.

MARUTI EMERGING AS R&D HUB FOR SUZUKI MOTOR CORPORATION Maruti Suzuki India Ltd (formerly Maruti Udyog Ltd) is India's largest passenger car company, accounting for over 50 per cent of the domestic car market. The company offers full range of cars from entry level Maruti 800 & Alto to stylish hatchback Ritz, A-star, Swift, Wagon R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara. The company is a subsidiary of Suzuki Motor Corporation of Japan. The company is engaged in the business of manufacturing, purchase and sale of motor vehicles and spare parts (automobiles). The other activities of the company include facilitation of pre-owned car sales, fleet management and car financing. They have four plants, three located at Palam Gurgaon Road, Gurgaon, Haryana and one located at Manesar Industrial Town, Gurgaon, Haryana. The company has seven subsidiary companies, namely Maruti Insurance Business Agency Ltd, Maruti Insurance Distribution Services Ltd, Maruti Insurance Agency Solutions Ltd, Maruti Insurance Agency Network Ltd, Maruti Insurance Agency Services Ltd, Maruti Insurance Agency Logistics Ltd and True Value Solutions Ltd. The first six subsidiaries are engaged in the business of selling motor insurance policies to owners of Maruti Suzuki vehicles and seventh subsidiary, True Value Solutions Ltd is engaged in the business of sale of certified pre-owned cars under the brand 'Maruti True Value'. Maruti Suzuki India Ltd was incorporated on February 24, 1981 with the name Maruti Udyog Ltd. The company was formed as a government company, with Suzuki as a minor partner, to make a people's car for middle class India. Over the years, the company's product range has widened, ownership has changed hands and the customer has evolved. In October 2, 1982, the company signed the license and joint venture agreement with Suzuki Motor Corporation, Japan. In the year 1983, the company started their productions and launched Maruti 800. In the year 1984, they introduced Maruti Omni and during the next year, they launched Maruti Gypsy in the market. In the year 1987, the company forayed into the foreign market by exporting first lot of 500 cars to Hungary. In the year 1990, the company launched India's first three-box car, Sedan. In the year 1992, Suzuki Motor Corporation, Japan increased their stake in the company to 50%. In the year 1993, they introduced the Maruti Zen and in the next year they launched Maruti Esteem in the market. In the year 1995, the company commenced their second plant. In the year 1997, they started Maruti Service Master as model workshop in India to look after sales services. In the year 1999, the third plant with new press, paint and assembly shops became operational. In the year 2000, the company launched Maruti Alto in the market. In the year 2002, Suzuki Motor Corporation increased their stake in the company to 54.2%. In January 2002, the company introduced 10 finance companies (8 + 2JVs) in Mumbai. Also, they found one new business segment, Maruti True Value for sales, purchase and trade of pre-owned cars in India. In the year 2005, the company launched the first world strategic model from Suzuki Motor Corporation 'the SWIFT' in India. In the year 2006, they launched WaganR Duo with LPG and also the New Zen Estillo. During the year 2006-07, the company commenced operations in the new car plant and the diesel engine facility at Manesar, Haryana. In November 2006, they inaugurated a new institute of Driving Training and Research (IDTR), which was set up as a collaborative project with Delhi Government at Sarai Kale Khan in South Delhi. During the year 2007-08, the company signed an agreement with the Adani group for exporting 200,000 units annually through the Mundra port in Gujarat. They launched Swift Diesel and SX4- Luxury Sedan with Tag line 'MEN ARE BACK' during the year. In July 2007, the company launched the new Grand Vitara, a stylish, muscular and 5-seater in the MUV segment. The company changed their name from Maruti Udyog Ltd to Maruti Suzuki India Ltd

with effect from September 17, 2007. During the year, the company entered into a joint venture agreement with Magneti Marelli Powertrain SpA and formed Magneti Marelli Powertrain India Pvt Ltd for manufacturing Electric Control Units. Also they entered into another joint venture agreement with Futaba Industrial Co Ltd and formed FMI Automotive Components Ltd for manufacturing Exhaust Systems Components. During the year, the company made pact with Shriram City Union Finance Ltd, a part of Shriram Group, Chennai, to offer easy, transparent and hassle-free car finance to their customers, particularly in semi urban and rural markets. The agreement is a joint initiative of the two companies for providing competitive car finance to people in Tier-II and Tier-III cities across the country. During the year 2008-09, the company launched a new A2 segment car, branded the A-star in India and in Europe as the new Alto. They raised their production capacity to a landmark 1 million cars. In June 2008, the company launched Maruti 800 Duo, which is a dual fuel (LPG-cum- petrol) model car. In March 2009, the company launched A-star or Suzuki Alto at Geneva Motor Show sales begin at EU. In April 2009, the company revealed new Ritz K12M engine at Gurgaon plant. During the year 2009-10, the company raised the capacity of their next generation K-series engine plant to more than 500,000 units per annum. They started work on an additional plant of 250,000 cars per annum capacity at Manesar. The company launched their fifth world strategic model, the Ritz. They also came out with the spacious multi purpose van, Eeco and the all new WagonR with a K-series engine. During the year 2010-11, the company launched refreshed variants of WagonR and Alto with the new K-series engines. SX4 was offered with a Super Turbo Diesel engine. The Company launched the Suzuki Kizashi, India's first sports luxury sedan. It sports a 2.4 litre engine and is endowed with best-in-class features. The Company developed in-house i-GPI (Integrated Gas Port Injection) Technology and launched factory-fitted CNG variants for five of its models: Alto, WagonR, Eeco, Estilo and SX4. Apart from launching new products, the company added 131 new sales outlets to reach 933 outlets in 668 cities and increased its service reach to 1,395 cities with 2,946 outlets. The company's network is now servicing about 1.2 million vehicles every month. The company plans to establish Plant C at Manesar, which will have an installed capacity of 250,000 units per annum. The plant is likely to be ready by end of fiscal 2012/ early 2013. The company plans to set up Rs 1700 crore diesel engine plant at Gurgaon. They are going to double the diesel engine capacity at their Gurgaon facility to six lakh units by 2014. Of this, Rs 950 crore is being invested for the first phase of 1.5 diesel engines by mid-2013. Japanese auto major Suzuki is all set to convert Maruti Udyog Ltds research and development (R&D) facilityas its Asia hub by 2007 for the design and development of new compact cars, according to a top official of thefirm. The countrys leading car manufacturer will make substantial investments to upgrade its research anddevelopment centre at Gurgaon in Haryana for executing design and development projects for Suzuki. Thisincludes localisation, modernisation and greater use of composite technologies in upcoming models.

The company will be hiring more software engineers and technocrats to handle Suzukis R&D projects.Investment would be more in terms of manpower than in infrastructure, which is already in place. Apart fromworking on innovative features, the R&D teams will focus on latest technologies using

CAD-CAM tools to rollout new models that will meet the needs of MULs diverse customers in the future.The reasons as to why it can be good for R&D is that 1. Firstly the cost involved in R&D and infrastructure is low in India as compared to other countries. Also the technical skills are abundantly available; again at a cheaper cost. 2. Secondly, India is growing as an export hub along with the Indian market growing aggressivelyinto becoming an attractive one for investors. 3. Thirdly, Suzukis investment in India, is also important as it has completely divested now as aresult MUL will now become a 100% subsidiary of Suzuki in the coming year.

Maruti Suzuki India Ltd on Tuesday posted a 36% increase in fiscal third-quarter profit, but investors hammered the firms shares on plans by its Japanese parent to set up a Gujarat factory that will make cars exclusively for Indias largest auto maker to sell. Net profit rose 36% to Rs.681 crore in the three months ended 31 December, said the company, slightly short of the Rs.694 crore estimate in a Bloombergpoll of 39 analysts, as higher discounts on some models countered gains from a weak yen. Revenue fell 3.1% to Rs.10,620 crore from a year earlier and vehicle sales fell 4.41% to 2.9 million. But investors focused more on an announcement by the company that its parent Suzuki Motor Corp. would form a separate company to build a plant in Gujarat and its entire production would be supplied to Maruti Suzuki to sell. Maruti Suzuki shares fell 8.12% to Rs.1,563.20 on a day the BSEs benchmark Sensex lost 0.12% to 20,683.51 points. The announcement raised concerns that Suzuki Motor may reap wider margins by selling its production at a high price to Maruti Suzuki and use cars made at the Gujarat plant for export, to the detriment of the Indian subsidiary, in which the Japanese auto maker has a 56.2% stake, and its minority shareholders. Existing shareholders have been left with several unanswered questions, and no ability or opportunity to ask them, said Amit Tandon, managing director of Institutional Investor Advisory Services India Ltd, or IiAS, an investor advisory firm. The new unit, called Suzuki Motor Gujarat Pvt. Ltd, will manufacture cars and engine components and Maruti Suzuki will sell the products in both domestic and export markets. Suzuki Motor said it will spend 50 billion yen ($485 million) on the project. According to earlier plans, Maruti Suzuki was to have made the investment, and the announcement on Tuesday was seen by some analysts as exposing the Indian company to market risks and shielding its Japanese parent.

The proposals leave scope for manipulation and raises issues of conflicts of interest on various counts: vehicular offtake, transfer pricing, rental for land lease, ownership of brands, product enhancements and development, said Shriram Subramanian, managing director of InGovern Research Services, a corporate governance firm. The logic that this is beneficial to minority investors of MSIL is not tenable as MSIL is a cash flow positive company and its cash is best utilized in expansion of a new facility, he said in an emailed statement. Maruti said the deal would be beneficial to shareholders. The cost of capital for Suzuki, which has idle cash on its books, is lower than for Maruti, it said. It would save Maruti the investment required for the Gujarat plant. The money will instead be used in developing the companys marketing, sales network and research and development unit. While we stand to gain, the primary reason why Suzuki is doing this is because India has emerged as the largest market for them, said Maruti chairman R.C. Bhargava. The new Suzuki subsidiary will sell the cars to Maruti at the cost of production, Bhargava said. The return of investment for Suzuki would be realized through growth in Marutis business. While Marutis own production capacity will stay at 1.5 million, it will actually sell 3 million cars without having to manufacture the other half, Bhargava said. A member on Marutis board said on condition of anonymity that the board had studied the arrangement to figure out whether it entailed any corporate governance issues and found none. J.N. Gupta, a former executive director at the Securities and Exchange Board of India, said that from a reading of the firms press statement, there seemed to be no issues that could harm the interests of minority stakeholders. Although the structure and the manner in which it has been announced is well within the scope of existing regulation, IiAS believes Maruti has denied minority shareholders a say in the directional changes undertaken by management, Tandon said. When Suzuki Motor announced its first expansion in India in 2003, it started a new joint venture called Maruti Suzuki Automobile India Ltd, in which it held a 70% stake. Later in 2006, Maruti Suzuki Automobile merged with Maruti Suzuki India. Last year, Suzuki also merged Suzuki Powertrain India Ltd, a 70:30 joint venture between Maruti and Suzuki, in Maruti Suzuki India. This effectively raised Suzukis stake in the Indian unit by at least 2 percentage points. The change in earlier plans for the Gujarat factory comes against the backdrop of Marutis production in its Gurgaon plant in Haryana coming to a standstill for a month because of labour unrest in 2012.

Headquartered in Ahmedabad, Suzuki Gujarat will be set up by April this year with a starting share capital of Rs.100 crore. It will be headed by N. Aizawa, a Suzuki executive who will be deputed from Japan, while other senior managers will likely be deputed from Maruti Suzuki. Production at Gujarat is expected to start by end-2016. Suzuki Gujarat will initially invest Rs.3,000 crore for a 250,000 unit per year production line, starting with 100,000 cars a year. In total, the two facilities planned in Gujaraton a 640 acre plot in Becharaji and 550 acre plot in Vithalpurcan accommodate seven production lines turning out almost 1.8 million cars a year. Till date, Maruti has invested Rs.250 crore in purchasing the two plots of land, which will now be leased to Suzuki Gujarat.

KEY SUCCESS FACTORS(1)The Quality Advantage Maruti Suzuki owners experience fewer problems with their vehicles than any other car manufacturer in India(J.D. Power IQS Study 2004). The Alto was chosen No.1 in the premium compact car segment and the Esteemin the entry level mid - size car segment across 9 parameters. (2)A Buying Experience Like No Other Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide MUL customers in finding the right car. (3)Quality Service Across 1036 Cities In the J.D. Power CSI Study 2004, Maruti Suzuki scored the highest across all 7 parameters: least problemsexperienced with vehicle serviced, highest service quality, best in-service experience, best service delivery, best service advisor experience, most user-friendly service and best service initiation experience.92% of Maruti Suzuki owners feel that work gets done right the first time during service. The J.D. Power CSIstudy 2004 also reveals that 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90% owners would probably repurchase the same make of vehicle. (4)One Stop Shop At Maruti Suzuki, customers will find all car related needs met under one roof. Whether it is easy finance,insurance, fleet management services, exchange- Maruti Suzuki is set to provide a singlewindow solution for all car related needs. (5) The Low Cost Maintenance Advantage The acquisition cost is unfortunately not the only cost customers face when buying a car. Although a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its regularly used spare partsmay be priced quite steeply. Not so in the case of a Maruti Suzuki. It is in the economy segment that theaffordability of spares is most competitive, and it is here where Maruti Suzuki shines.

(6)Lowest Cost of Ownership

The highest satisfaction ratings with regard to cost of ownership among all models are all Maruti Suzukivehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni. (7) Technological Advantage It has introduced the superior 16 * 4 Hypertech engines across the entire Maruti Suzuki range. This newtechnology harnesses the power of a brainy 16-bit computer to a fuel-efficient 4-valve engine to createoptimum engine delivery. This means every Maruti Suzuki owner gets the ideal combination of power and performance from his car.