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Maruti to raise Suzuki profits 10%

BS Corporate Bureau

With Maruti Udyog Ltd, the country's largest car-maker, all set to become a subsidiary of Suzuki Motor Corporation, the revenues and profits of the Japanese company are expected to rise sharply.

The firm has said its topline as well as bottomline would get a boost of 10 per cent from the acquisition, in the financial year 2002-03.

Analysts had earlier forecast that once Maruti Udyog became a subsidiary of Suzuki, it would see a 13 per cent growth in sales as well as profits in 2002-03.

The company's valuation will also increase 15 per cent as a result of its agreement with the government last week to subscribe to the latter's entitlement to a Rs 4 billion rights issue, helping it increase its shareholding to around 54 per cent in the company. Both partners currently hold a 50 per cent stake each in Maruti Udyog.

Announcing the company's results in Japan, Suzuki chairman Osamu Suzuki said on Monday the firm had not yet factored in a majority stake in Maruti into its earnings forecasts. He added that the company might revise its forecasts after it officially acquired the additional shareholding in Maruti Udyog.

Suzuki said it would post a record group operating profit of ¥68 billion in 2002-03, and aimed to send its operating profit soaring to ¥110 billion in 2004-05. The company is aiming at group sales of ¥2 trillion and global vehicle sales of 2 million units in 2004-05. It also said it expected group sales to rise 5.4 per cent during the year to around ¥1.76 trillion.

However, analysts said these were "conservative" estimates, and new developments in the Japanese and Indian markets would serve as a booster. According to them, Suzuki is in a strong position to meet its targets for the year, particularly because it was assuming a conservative exchange rate of ¥120 to the dollar.

Moreover, with its new deal for supplying vehicles for Nissan Motors and its proposed acquisition of additional shareholding and controlling stake in Maruti Udyog, Suzuki has a strong position in the Japanese market.

The firm, with 20 per cent owned by General Motors Corporation, posted a 15.2 per cent rise in group operating profit to ¥58.46 billion ($464.4 million) in 2001-02, as currency rates helped rev up its overseas sales.

Suzuki, which is also Japan's third-largest motorcycle maker, said group net profit rose 10.6 per cent to ¥22.39 billion, with group sales increasing 4.2 per cent at a record ¥1.67 trillion.

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