Maruti drives Suzuki's global returns

Japanese auto major gets nearly Rs 4,000 crore from India as royalty and dividends

Japanese automobile maker Suzuki Motor Corporation's (SMC) income from its India subsidiary, Maruti, has touched nearly Rs 4,000 crore in royalties and dividends - an all-time high.

In the last financial year (FY16), Suzuki got Rs 3,975 crore, under the two heads, from India - a jump of 24 per cent from Rs 3,194 crore in the year ended March 31, 2015 (FY15).

Suzuki's net income (profit) in the year ended March 31, 2016 was Rs 7,291 crore approx against Rs 6,053 crore in the previous year. So, as a per cent, the India contribution in the form of royalty and dividend went up to 54.5 per cent in year ended March 31, 2016 from 52.76 per cent a year before.

India now contributes to half of Suzuki's annual automobile sales of 2.86 million units. In FY15, it was 45 per cent. The 24 per cent growth comes on account of record sales volume, revenue and profit posted by Maruti Suzuki last year, helped by double-digit sales growth and benign raw material prices.

New launches such as Baleno and S Cross, along with growth from existing products like Ciaz, helped the company post strong growth last year and increase market share to 47 per cent from 45 per cent a year ago. Maruti posted a record profit of Rs 4,571 crore in FY16 against Rs 3,711 crore in FY15. India's largest car maker pays its parent a royalty on net sales revenue. Through its 56.21 per cent stake in Maruti, Suzuki is entitled to a share in dividend announced by the Indian subsidiary.

In FY15, a royalty rate of 5.7 per cent on Maruti's revenue of Rs 48,605 crore translated into Rs 2,770 crore for Suzuki. In FY16, a six per cent royalty on Maruti's revenue of Rs 56,350 crore amounted to Rs 3,381 crore for Suzuki. Maruti announced a record dividend of Rs 35 a share for FY16, up 40 per cent from FY15. Suzuki, the promoter got richer by Rs 594 crore as a result of this dividend last year. Its dividend income was Rs 424 crore in FY15. The India performance was instrumental in the 20 per cent increase in Suzuki's profit to Rs 7,291 crore, approximately, for the year ended March 31, 2016.

"The future of Suzuki depends on the Indian market. Once production in Gujarat begins, sales in India will overtake Suzuki's sales from rest of the world," said R C Bhargava, chairman, Maruti Suzuki.

Suzuki's net sales in its home market, Japan, decreased 4.3 per cent to ¥1,047.9 billion in the year ended March 31, 2016 owing to hike in light motor vehicle tax. But the overseas net sales increased by 11 per cent to ¥2,132.8 billion mainly owing to the India performance. Announcing its results for the year ended March 31, 2016 early this month, Suzuki said for the moment the group "will prioritise growth investment centering on India". Suzuki is investing $2.8 billion (Rs 18,760 crore) to set up a plant in Gujarat, products from which will be marketed by Maruti Suzuki. The first phase of the plant is scheduled to become operational in early 2017.