the contracts, agreements/
arrangements entered into or to be entered into by us with any company in which they
hold Directorships or any partnerships in which they are a partner.
Except as stated otherwise in this Draft Red Herring Prospectus, we have not entered
into any contract, agreements or arrangement during the preceding two years from the
date of the Draft Red Herring Prospectus in which the directors are interested directly or
indirectly and no payments have been made to them in respect of these contracts,
agreements or arrangements or are proposed to be made to them.
Borrowing Powers of Directors
Article 50 of the Articles of Association provides that the Board of Directors may by
means of the resolution passed at a meeting of the Board from time to time, borrow
and/or secure the payment of any sums of money for the purposes of our Company.
The Board of Directors of MUL is authorized to borrow by way of cash credit, overdraft,
working capital loan from scheduled banks / financial institutions upto a limit of Rs.
10,000 million. The committee of directors comprising of the managing director,
director(finance) and director (marketing and sales) is authorized to approve the terms
and conditions in respect of any borrowings.
Article 52 provides that subject to Section 117 of the Act, any debentures, debentures
stock, bonds or other securities may be issued at discount, premium or otherwise and
with any special privileges, as to redemption, surrender, drawings, allotment of shares,
appointment of directors and otherwise. Debentures, debenture stocks, bonds and other
securities may be made assignable free from any equities between our Company and the
person to whom the same may be issued.
Revaluation of Assets
We have not revalued any of its assets since its inception.
Classes of Shares
Our authorised capital is Rs. 1,550 million, which is divided into 310 million equity shares
of Rs. 5/- each.
Payment or Benefit to Promoters or Officers of our Company
Except as stated otherwise in this Draft Red Herring Prospectus, no amount or benefit
has been paid or given within the two preceding years or is intended to be paid or given
to any of our promoter or officers of except the normal remuneration for services
rendered as directors, officers or employees.
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MAIN PROVISIONS OF ARTICLES OF ASSOCIATION OF MARUTI UDYOG LIMITED
Pursuant to Schedule II of the Companies Act and the SEBI Guidelines, the main
provisions of the Articles of Association of Maruti solutions relating to voting rights,
dividend, lien, forfeiture, restrictions on transfer and transmission of equity
shares/debentures and/or on their consolidation /splitting are detailed below:
Main Provisions of the Articles of Association of Maruti Udyog Limited
5. Power of Company to purchase its own Shares: Subject to the provisions of
Section 77A and 77B of the Act, the Company may purchase its own Shares (hereinafter
referred to as “buy back”) out of :(i) Its free reserves; or
(ii) the Share premium account; or
(iii) the proceeds of any Shares
Provided that no buy back of any kind of Shares shall be made out of the proceeds of an
earlier issue of the same kind of Shares.
6. Power to issue sweat equity Shares: The Company may issue equity Shares to
employees or directors at a discount subject to the conditions specified in Section 79A of
the Act.
10. Commission and brokerage: The Company may pay commissions and brokerage
subject to and in accordance with the provisions of the Act.
FORFEITURE AND LIEN
19.If call or installment not paid notice may be given: If any member fails to pay
any call or installment on or before the day appointed for the payment of the same, the
Board may at any time thereafter during such time as any part of the call or installment
remains unpaid serve a notice on such member requiring him to pay the same, together
with any interest that may have accrued and all expenses that may have been incurred
by the Company by reason of such non-payment.
20.Form of notice: The notice shall name a day (not being less than fourteen days from
the date of service of the notice) and a place or places on and at which such call or
installment and such interest and expenses as aforesaid are to be paid. The notice shall
also state that in the event of non-payment on or before the time so named, and at the
place appointed, the Share in respect of which such call was made or installment is
payable will be liable to be forfeited.
21.If notice not complied with Share may be forfeited: If the requirement of any
such notice as aforesaid be not complied with, any Share in respect of which such notice
has been given may, at any time thereafter, before payment of all calls or installments,
interest and expenses due in respect thereof, be forfeited by a resolution of the Board to
that effect. When any Share is forfeited an entry of the forfeiture with the date thereof
shall be made in the register of members.
22.Forfeited Share to become property of the Company: Any Share so forfeited
shall be deemed to be the property of the Company, and the Board may sell, re-allot or
otherwise dispose of the same in such manner as they think fit.
23.Power to annul forfeiture: The Board may, at any time, before any Share so
forfeited shall have been sold, re-allotted or otherwise disposed of, annul the forfeiture
thereof upon such conditions as they think fit.
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24.(i) Effect of forfeiture: A Person whose Shares have been forfeited shall cease to
be a member in respect of the forfeited Shares, but shall, notwithstanding the forfeiture,
remain liable to pay to the Company all money which, at the date of forfeiture, were
presently payable by him to the Company in respect of the Shares, together with interest
thereon from the date of forfeiture until payment at such rate as may be determined by
the Board from time to time and the Board may enforce payment thereof or any part
thereof, without any deduction or allowance for the value of the Shares at the time of
forfeiture, but shall not be under any obligation to do so.
(ii)The liability of such Person shall cease if and when the Company shall have received
payment in full of all such moneys in respect of the Shares.
25.Declaration of forfeiture:
(i) A duly verified
declaration in writing that the declarant is a Director, the
Manager or the Secretary of the Company and that a Share in the Company has been
duly forfeited on a date stated in the declaration, shall be conclusive evidence of the
facts therein stated as against all person claiming to be entitled to the Share.
(ii) The Company may receive the consideration, if any, given for the Share on any sale
or disposal thereof and may execute a transfer of the Share in favour of the Person to
whom the Share is sold or disposed of.
(iii) The transferee shall thereupon be registered as the holder of the Share.
(iv) The transferee shall not be bound to see to the application of the purchase money, if
any, nor shall his titled to the Share be affected by any irregularity or invalidity in the
proceedings in reference to the forfeiture, sale or disposal of the Share.
26. Forfeiture provisions to apply to non-payment in terms of issue: The provision
of these Articles as to forfeiture hereof shall apply in the case of non-payment of any
sum which, by the terms of issue of a Share, become payable at a fixed time, whether
on account of the nominal value of a Share or by way of premium, as if the same had
been payable by virtue of a call duly made and notified.
27. Company’s lien on Share / debenture: The Company shall have a first and
paramount lien on every Share / debenture (not being a fully paid Share / debenture) for
all moneys (whether presently payable or not) called or payable at a fixed time in
respect of that Share / debenture, and the Company shall also have lien on all Shares /
debentures (other than fully paid Shares/debentures) standing registered in the name of
a single person, for all money presently payable by him or his estate to the Company,
but the Board may at any time, declare any Share / debenture to be wholly or in part
exempt from the provisions of this Article. The Company’s lien if any, on a Share /
debenture extend to all dividends / bonuses payable thereon. Unless otherwise agreed,
the registration of a transfer of Shares / debentures shall operate as a waiver of the
Company’s lien, if any, on such Shares or debentures.
28. Enforcement of lien by Sale: The Company may sell, in such manner as the Board
think fit, any Share on which the Company has a lien, but no sale shall be made unless
some sum in respect of which the lien exists is presently payable, nor until the expiration
of fourteen days after a notice in writing stating and demanding payment of such part of
amount in respect of which the lien exists as is presently payable has been given to the
registered holder for the time being of the Share, or the person entitled by reason of his
death or insolvency to the Share.
29. Application of proceeds of sale: The proceeds of the sale shall be applied on
payment of such part of the amount in respect of which the lien exists as is presently
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payable, and the residue shall (subject to a like lien for sums not presently payable as
existed upon the Shares prior to the sale) be paid to the person entitled to the Shares on
the date of the sale. The purchaser shall be registered as the holder of the Shares and
he shall not be bound to see to the application of the purchase money, nor shall his title
to the Shares be affected by any irregularity or invalidity in the proceedings in reference
to the sale.
30.Board may issue new certificates: Where any Share under the
behalf herein contained is sold by the Board and the certificate in respect
been delivered up to the Company by the former holder of such Share,
issue a new certificate for such Share distinguishing it in such manner as
fit from the certificate not so delivered up.
powers in that
thereof has not
the Board may
they may think
TRANSFER OF SHARES
30A.Transfer of Shares by GoI : No Share held by or on behalf of GoI may be
transferred by or on behalf of GoI to or in favour of any party unless the written consent
of Suzuki has been obtained prior to the consummation of such transfer of Shares.
Provided that GoI shall be entitled to divest its Shares in the Indian market, subject to
the restriction that no Person shall hold, in the aggregate, more than 5 percent of the
total paid up Shares except that Indian public financial institutions, multilateral and
bilateral development financial institutions, scheduled commercial banks, mutual funds,
foreign institutional investors, foreign venture capital investors and venture capital funds
registered with Securities and Exchange Board of India may individually hold upto 10
percent Shares.
Provided further that GoI shall be entitled to divest its Shares in accordance with Article
5 and Article 6 of the Revised Joint Venture Agreement.
30B.Transfer of Shares by Suzuki: So long as GoI has the right to exercise its put
options under the Revised Joint Venture Agreement or until the termination of the
Revised Joint Venture Agreement, whichever is earlier, Suzuki shall not transfer any
Shares of the Company held by Suzuki as will reduce the Suzuki’s aggregate
shareholding in the Company (together with its subsidiary/ies or Suzuki Associate) to
less than 51 percent of the paid up Shares, without the prior written consent of GoI.
Notwithstanding the foregoing it is agreed and Suzuki undertakes that so long as GoI
has the right to exercise its put options under the Revised Joint Venture Agreement or
until termination of the Revised Joint Venture Agreement, whichever is earlier, Suzuki
shall hold, as registered and beneficial owner, not less than 26 percent of the paid up
Shares of the Company.
30C.Permissible Suzuki Transfers: Notwithstanding any provision contained in Article
30B:
Suzuki shall be entitled to transfer any Shares held by Suzuki to any subsidiary of Suzuki
or a Suzuki Associate, subject in each case to the condition that until the date on which
GoI ceases to hold at least 10 percent of the paid-up Shares, the Suzuki subsidiary or
Suzuki Associate acquiring the Shares shall have delivered to GoI a deed of adherence
(in the form provided in the Revised Joint Venture Agreement) undertaking to adhere to
the Revised Joint Venture Agreement and not to transfer any of the Shares being
acquired by it to any party (other than Suzuki or any subsidiary of Suzuki or a Suzuki
Associate) and further undertaking that prior to ceasing to be a Suzuki subsidiary or
Suzuki Associate, to transfer back the Shares to Suzuki or Suzuki subsidiary or Suzuki
Associate.
Suzuki shall be entitled to transfer all (but not less than all) of the Shares of the
Company held by it or its subsidiary or subsidiaries or Suzuki Associate to any successor
by amalgamation, merger or consolidation, or to, any person, firm, or corporation to
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which, at the same time substantially all of the property, business and assets, of Suzuki
are sold (“Corporate Successor”) subject to applicable Indian laws and regulations, in
which event Suzuki shall procure the Corporate Successor to become bound hereby and
to succeed to all of the rights and obligations of Suzuki under the Revised Joint Venture
Agreement.
30D.Tag Along Rights: If within a period commencing from the Closing Date (as
defined in the Revised Joint Venture Agreement) until December 31, 2003 or listing of
the Shares, whichever is earlier, Suzuki or its subsidiaries or a Suzuki Associate
(collectively referred to as “Suzuki Seller”) desires to sell any of its Shares in excess of
51 percent of the total paid up Shares of the Company to a third party, Suzuki shall
provide written notice (“Sale Notice”) to GoI indicating the name of the proposed buyer,
the number of Shares and the price per Share at which the Suzuki Seller proposes to
sell its Shares to the prospective buyer. Within thirty (30) days of receipt of the Sale
Notice, GoI shall be entitled to send a tag along notice to Suzuki (“Tag along Notice”)
offering to sell to Suzuki Seller’s prospective buyer, at the same price and on the same
terms as offered to Suzuki Seller by the said buyer, a percentage of the total number of
Shares then owned by GoI in the Company as on the date of the Sale Notice which is
equal to the percentage of the total number of Shares owned by Suzuki i.e. the Suzuki
Sellers collectively (as on the date of the Sale Notice) which are proposed to be sold by
Suzuki Seller to the prospective buyer (“Tag Along Shares”).
If GoI opts to send a Tag Along Notice, Suzuki shall ensure that the proposed buyer also
acquires all of the Tag Along Shares offered by GoI for the same consideration and on
the same terms and conditions offered to Suzuki Seller. If the proposed buyer for any
reason does not acquire the Shares held by Suzuki Seller within a period of thirty (30)
days of the Sale Notice, GoI’s Tag Along Notice (if sent) and all rights thereunder shall
automatically lapse and shall be inoperative. If however the offer is renewed by the
same or another prospective buyer, the Tag Along Rights of GoI shall again apply.
Provided however that GoI’s Tag Along Rights under this Article shall not extend beyond
the period specified in the first paragraph of this Article 30D and shall not apply to (i)
transfer of Shares permitted under Article 30C; and (ii) any Shares which are subject to
a lock-in after the date of listing of the Company’s Shares.”
30E.GoI’s Put Options: GoI shall have the following put options:
In case GoI does not undertake a price discovery through book building and/or public
offer and hence does not divest any Shares in the Indian market prior to March 31, 2003
or within the extended period expiring on December 31, 2003, GoI shall be entitled to
issue a written notice (“Put Option Notice”) to Suzuki requiring Suzuki to purchase
from GoI all GoI’s Shares and Suzuki shall be obliged to buy all the Shares from GoI
within sixty (60) days from the date of receipt of the Put Option Notice (subject to
receipt of all relevant regulatory approvals) and in any event not later than 30 days from
the date on which all relevant regulatory approvals are received, at a price per Share
which is higher of: (i) the book value of the Shares as on March 31, 2001 (i.e. Rs.
2000/- per Share, being rounded off) or (ii) the book value of the Shares as on the last
audited balance sheet of the Company (as determined by the auditors of the Company)
preceding the date of the Put Option Notice referred to in this Article 30E (a). The Put
Option under Article 30E (a) shall commence from March 31, 2003 and shall expire on
April 30, 2004;
Suzuki agrees that in the event the book building exercise is undertaken and the offer
process initiated, Suzuki shall bridge any shortfall between the Shares offered for sale
and the bids received. *For this purpose it is agreed that where the floor price, in the
public offer, is Rs. 2300 and there is a shortfall in the demand through the bids received,
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Suzuki shall, and Suzuki undertakes to, as of no later than the date and time of closure
of the issue, submit a bid to the extent of the said shortfall at the said price of Rs. 2300
per Share, in accordance with all relevant approvals.
In respect of the Residual Shares (as defined in the Revised Joint Venture Agreement),
GoI shall have the right to exercise its put option under Article 30E(a);
In case GoI divests Shares in the Indian market which is equal to or more than the
Minimum Divestment Shares at a price equal to or higher *than Rs. 2300 per Share, GoI
shall be entitled to issue a written notice (“Put Option Notice”) to Suzuki requiring
Suzuki to purchase from GoI the Residual Shares (as defined in the Revised Joint
Venture Agreement) and Suzuki shall be obliged to buy the said Residual Shares from
GoI within sixty (60) days from the date of receipt of the Put Option Notice (subject to
receipt of all applicable regulatory approvals) and in any event no later than 30 days
from the date on which all applicable regulatory approvals are received, at a price per
Share which is equal to the average of the daily closing prices of the Shares of the
Company as quoted on the National Stock Exchange of India in the ninety (90) day
period preceding the date of the Put Option Notice referred to in this Article 30E (c). The
Put Option under Article 30E (c) shall commence from four (4) months after the date of
listing of the Company’s Shares and shall expire twenty four (24) month after the date of
listing.
Provided that in case of (c) above, the average price referred to therein shall be
discounted as provided in Proviso (i) and (ii) to Article 6.1(c) of the Revised Joint
Venture Agreement:
After the expiry of the aforesaid put options, if for any reason GoI continues to hold
Shares, GoI shall be free to dispose of the Shares in accordance with Article 3 of the
Revised Joint Venture Agreement.
TRANSFER AND TRANSMISSION OF SHARES
31.Directors may refuse to transfer Shares: Subject to the provisions of Section 111
of the Act and Section 22A of the Securities Contracts (Regulation) Act, 1956, the
Directors may, at their own absolute and uncontrolled discretion and by giving reasons,
decline to register or acknowledge any transfer of Shares which is not in accordance with
these Articles, whether fully paid or not and the right of refusal, shall not be affected by
the circumstances that the proposed transferee is already a member of the Company but
in such cases, the Directors shall within two months from the date on which the
instrument of transfer was lodged with the Company, send to the transferee and
transferor notice of the refusal to register such transfer provided that registration of
transfer shall not be refused on the ground of the transferor being either alone or jointly
within any other Person or Persons indebted to the Company on any account whatsoever
except when the Company has a lien on the Shares. Transfer of Shares / debentures in
whatever lot shall not be refused.
32.Company not bound to recognize any interest in Shares other than that of
the registered holders: Subject to the provision of the Act and save as herein
otherwise provided, the Company shall be entitled to treat the person whose
name
appears on the register of members as the holder of any Share as the absolute owner
thereof and accordingly shall not (except as ordered by a Court of competent jurisdiction
or as by law required) be bound to recognize any benami trust or equity or equitable,
contingent or other claim to or interest in such Share on the part of any person whether
or not it shall have express or implied notice thereof.
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33.Execution of transfer: The instrument of transfer of any Share in the Company
shall be executed both by the transferor and the transferee and the transferor shall be
deemed to remain holder of the Share until the name of the transferee is entered in the
register of members in respect thereof.
34.Instrument of transfer: Subject to the provisions of Section 108, the Shares of the
Company shall be transferred in Form No. 7B of the Companies (Central Government’s)
General Rules and Forms 1956 or any amendment thereof.
35.No fee on transfer or transmission: No fee shall be charged for registration of
transfer, transmission, Probate, Succession Certificate and Letters of administration,
Certificate of Death or Marriage, Power of Attorney or similar other document.
36.Application by transferor:
Application for the registration of the transfer of a Share may be made either by the
transferor or the transferee, provided that, where such application is made by the
transferor no registration shall, in the case of a partly paid Share, be effected unless the
Company gives notice of the application to the transferee in the manner prescribed by
Section 110 of the Act, and subject to the provisions of these Articles the Company shall,
unless objection is made by the transferee within two weeks from the date of receipt of
the notice, enter in the register the name of the transferee in the same manner and
subject to the same conditions as if the application for registration of the transfer was
made by the transferee.
DEMATERIALISATION OF SECURITIES
37. Notwithstanding anything contained in these Articles, the Company shall be entitled
to dematerialise its Shares and other securities pursuant to the Depositories Act, 1996
and to offer its Shares and other securities for issue in dematerialised form. The
Company shall further be entitled to maintain a Register of Members with the details of
members holding Shares both in material and dematerialised form in any media as
permitted by law including any form of electronic media. The provisions relating to joint
holders of Shares, calls, lien on Shares, transfer and transmission of Shares shall be
applicable to Shares held in a depository so far as they apply to Shares held in physical
form subject to the provisions of the Depositories Act, 1996.
38.Transfer to be left at office and evidence of title to be given: Every instrument
of transfer shall be left at the office for registration, accompanied by the certificate of the
Shares to be transferred, and such evidence as the Company may require to prove the
title of the transferor or his right to transfer the Shares. all instruments of transfer shall
be retained by the Company, but any instrument of transfer which the Company may
decline to register shall be returned to the person depositing the same.
39.Right of refusal to register a Person entitled by transmission: Subject to the
provisions of Section 111 of the Act, the Company shall have the same right to refuse
to register a Person entitled by transmission to any Shares or his nominee, as if he were
the transferee named in an ordinary transfer presented for registration.
40.Transmission of registered Shares: The executor or administrator of a
deceased member (not being one of several joint holders) shall be the only Person
recognized by the Company as having any title to the Share registered in the name of
such member, and, in case of the death of any one or more of the joint holders of any
registered Share, the survivor shall be the only Person recognized by the Company as
having any title to or interest in such Share, but nothing herein contained shall be taken
to release the estate of a deceased joint holder from any liability on the Share held by
him jointly with any other person. Before recognizing any executor or administrator the
Directors may require him to obtain a grant of Probate or Letters of Administration or
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other legal representation, as the case may be from a competent Court in India and
having effect in Delhi.
Provided nevertheless that in any case where the Board in their absolute discretion think
fit it shall be lawful for the Board to dispense with the production of Probate or Letters of
Administration or such other legal representation upon such terms as to indemnity or
otherwise as the Board, in their absolute discretion, may consider adequate.
41.As to transfer of Shares of insane, minor, deceased or bankrupt members.
(Transmission Article): Any committee or guardian of a lunatic or minor member or
any person becoming entitled to or to transfer a Share in consequence of the death or
bankruptcy or insolvency of any member upon producing such evidence that he
sustain the character in respect of which he proposes to act under this Article or of his
title as the Board think sufficient, may, with the consent of the Board (which the Board
shall not be bound to give) be registered as member in respect of such Share, or may,
subject to the regulations as to transfer hereinbefore contained, transfer such Share.
This Article is hereinafter refereed to as the “Transmission Article”.
42.Election under the Transmission Article:
(i) If the person so becoming entitled under the Transmission Article shall elect to be
registered as holder of the Share himself, he shall deliver or send to the Company a
notice in writing signed by him stating that he so elects.
(ii) If the person aforesaid shall elect to transfer the Share, he shall testify his election
by executing an instrument of transfer of the Share.
(iii)All the limitations, restriction and provisions of these Articles relating to the right to
transfer and the registration of instruments of transfer of a Share shall be applicable to
any such notice or transfer as aforesaid as if the death, lunacy, bankruptcy or insolvency
of the member had not occurred and the notice of transfer were a transfer signed by that
member.
43.Rights of Persons entitled to Shares under the Transmission Article: A Person
so becoming entitled under the Transmission Article to a Share by reason of the death,
lunacy, bankruptcy or insolvency of the holder shall, subject to the provisions of Article
82 and Section 206 of the Act, be entitled to the same dividends and other advantages
as he would be entitled to if he were the registered holder of the Share.
Provided that the Board may at any time give notice requiring any such person to elect
either to be registered himself or to transfer the Share, and if the notice is not complied
with within ninety days, the Board may thereafter withhold payment of all dividends,
bonus or other moneys payable in respect of the Share, until the requirements of the
notice have been complied with.
INCREASE, REDUCTION AND ALTERATION OF CAPITAL
44. Power to increase capital: The Board may with the sanction of the Company in
general meeting increase the Share capital by such sum, to be divided into Shares of
such amount, as the resolution shall prescribe.
45.On what condition new Shares may be issued: New Shares shall be issued upon
such terms and conditions and with such rights and privileges annexed thereto as the
general meeting resolving upon the creation thereof shall direct and if no direction be
given as the Board shall determine.
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46.How far new Shares to rank with existing Shares: Except so far as otherwise
provided by the conditions of issue or by these presents, any capital raised by the
creation of new Shares shall be considered part of then existing capital of the Company
and shall be subject to the provisions herein contained with reference to the payment of
dividends, calls and installments, transfer and transmission, forfeiture, lien, surrender
and otherwise.
47.Reduction of capital etc.: Subject to the provisions of Section 100 to 105 of the
Act, the Company may, from time to time by special resolution reduce its capital by
paying off capital or canceling capital which has been lost or is un-represented by
available assets or is superfluous or by reducing the liability on the Shares or otherwise
as may seem expedient, and capital may be paid off upon the footing that it may be
called up again or otherwise and the Directors may subject to the provisions of the Act,
accept surrender of Shares.
48.Sub-division, consolidation and cancellation of Shares.The Company may, by
ordinary resolution:consolidate and divide all or any of its Share capital into Shares of larger amount
than its existing Shares;
•
sub-divide its existing Shares or any of them into Shares of smaller amount than
is fixed by the memorandum, subject, nevertheless, to the provisions of clause
(d) of sub-section (1) of section 94 of the Act;
•
cancel any Shares which, at the date of the passing of the resolution in that
behalf, have not been taken or agreed to be taken by any Person, and diminish
the amount of its Share capital by the amount of the Shares so cancelled.
MODIFICATION OF RIGHTS
49.Power to modify rights: If at any time, the capital of the Company, by reason of
the issue of preference Shares or otherwise, is divided into different classes of Shares,
all or any of the rights and privileges attached to each class may subject to the
provisions of Sections 106 and 107 of the Act be modified, abrogated or dealt with by
agreement between the Company and any person purporting to contract on behalf of
that class, provided such agreement is (a) ratified in writing by the holders of at least
three-fourths of the nominal value of the issued Shares of that class or (b) confirmed by
special resolution passed at a separate general meeting of the holders of Shares of that
class and all the provision hereinafter contained as to general meeting shall, mutatis
mutandis apply to every such meeting, except that the quorum thereof shall be
members holding or representing by proxy one-fifty of the nominal amount of the issued
Shares of that class.
BORROWING POWERS
50.Power to borrow: Subject to the provisions of the Act, the Board may by means of
the resolution passed at a meeting of the Board from time to time, borrow and/or secure
the payment of any sums of money for the purposes of the Company.
51.Conditions on which money may be borrowed: The Board may raise or secure
the repayment of such sum or sums in such manner and upon such terms and conditions
in all respects as they think fit and, in particular, by the issue of bonds, perpetual or
redeemable, debentures or debenture stock, or any mortgage or other security on the
undertaking of the whole or any part of the property of the Company (both present and
future), including its uncalled capital for the time being.
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52.Issue at discount etc. or with special privileges: Subject to Section 117 of the
Act, any debentures, debenture stock, bonds or other securities may be issued at a
discount, premium or otherwise and with any special privileges, as to redemption,
surrender, drawings, allotment of Shares, appointment of Directors and otherwise.
Debentures, debenture stock, bonds and other securities may be made assignable free
from any equities between the Company and the Person to whom the same may be
issued.
53.Instrument of Transfer: Save as provided in Section 108 of the Act, no transfer of
debentures or debenture stock shall be registered unless a proper instrument of transfer
duly stamped and executed by the transferor and transferee has been delivered to the
Company together with the certificate or certificates of the debentures or debenture
stock as the case may be.
54.Dematerialisation of Debentures: Notwithstanding anything contained in Article
53 of the Articles of Association, the Company may issue debentures in dematerialised
form and debenture holders shall also have the option to hold debentures in
dematerialised form and re-materialise them as and when he wishes to do so in
accordance with the provision of Depositories Act, 1996 and other applicable laws as
amended from time to time.
55.Term of Issue of Debenture: Any debentures, debenture-stock or other securities
may be issued at a discount, premium or otherwise and may be issued on condition that
they shall be convertible into Shares of any denomination and with any privileges and
conditions as to redemption, surrender, drawing, allotment of Shares, attending (but not
voting) at the General Meeting, appointment of Directors and otherwise Debentures with
the right to conversion into or allotment of Shares shall be issued only with the consent
of the Company in the General Meeting by a Special Resolution.
56.Notice of refusal to register transfer: If the Board refuses to register the transfer
of any Debentures or debenture stock the Company shall, within two months from the
date on which the instrument of transfer was lodged with the Company, send to the
transferee and to the transferor notice of the refusal.
57.Persons not to have priority over any prior charge: Whenever any uncalled
capital of the Company is charged all Persons taking any subsequent charge thereon
shall take the same subject to such prior charge and shall not be entitled by notice to the
shareholders or otherwise, to obtain priority over such prior charge.
58.Indemnity may be given: If the Directors or any of them or any other person shall
become personally liable for the payment of any sum primarily due from the company,
the Directors may execute or cause to be executed any mortgage, charge or security
over or affecting the whole or any part of the assets of the Company by way of
indemnity to secure the Directors or Persons so becoming liable as aforesaid from any
loss in respect of such liability.
GENERAL MEETINGS
59.When General Meeting to be held: In addition to any other meeting, general
meetings of the Company shall be held within such intervals as are specified in Section
166(1) of the Act and subject to the provisions of Section 166(2) of the Act, at such
times and places as may be determined by the Board. Such general meetings shall be
called “Annual General Meetings” and shall be specified as such in the notice convening
the meeting. Any other meeting of the Company shall be called an “Extra-ordinary
General Meeting”.
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60.When other General Meeting to be held:
(i)The Board shall on requisition of the members holding not less than one-tenth of the
paid-up capital of the Company, call an extra-ordinary general meeting.
(ii)The Board may, whenever it thinks fit, call an extraordinary general meeting.
61.Circulation of members’ resolution: The Company shall comply with the
provisions of Section 188 of the Act as to giving notice of resolution and circulating
statements on the requisition of members.
62.Notice of meeting: Save as provided in sub-section (2) of Section 171 of the Act,
not less than twenty-one days’ notice shall be given of every general meeting of the
Company. Every notice of a meeting shall specify the place and the day and hour of the
meeting and shall contain a statement of the business to be transacted thereat. Where
any such business consists of “special business” as hereinafter defined there shall be
annexed to the notice a statement complying with Section 173(2) and (3) of the Act.
Notice of every meeting of the Company shall be given to every member of the
Company, to the Auditors of the Company and to any Person entitled to a Share in
consequence of the death or insolvency of a member in any manner hereinafter
authorised for the giving of notice to such Persons.
Provided that where the notice of a general meeting is given by advertising the same in
a newspaper circulating in the neighborhood of the office under sub-section (3) of
Section 53 of the Act, the statement of material facts referred to in Section 173 (2) of
the Act need not be annexed to the notice as required by that Section but it shall be
specified in the advertisement that the statement has been forwarded to the members of
the Company.
The accidental omission to give any such notice to or its non-receipt by any member or
other Persons to whom it should be given shall not invalidate the proceedings of the
meeting.
63.Short notice by consent: With the consent of all members entitled to receive notice
of a meeting or to attend and vote at any such meeting, a meeting may be convened by
shorter notice than twenty one days.
PROCEEDINGS AT GENERAL MEETINGS
64.Business of meetings: The business of an annual general meeting shall be to
receive and consider the Profit and Loss Account, the Balance Sheet and the Reports of
the Directors and of the Auditors, to declare dividends and to transact any other
business which under these Articles ought to be transacted at an annual general
meeting. All other business transacted at an annual general meeting and all business
transacted at an extraordinary general meeting shall be deemed special.
65.Quorum: Five members present in Person shall be a quorum for a general meeting of
the Company
66.Right of President to appoint any person as his representative:
(i)The President, so long as he is a shareholder of the Company, may, from time to time
appoint one or more person(s) (who need not be a member or members of the
Company) to represent him at all or any meeting(s) of the Company.
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(ii)Any one of the Persons appointed under sub-clause (i) of this Article shall be deemed
to be a member of the Company and shall be entitled to vote and be present in person
and exercise the same rights and powers (including the right to vote by proxy) as the
President could exercise as a member of the Company.
(iii)The President may, from time to time, cancel any appointment made under subclause (i) of this Article and make fresh appointments.
(iv)The production at the meeting of an order of the President evidenced as provided in
the Constitution of India, shall be accepted by the Company as sufficient evidence of any
such appointment or cancellation of aforesaid.
67.Resolution to be passed by Company in general meeting: Any act or resolution
which, under the provisions of these Articles or of the Act, is permitted or required to be
done or passed by the Company in general meeting shall be sufficiently so done or
passed if effected by an ordinary resolution as defined in Section 189(1) of the Act
unless otherwise required in accordance with these Articles, [including Article 66A] or
either the Act or these Articles specifically require such act to be done or resolution
passed by a special resolution as defined in Section 189(2) of the Act.
68.Chairman of general meeting: The Chairman of the Board for the time being shall
be entitled to take the Chair at every general meeting. If there be no such Chairman, or
if at any meeting he shall not be present within fifteen minutes after the time appointed
for holding such meeting or is unwilling to act, the members present shall choose
another Director as chairman, and if no director be present, or if all the Directors present
decline to take the chair, then the members present shall on a show of hands or on a
poll if properly demanded, elect one of their number to be the Chairman.
69.When if quorum not present meeting to be dissolved and when to be
adjourned:
If
within half-an-hour from the time appointed for the meeting a quorum be not present,
the meeting, if convened on the requisition of shareholders, shall be dissolved, but in
any other case it shall stand adjourned to the same day in the next week, at the same
time and place, or to such other day and at such time and place as the Board may by
notice to members appoint. If at such adjourned meeting a quorum be not present,
those members who are present shall be a quorum and may transact the business for
which the meeting was called.
70.How question to be decided at meeting: Every question submitted to a meeting
shall be decided in the first instance by a show of hands, and in the case of an equality
of votes, both on show of hands and on a poll, the Chairman of the meeting shall have a
casting vote in addition to the vote or votes to which he may be entitled as a member.
71.Passing of resolutions by postal ballot: Subject to the provisions of Section 192A
of the Act, the Company may pass a resolution by means of a postal ballot, instead of
transacting the business in general meeting.
72.What to be evidence of the Passing of a Resolution where poll not
demanded.
At any
general meeting a resolution put to vote of the meeting shall be decided on a show of
hands, unless a poll is, (before or on the declaration of the result of the show of hands)
demanded in accordance with provision of the Act and unless a poll is so demanded, a
declaration by Chairman that a resolution has on a show of hands been carried
unanimously or by a particular majority or lost, and an entry to that effect in the book of
proceedings of the Company, shall be conclusive evidence of the fact, without proof of
the number or proportion of the votes recorded in favour of or against that resolution.
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73.In what cases poll taken without adjournment: Subject to the provisions of
Section 180 of the Act, any poll duly demanded on the election of a Chairman of a
meeting or on any question of adjournment shall be taken at the meeting and without
adjournment.
74.Consideration of poll when demanded: If a poll is duly demanded, it shall be
taken in such manner and at such time and place as the Chairman of the meeting
directs, and either at once, or after an interval or adjournment or otherwise, and the
result of the poll shall be deemed to be the decision of the meeting on the resolution on
which the poll was taken. The demand of a poll may be withdrawn at any time by the
person or Persons who made the demand.
75.Business may proceed not withstanding demand of poll: The demand of a poll
shall not prevent the continuance of a meeting for transaction of any business other than
the question on which a poll has been demanded.
76.Chairman’s decision conclusive: The Chairman of any meeting shall be the
sole judge of the validity of every vote tendered at such meeting. The Chairman present
at the taking of a poll shall be the sole judge of the validity of every vote tendered by
such poll.
On a poll a member entitled to more than one vote, or his proxy or other person entitled
to vote for him, as the case may be, need no, if he votes, use all his votes or cast in the
same way all the votes he uses.
77.Power to adjourn general meeting:The Chairman of a general meeting may
with the consent of the meeting adjourn the same from time to time and from place to
place, but no business shall be transacted at any adjourned meeting other than the
business left unfinished at the meeting from which the adjournment took place.
VOTES OF MEMBERS
78.Votes of members. Upon a show of hands every member present in person or by
proxy or by duly authorised representative shall have one vote, and upon a poll, every
member present in person or by proxy or by duly authorised representative, shall have
one vote for every Share held by him.
79.Procedure where a Company is a member of the Company: Any member which
is a body corporate may attend a general meeting
by a
representative
duly
authorised by a resolution of the board of such body corporate in accordance with the
provisions of Section 187 of the Act and vote on a show of hands and by proxy. The
production at the meeting of a copy of such resolution duly authenticated by such body
corporate shall at the meeting be accepted by the Company as sufficient evidence of the
validity of his appointment.
80.Votes in respect of deceased, insane and insolvent members: Any person
entitled under the Transmission Article to transfer any Shares may vote at any
general meeting in respect thereof in the same manner as if he were the registered
holder of such Shares provided that at least seventy two hours before the time of
holding the meeting or adjourned meeting, as the case may be, at which he proposes to
vote he shall satisfy the Board of his right to transfer such Shares unless the Board shall
have previously admitted his right to such Shares or his right to vote at such meeting in
respect thereof.
81.Votes in respect of Shares of members of unsound mind: A member of unsound
mind, or in respect of whom an order has been made by any Court having
jurisdiction in lunacy, may vote whether on a show of hands or on poll by his committee
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or other legal guardian and any such committee or guardian may on a poll, vote by
proxy.
82.Joint holders: Where there are joint registered holders of any Share any one of such
Person may vote at any meeting either personally or by proxy in respect of such Shares
as if he were solely entitled thereto; and if more than one such joint holders be present
at any meeting either personally or by proxy, that one of the said Persons so present
whose name stands first on the Register in respect of such Shares shall alone be entitled
to vote in respect thereof. Several executors or administrators of a deceased member in
whose name any Share is registered shall for the purposes of this Article be deemed
joint holders thereof.
83.Proxies permitted: On a poll votes may be given either personally or by proxy, or in
the case of body corporate by a representative duly authorised as aforesaid.
84.Instrument appointing proxy to be in writing: A member entitled to attend
and vote at a meeting may appoint another person (whether a member or not) as his
proxy to attend a meeting and vote on a show of hands or on a poll. No member shall
appoint more than one proxy to attend on the same occasion. A proxy shall not be
entitled to speak at a meeting. The instrument appointing a proxy shall be in writing and
be signed by the appointer or his attorney duly authorised in writing or if the appointer is
a body corporate, be under its seal or be signed by an officer or an attorney duly
authorised by it.
85.Instrument appointing a proxy to be deposited at the office: The instrument
appointing a proxy and the power of attorney or other authority ( if any) under which
it is signed, or a notarially certified copy of that power of authority, shall be deposited at
The Office of the Company not less than forty-eight hours before the time for holding the
meeting of adjourned meeting at which the person named in the instrument purports to
vote in respect thereof and in default the instrument of proxy shall not be treated as
valid.
86.When vote by proxy valid through authority revoked: A vote given in
accordance with the terms of an instrument appointing a proxy shall be valid
notwithstanding the previous death or insanity of the principal, or revocation of the
instrument, or transfer of the Share in respect of which the vote is give, provided no
intimation in writing of the death, insanity, revocation or transfer of the Share shall have
been received by the Company at the office before the vote is given.
Provided nevertheless that the Chairman of any meeting shall be entitled to require such
evidence as he may in his discretion think fit of the due execution of an instrument of
proxy and that the same has not been revoked.
87.Form of instrument appointing proxy: Every instrument appointing a proxy may
be as nearly as circumstance will admit in the following form or in any other form as the
Board shall approve:
MARUTI UDYOG LIMITED
I/We ……….……….……….……….………. being a member of Maruti Udyog Limited hereby
appoint of (or failing him ……….………. of ……….………. or failing him ……….………. of
……….……….) as my/our proxy to attend and vote for me/us, and on my/our behalf at the
Annual or Extraordinary (as the case may be) General Meeting of the Company to be
held on the ……. day of ……….……….
Signed by the said ……….……….……….……….
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88.Restriction on voting: No member shall be entitled to be present, or to vote on any
question either personally or by proxy or as proxy for another member, at any general
meeting or upon, a poll, or be reckoned in quorum whilst any call or other sum shall be
due and payable to the Company in respect of any of the Shares of such member.
89.Admission or rejection of votes: Any
objection
as to the
admission or
rejection of a vote, either on a show of hands, or on a poll, may in due time, shall be
referred to the Chairman who shall forthwith determine the same, and such
determination made in good faith shall be final and conclusive.
90.Time for objection to vote: No objection shall be made to the validity of any vote
except at the meeting or poll at which such vote shall be tendered and every vote
whether given personally or by proxy or as proxy of another member, not disallowed at
such meeting or poll, shall be deemed valid for all purposes of such meeting or poll
whatsoever.
BOARD OF DIRECTORS
91.Number of Directors:
(1)The Maximum number of Directors on the Board of the Company shall be not more
than twelve. The Directors are not required to hold any qualification Shares.
Appointment of Directors:
(2)So long as Suzuki (together with its subsidiary/ies or Suzuki Associate) holds more
than 50 percent of the paid-up Shares, Suzuki shall be entitled to nominate for
appointment a majority of the Directors on the Board of the Company.
So long as GoI’s shareholding in the Company is more than 25 percent of the paid-up
Shares, GoI shall, until December 31, 2003, have the right to nominate for appointment
two (2) part-time, retiring Directors on the Board of the Company.
After GoI’s right to nominate two Directors on the Board ceases as provided above, but
GoI continues to hold at least 10 percent of the total paid up Shares or until the end of
the period of 12 months after the expiry of the last of the put options referred to in the
Revised Joint Venture Agreement (whichever is earlier), GoI shall continue to have the
right to nominate one (1) Director on the Board who shall be a part-time, retiring
Director.
The independent Directors shall be appointed by the Board of the Company.
Suzuki and GoI, as the case may be, shall be entitled to remove the Directors nominated
by each of them and appoint any other person(s) in his/their place.
(3)Suzuki shall have the right to nominate, from amongst its nominee Directors, for
appointment, the Chairman and also the Managing Director of the Company. The
Chairman shall chair the general meetings of the Company and also the meetings of the
Board of Directors of the Company.
(4)The Managing Director, who shall be a non-retiring Director, shall be the chief
executive officer of the Company, who shall be vested with substantial powers of
operational management which shall be exercised under the overall superintendence,
direction and control of the Board of Directors and subject to the powers exercisable by
the Board of Directors.
(5) Not less than two-thirds of the total number of Directors shall be elected by the
Company in general meeting and shall be liable to retire by rotation in accordance with
the Act. A retiring director may be re-elected. Any casual vacancy occurring in the
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office of a director may be filled by the Board of Directors. A person who is not a retiring
director shall be eligible for appointment in accordance with Section 257 of the Act.
(6) All Directors shall be paid such salary, fees and allowances as the Company may
from time to time determine.
92.Additional Director: The Board shall have power at any time, and from time to
time, to appoint a person as an additional director, provided the number of the directors
and additional directors together shall not at any time exceed the maximum strength
fixed for the Board by the articles.
93.Alternate Director: The Board may appoint an Alternate Director to act for a nonresident Director or for a Director (hereinafter called “the Original Director”) during his
absence for a period of three months from the State in which the meetings of the Board
are ordinarily held. An Alternate Director appointed under this Article shall be a person
recommended for such appointment by the Original Director. An Alternate Director
appointed shall not hold office for a period longer than the permissible to the Original
Director in whose place he has been appointed and shall vacate office if and when the
Original Director returns to the State. If the terms of office of the Original Director ends
before he so returns to that State, any provisions in the Act or retiring Directors in
default of another appointment shall apply to the Original Director and not to the
Alternate Director.
94.Appointment of Director as a Director of the Company in which the Company
is interested: A Director of the Company may become a Director of any Company
promoted by this Company or in which it may
be
interested as
a
Member,
Shareholder or otherwise.
95.Disqualification of Director:
(1)The office of a Director shall ipso facto become vacant if:he is found to be of unsound mind by a Court of Competent jurisdiction; or
•
he applies to be adjudicated an insolvent; or
•
he is adjudged an insolvent; or
•
he is convicted by a Court of any offence involving moral turpitude and is
sentenced in respect thereof to imprisonment for not less than six months; or
•
he fails to pay any call in respect of Shares of Company held by him, whether
alone or jointly with others, within six months from the last date fixed for the
payment of the call unless the Central Government has by notification in the
Official gazette, removed the disqualification incurred by such failure; or
•
he absents himself from three consecutive meetings of the board or from all
meetings of the Board for the continuous period of three months, which ever is
longer, without obtaining leave of absence from the Board; or
•
he (whether by himself or by any person for his benefit or on his account), or any
firm in which he is a partner, or any private company of which he is a Director,
accepts a loan, or any guarantee or security for a loan, from the Company in
contravention of Section 295 of the Act; or
•
he becomes disqualified by an order of the Court under Section 203 of the Act; or
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•
he acts in contravention of Section 299 of the Act; or
•
he is removed from office in pursuance of Section 284 of the Act; or
•
having been appointed a Director by virtue of his holding any office or other
employment in the Company, he ceases to hold such office or other employment
in the Company; or
•
by notice in writing to the Company he resigns his office; or
•
any office or place of profit under the Company or under any subsidiary of the
Company is held in contravention of Section 314 of the Act and by operation of
that section he is deemed to vacate office.
(2)Notwithstanding any matter or thing in sub-clause (e), (f) and (k) of Clause (1), the
disqualification referred to in those sub-clauses shall not take effect:
•
for thirty days from the date of adjudication, sentence or order; or
•
where any appeal or petition is preferred within the thirty days aforesaid against
the adjudication, sentence or conviction resulting in the sentence or order until
the expiry of seven days from the date on which such appeal or petition is
disposed of; or
•
where within the seven days aforesaid any further appeal or petition is preferred
in respect of the adjudication, sentence, conviction or order, and the appeal or
petition, if allowed, would result in the removal of the disqualification, until such
further appeal or petition is disposed of.
PROCEEDINGS OF THE BOARD
96.Meetings of Board: The Board shall meet at least once in every three months for
the dispatch of business and may adjourn and otherwise regulate its meeting and
proceedings. Notice in writing of every meeting of the Board shall be given to every
Director for the time being in India, and at his usual address in India to every other
Director.
97.Director may summon meeting: A Director may, at any time, and the Secretary
shall, upon the request of the Director made at any time, convene a meeting of the
Board.
98.Chairman: If the Chairman is not present within five minutes after the time
appointed for holding the meeting of the Board, the Directors present shall choose some
one of their number to be the chairman of such meeting.
99.Quorum: The quorum for a meeting of the Board shall be two or 1/3rd of their
strength whichever is higher, subject to the provisions of Section 287 of the Act. The
presence of a GoI nominated director is not necessary to constitute a quorum for a
meeting of the Board except that until December 31, 2003 or so long as GoI holds more
than 25 percent Shares of the Company (whichever occurs first), The presence of one
director nominated by GoI shall be necessary to constitute a quorum for a meeting of the
Board in which a resolution is proposed to be passed in respect of any matter specified in
Article 108.
Provided however that if within half an hour from the time appointed for holding the
Board meeting, a quorum as aforesaid is not present, the meeting shall stand adjourned
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to same day in next week at the same time and place. If at the adjourned meeting also,
a quorum is not present within half an hour from the time appointed for holding the
meeting, the directors present at that meeting shall constitute a quorum and the Board
shall be entitled to take a decision on any of the aforesaid matters notwithstanding the
absence of a nominee director of GoI.
100.Power of Quorum: A meeting of the board at which a quorum is present shall be
competent to exercise all or any of the authorities, powers and discretion by or under
these Articles or the Act for the time being vested in or exercisable by the Board
generally.
101.How question to be decided: Unless otherwise required by the Act or under
Article 108, all decisions at the meeting of the Board of Directors of the Company shall
be made by a majority of the Directors present and voting. In case of an equality of
votes, the Chairman shall have a casting vote.
102.Powers to appoint Committee and to delegate: The Board may subject to the
provision of the Act, from time to time and at any time, delegate any of its powers to a
Committee consisting of such Director or Directors as they think fit, and may, from time
to time, revoke such delegation. Any Committee so formed shall in the exercise of the
powers so delegated, conform to any regulations that may from time to time be imposed
upon it by the Board.
103.Proceedings of Committee.The meeting and proceedings of any such Committee
shall be governed by the provisions herein contained for regulating the meeting and
proceedings of the Board so far as the same are applicable thereto, and are not
superseded by any regulations made by the Board under the last preceding Article.
104.When acts of a Director valid notwithstanding defective appointments, etc.,
Acts done by a person as a Director shall be valid notwithstanding, that it may
afterwards
be discovered that
this appointment was invalid by reason of any
defect or disqualification or had terminated by virtue of any provisions contained in the
Act or in these Articles.
Provided that nothing in this Article shall be deemed to give validity to acts done by a
director after his appointment has been shown to the company to be invalid or to have
terminated.
105.Resolution by circulation:Save in those cases where a resolution is required by
Section 292, 297 and 372A(2) of the Act to be passed at a meeting of the Board, a
resolution shall be as valid and effectual as if it had been passed at a meeting of the
Board or a Committee of the Board as the case may be, duly called and constituted, if a
draft thereof in writing is circulated, together with the necessary papers, if any, to all the
Directors, or to all the members of the Committee or the Board, as the case may be,
then in India (not being less in number than the quorum fixed for a meeting of the Board
or Committee, as the case may be) and to all other Directors or members of the
Committee at their usual addresses in India, and has been approved by such of them as
are then in India or by a majority of such of them as are entitled to vote on the
resolution.
MINUTES
106.Minutes to be made:
(1) The Board shall in accordance with the provisions of Section 193 of the Act, cause
minutes to be kept by making entries thereof in books provided for the purpose. The
said books shall be maintained and the entries therein made, dated and signed in the
manner provided by Section 193 of the Act.
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(2) The said minutes shall contain particulars:•
of the names of the Directors present at each meeting of the Board and of any
Committee of the Board and in the case of each resolution passed at the meeting,
the names of the Directors, if any dissenting from or not concurring in the
resolution;
of all appointments of Directors and other officers of the Company;
•
of all orders made by the Board and Committee of the Board; and
•
of all proceedings of general meetings of the Company and of meetings of the
Broad and Committee of the Board.
The minutes of each meeting shall contain a fair and correct summary of the proceedings
thereat.
Provided that no matter need be included in any such minutes which the Chairman of the
meeting, in his absolute discretion, is of opinion:•
is or could reasonably be regarded as defamatory of any person:
•
is irrelevant or immaterial to the proceedings; or
•
is detrimental to the interest of the Company.
(3) Any such minutes of any meeting of the Board or of any Committee of the Board or
of the Company in general meeting, kept in accordance with the Provision of Section 193
of the Act, shall be evidence of the matters stated therein. The minute books of general
meetings of the Company shall be kept at the office and shall be open to inspection by
members during business hours between 10.00 a.m. and 12 noon on working days.
POWER OF THE BOARD
107. General powers of the board:
(1) The Business of the Company shall be managed by the Board of Directors who
may pay all the expenditure incurred in setting up and registering the Company.
(2) Subject to the provision of the Act, the Board of Directors of the Company shall be
entitled to exercise all such powers, and to do all such acts and things, as the Company
is authorised to exercise and do;
Provided that the Board shall not exercise any powers or do any act or thing which is
directed or required by any law for the time being in force or by the Memorandum or
Articles of Association of the Company or otherwise, to be exercised or done by the
Company in general meeting.
Provide further that in exercising any such power or doing any such act or thing the
Board shall be subject to the provisions contained in that behalf in the Act, or in the
Memorandum or Articles of the Company, or in any regulation not inconsistent therewith
and duly made thereunder, including regulations made by the company in general
meeting.
(3)No regulation made by the Company in general meeting shall invalidate any prior act
of the Board which would have been valid if that regulation had not been made.
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108.GoI’s affirmative right:
(I)So long as GoI holds more than 25% of the paid up Shares of the Company or until
March 31, 2003 (whichever occurs first), no action shall be taken by the Board or the
shareholders in general meeting on the matters listed below without the same having
been first approved by the Board of the Company with the affirmative vote of a Director
nominated by GoI (subject however to the provisions of Article 99 above):
Sale, transfer, lease or other disposition of fixed assets of the Company which in a
financial year is in excess of five (5) percent of the gross fixed assets of the Company
(as provided in the Revised Joint Venture Agreement) and which is not in the ordinary
course of business;
Variation of rights attached to Shares;
Reduction of Share capital of the Company;
Buy-back of Shares of the Company;
Employee retrenchments except in the ordinary course of business or pursuant to
disciplinary action;
Increase in the paid-up Share capital except as provided in the Revised Joint Venture
Agreement; and
Taking of steps to wind up or terminate the corporate existence of the Company or
entering into any arrangement with the creditors of the Company.
After March 31, 2003 or the date on which GoI ceases to hold 25% Shares of the
Company (whichever occurs first) and so long as GoI holds more than 10% Shares of
the Company, no action shall be taken by the Board or the shareholders in general
meeting on the matters listed below without the same having been first approved by the
Board of the Company with the affirmative vote of a Director nominated by GoI (subject
however to the provisions of Article 99 above):
sale, transfer, lease or other disposition of fixed assets of the Company which in a
financial year is in excess of ten (10) percent of the fixed assets of the Company (as
provided in the Revised Joint Venture Agreement) and which is not in the ordinary
course of business;
increase in paid-up Share capital except as provided in the Revised Joint Venture
Agreement; and
taking of steps to wind up or terminate the corporate existence of the Company or
entering into any arrangement with the creditors of the Company.
Provided however that GoI’s rights under this Article 108 (II) shall automatically lapse
and shall not apply after December 31, 2003.
109 Specific powers of the Board: Without prejudice to the general powers conferred
by the last preceding Article, and the other powers conferred by these Articles, and
subject to the provisions of the Act, the Board of Directors shall have the following
powers, that is to say, powers;
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To acquire property:
(1) to purchase, take on lease or otherwise acquire for the Company, property, rights or
privileges which the Company is authorised to acquire at such price and generally on
such terms and conditions as they think fit.
Revenue Budgets:
(2) to approve revenue and capital budgets of the Company including proposals in
regard to the expansion, diversification, modernization, replacement of plant, machinery
and equipments, balancing requirements of equipments, investments in joint ventures or
associated companies as well as variations in the approval estimates.
To pay for property in debentures etc.:
(3) to pay for any property, rights or privileges acquired by, or services rendered to the
Company either wholly or partially in cash or in Shares, bonds, debentures, or other
securities of the Company, and any such Shares may be issued either as fully paid up or
with such amount credited as paid up thereon as may be agreed upon; and any such
bonds, debentures or other securities may be either specifically charged upon all or any
part of the property of the Company and its uncalled capital or not so charged;
To secure contracts by Mortgage:
(4) to secure the fulfillment of any contracts or engagements entered into by the
Company by mortgage or charge of all or any of the property of the Company and its
uncalled capital for the time being or in such other manner as they may think fit.
To appoint officers, etc.:
(5) to appoint and at their discretion, remove or suspend such managers, secretaries,
officers, clerks, workmen, employees, agents and servants, specialists and consultants
for permanent or temporary or special services as they may from time to time, think fit,
and to determine their powers and duties and fix their specific scales of pay and
allowances of specific jobs.
To appoint trustees:
(6) to appoint any person or Persons (whether incorporated or not), to accept and hold
in trust for the Company any property belonging to the Company or in which it is
interested or for any other purposes, and to executed and do all such deeds and things
as may be requisite in relation to any such trust and provide for the remuneration of
such trustee of trustees;
To bring and defend action, etc.:
(7) to institute, conduct, defend, compound or abandon any legal proceeding by or
against the Company or its officers or otherwise concerning the affairs of the Company
and also to compound and allow time for payment or satisfaction of any claims or
demands by or against the Company;
To refer to arbitration:
(8) to refer any claims or demands by or against the Company to arbitration and observe
and perform the awards;
To give receipt:
(9) to make and give receipts, release and other discharges for money payable to the
company and for the claims and demands of the Company;
To authorize acceptance, etc.:
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(10) to determine who shall be entitled to sign on the Company’s behalf, bills, notes,
receipts, acceptances, endorsements, cheques, releases, contracts and documents;
To appoint attorneys:
(11) to provide from time to time for the management of the affairs of the Company at
different places in such manner as they think fit, and in particular to appoint any person
to be the attorneys or agents of the Company with such powers (including power to subdelegate) and upon such terms as may be thought fit;
To invest moneys:
(12) to invest in the Reserve Bank of India or in such securities as may be approved and
deal with any of the moneys of the Company upon such investments authorised by the
Memorandum of Association of the Company (not being Shares in this Company) and in
such manner as they think fit, and from time to time to vary or release such
investments;
To give security by way of indemnity:
(13) to execute in the name and on behalf of the Company in favour of any Director or
other person who may incur or be about to incur any personal liability of the benefit of
the Company, such mortgages of the Company’s property (present and future) as they
think fit and any such mortgage may contain a power of sale and such other powers,
covenants and provisions as shall be agreed upon;
To give percentage:
(14) Subject to the approval to give to any person employed by the Company a
commission on the profits of any particular business transaction, or a Share in the
general profits of the Company, and such commission or Shares of profits shall be
treated as part of the working expenses of the Company;
To make bye laws:
(15) from time to time to make, vary and repeal bye laws and/or rules for the regulation
of the business of the Company, and for determination of service conditions of its
employees;
To give award or allow any bonus:
(16) to give, award or
allow
any
bonus, pension superannuation, gratuity or
compensation to any employee of the Company, or his widow, children, or dependants,
that may appear to the Directors just or proper, whether such employee, his widow,
children or dependants has or have not a legal claim upon the Company;
To create provident fund:
(17) before declaring any dividend, to set aside such portion of the profits of the
Company as they may think fit, to form a fund to provide for such pensions, gratuities of
compensation or to create any provident fund or benefit fund in such manner as the
Directors may deem fit;
To make Contracts etc.:
(18) to enter into all such negotiations and contracts and rescind and vary all such
contracts, and execute and do all such acts, deeds, and things in the name and on behalf
of the Company as they may consider expedient for or in relation to any of the matters
aforesaid or otherwise for the purposes of the Company; and
To delegate powers:
(19) subject to the restrictions laid down in Section 292 of the Act, to delegate any of
the powers, authorities and discretion for the time being vested in them, subject
however, to the ultimate control and authority being retained by them.
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DIVIDENDS
112. Dividends: The profits of the Company available for payment of dividend subject
to any special rights relating thereto created or authorised to be created by these
presents and subject to the provisions of these presents as to the reserve fund, shall be
divisible amongst the members in proportion to the amount of capital held by them
respectively provided always that (subject as aforesaid) any capital paid upon a Share
during the period in respect of which a dividend is declared shall only entitle the holder
of such Share to an apportioned amount of such dividend as from the date of payment.
113. Capital paid up in advance: Where capital is paid up on any Shares in advance of
calls upon the footing that the same shall carry interest such capital shall not, whilst
carrying interest, confer a right to participate in profit or dividends.
114. Declaration of dividends: The Company in general meeting may declare a
dividend to be paid to the members according to their rights and interest in the profits
and may fix the time for payment but no dividend shall exceed the amount
recommended by the Board.
115. Dividends out of profits only and not to carry Interests: No dividend shall be
declared or paid by the Company for any financial year except out of the profits
of the Company for that year arrived at after providing for the depreciation in
accordance with the provisions of the sub-section (2) of Section 205 of the Act or out of
profits of the Company for any previous financial year or years arrived at after providing
for the depreciation in accordance with those provisions remaining undistributed or out
of both or out of moneys provided by the Central Government for the payment of
dividend in pursuance of a guarantee given by the Central Government. No dividend
shall carry any interest as against the Company.
116. When to be deemed net profits: The declaration
in the annual accounts
duly certified by the auditors under section 227 of the Act as to the amount of the net
profits of the Company shall be conclusive.
117. Interim dividend: The Directors may, from time to time, pay to the members
such interim dividend as in or towards satisfaction of the debts, liabilities or
engagements in respect of which the lien exists.
118. Debts may be deducted: The Directors may retain any dividends on which the
Company has lien and may apply the same in or towards satisfaction of the debts,
liabilities or engagements in respect of which the lien exists.
119. Dividend and call together: Subject to the provisions of Section 205 (A) of the
Act, any general meeting declaring a dividend may adjust a call made on the members
of such amount as the meeting fixes and the call be made payable at the time as the
dividend. The making of a call under this clause, shall be deemed ordinary business of an
ordinary general meeting which declares a dividend.
120. Distribution of Reserves, etc.: The Company in general meeting may resolve
that any moneys, investments, or other assets forming part of the undivided profits of
the Company standing to the credit of the reserves, or in the hands of the Company and
available for distribution or representing premia received on the issue of Shares and
standing to the credit of the Share premium account, be capitalized and distributed
amongst the share holders in accordance with their rights and that all or any part of such
capitalized fund be applied on behalf of the shareholders in paying up in full any
unissued Shares so fully paid be distributed accordingly amongst the shareholders in the
proportion in which they are entitled to receive dividends, and shall be accepted by them
in full satisfaction of their interest in the said capitalized sum. For the purpose of giving
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effect to any resolution under this Article the Board may settle any difficulty which may
arise in regard to the distribution as they think expedient and in particular may issue
fractional certificates and may determine that cash payment shall be made to any
members upon the footing of the value so fixed or that fractions of less than one rupees
may be disregarded in order to adjust the rights of all parties, and may vest any such
cases of specific assets in trustees upon such trust for the Persons entitled to the
dividend or capitalized fund as may seem expedient to the Board. Where requisite, a
proper contract shall be filed in accordance with Section 75 of the Act, and the Board
may appoint any person to sign contract on behalf of the person entitled to the dividend
or capitalized fund, and such appointment shall be effective, provided that subject to the
provisions contained in Section 205(3) of the Act no dividend shall be payable except in
cash.
121.Dividends are to be paid in cash: Subject to the provisions of Section 205 of the
Act, no dividend shall be payable except in cash.
122. Effect of transfer: A transfer of Shares shall not pass the right to any dividend
declared thereon before the registration of the transfer.
123. Dividend to joint holders: Any one of the several Persons, who are registered as
the joint holders of any Shares, may give effectual receipts for all dividends and
payments on account of dividends in respect of such Shares.
124. Payment by post: Unless otherwise directed, any dividend may be paid by cheque
or warrant sent through the post to the registered address of the member or Person
entitled or in case of joint holders, to the registered address of that one whose name
stands first on the register, and every such cheque or warrant so sent shall be made
payable to the order of the person to whom it is sent.
125. Notice of dividends: Notice of the declaration of any dividend, whether interim or
otherwise, shall be given to the holders of registered Shares in the manner hereinafter
provided.
126. Unpaid or Unclaimed dividend: Where the Company has declared a dividend but
which has not been paid or claimed within 30 days from the date of the declaration, to
any shareholder entitled to the payment of the dividend, the company shall within 7
days from the date of the expiry of the said period of 30 days, transfer the total amount
of dividend which remains unpaid or unclaimed within the said period of 30 days, to a
special account to be opened by the company in that behalf in any scheduled bank, to be
called “Unpaid Dividend Account of Maruti Udyog Limited”.
Any money transferred to the unpaid dividend account of the company as above which
remains unpaid or unclaimed for a period of seven (7) years from the date of such
transfer shall be transferred by the Company to the Fund established under sub-section
(1) of section 205C of the Act.
No unclaimed or unpaid dividend shall be forfeited by the Board.
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MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTIONS
The following Contracts (not being contracts entered into in the ordinary course of
business carried on by our Company or entered into more than two years before the
date of this Draft Red Herring Prospectus) which are or may be deemed material have
been entered or to be entered into by our Company. These Contracts, copies of which
have been attached to the copy of this Draft Red Herring Prospectus, delivered to the
Registrar of Companies, National Capital Territory of Delhi and Haryana located at New
Delhi for registration and also the documents for inspection referred to hereunder, may
be inspected at the Corporate Office of our Company situated at 11th Floor, Jeevan
Prakash Building, 25, Kasturba Gandhi Marg, New Delhi – 110 001from 10.00 a.m. to
4.00 p.m. from the date of this Draft Red Herring Prospectus until the date of Issue
Closing Date.
MATERIAL CONTRACTS
1. Letter of appointment to Kotak Mahindra Capital Company Ltd from GoI dated
May 17, 2002 appointing them as BRLM
2. Letter of appointment to ICICI Securities Ltd from GoI dated November 8, 2002
appointing them as Co-BRLM
3. Letter of appointment to JM Morgan Stanley Pvt. Ltd. and HSBC Securities and
Capital Markets (India) Pvt. Ltd. from GoI dated December 12, 2002 appointing
them as Co-BRLM
4. Memorandum of Understanding amongst GoI, the Company, BRLM and Co-BRLMs
5. Letter from GoI appointing MCS Ltd
6. Letter from GoI appointing _____ [Syndicate members]
7. Underwriting agreement
8. Syndicate agreement
9. Escrow agreement
MATERIAL DOCUMENTS
10. Revised Joint Venture Agreement dated May 15, 2002.
11. Letter from Suzuki dated February 19, 2003.
12. Our Memorandum and Articles of Association as amended from time to time.
13. Our certificate of incorporation dated February 24, 1981
14. Resolution of the Board of Directors of the Company, passed at its Meeting held
on ____
15. Letters dated February 7, 2003, from Ministry of Heavy Industries and Public
Enterprises, Department of Heavy Industry, authorizing the issue
16. The Report of the Auditors, M/s Price Waterhouse, Chartered Accountants as set
out herein dated March 25, 2003 and March 31, 2003
17. Copies of the Annual Report for the year ended March 31, 1998, 1999, 2000,
2001 and 2002 of the Company on which Report of the Auditors of the Company,
M/s Price Waterhouse, and Chartered Accountants is based.
18. A copy of the tax benefit report dated ______ from our Auditors, M/s Price
Waterhouse, Chartered Accountants
19. Consent dated __, from our Auditors for inclusion of their report on Accounts in
the form and context in which they appear in the Draft Red Herring Prospectus.
20. Consents of: (a)Auditors, Bankers to the Company and (b) Book Running Lead
Manager, Co-Book Running Lead Managers, Advocate & Solicitor, Legal Advisors,
Registrar and Bankers to the Offer as referred to in their respective capacities.
21. General Power of Attorney executed by Directors of the Company in favour of
person(s) for signing and making necessary changes in the Draft Red Herring
Prospectus.
22. Resolution of the Meeting of the Board of Directors held on _____, authorising the
Registrar to the Offer to sign the Stockinvests on our behalf for realising the
proceeds of the Stockinvests.
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23. Resolution of our Members passed at the Extra Ordinary General Meeting held on
____appointing M/s Price Waterhouse, Chartered Accountants as Auditors for the
year 2001-2002.
24. Due Diligence Certificate dated April 25, 2003 to SEBI from, Kotak Mahindra
Capital Company Limited, ICICI Securities Limited, JM Morgan Stanley Private
Limited and HSBC Securities and Capital Markets (India) Pvt. Ltd.
25. SEBI As per the letter no. 2[16]/2000–PE-VI, dated February 7, 2003, from the
Ministry of Heavy Industries and Public Enterprises, Department of Heavy
Industry, GoI, the Cabinet Committee of Disinvestment has approved the
disinvestment in Maruti by GoI by way of Offer for sale of its shareholding in the
domestic market.
26. SEBI letter RM/21334/2003 dated October 29, 2002 granting approval for
retention of over-subscription over and above the limit of 10% allowed for the
purposes of rounding off under clause 6.4.2(f) of SEBI Guidelines.
27. SEBI observation Letters No. ______ dated ______ , ______ and fresh duediligence certificate dated ______,.
28. In-principle listing approval dated ________ , _______and _________from NSE
and BSE. Initial listing application dated _______, ___________ and ______, for
listing the equity shares at NSE and BSE, respectively.
29. Approval from the RBI for (a) transfer of equity shares in the Offer for Sale to
NRIs and FIIs pursuant to its letter No. __________dated __________; (b)
transfer of equity shares by the existing non-resident shareholders to residents
pursuant to the Offer for Sale pursuant to its letter No. __________dated
__________; and (c) participation of FIIs in the Fresh Issue pursuant to its letter
No. ______ dated _____ .
30. Tripartite Agreement between the NSDL, us and _____ dated _____ .
31. Tripartite Agreement between the CDSL, us and ____ dated _____.
32. Annual Report of the group companies
33. Approval from GoI, Ministry of Finance and Company Affairs (Department of
Economic Affairs) pursuant to its letter no. FC.II: 74(1982)-Comp dated April 16,
2003 for the transfer of equity shares in this Offer to eligible non-resident
investors, NRIs and FIIs. In terms of the approval of GoI, OCBs have not been
permitted to participate in the Offer.
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DECLARATION
All the relevant provisions of the Companies Act, 1956, and the guidelines issued by the
GoI or the guidelines issued by the Securities and Exchange Board of India, as the case
may be, have been complied with and no statement made in this Draft Red Herring
Prospectus is contrary to the provisions of the Companies Act, 1956, the Securities and
Exchange Board of India Act, 1992 or rules made thereunder or guidelines issued, as the
case may be.
SIGNED BY THE DIRECTORS
Mr. (Through their constituted attorney Mr.______________)
SIGNED BY THE SELLING SHAREHOLDER
Mr _________(As authorised vide _______)
Date:
Place:
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