What Makes Maruti Suzuki Stand Out?

Analysing VBM Metrices

Ever wonder if a company is truly building wealth or just blowing smoke? Value-based
metrics (VBMs) are financial indicators that assist managers and investors in determining if
a company's direction will result in success or failure. These measures, which originated in
corporate finance, cut through the illusion of statistics to show the real economic value being
produced. VBMs, to put it simply, tell you if a firm is profitable or merely losing money.
Stay tuned as we delve deeper into these wealth-whisperers and their crucial role in
navigating the financial world.

When it comes to the Indian automobile industry, Maruti Suzuki is a name that needs no
introduction. From producing affordable and reliable cars to consistently topping the sales
charts, Maruti Suzuki has become a household name in India. But what sets this company
apart from its competitors? In this blog post, we will take a closer look at Maruti Suzuki's
VBM metrices - a set of key parameters that have contributed to the company's success.
These include grassroot innovation, culture and belief, competition, organization structure,
commitment and belief, compensation, and future plans. Let's dive into the world of Maruti
Suzuki and see what makes it stand out in the highly competitive automotive market.

Beyond mere profit: Economic Value Added (EVA) unveils a company's true wealth
creation by measuring whether operating after-tax income exceeds the cost of its invested
capital. This comprehensive metric, encompassing both debt and equity providers, empowers
informed decision-making for both managers and investors.
EVA = NOPAT -Cost of Capital * Capital
where:
NOPAT = Net Operating Profits After Taxes
Capital = Capital invested by debt holders and equity holders
Cost of Capital = Weighted average of the after-tax cost of debt and cost of equity

EVA Comparison of Maruti Suzuki, Bajaj Auto, and Tata Motors and Maruti
reigns supreme, exceeding cost of capital by a mile:

Company 2022 EVA 2023 EVA Difference % Change WACC

Maruti Suzuki 450,724 660,193 209,469 46.50% 0.02

Bajaj Auto (est.) 280,000 310,000 30,000 10.71% 0.04

Tata Motors (est.) 150,000 180,000 30,000 20.00% 0.03

Maruti Suzuki outperforms Bajaj Auto and Tata Motors in EVA growth: Its 2023 EVA
of ₹660,193 surpasses their highest by a significant margin. This suggests Maruti effectively
generates economic value, exceeding the cost of its capital.

 Maruti's EVA growth (209,469) , Bajaj Auto (1,085.52) and Tata Motors (21,827).
  Their WACCs (shown in the table) shows that Maruti likely enjoys a lower cost of
capital, further amplifying their value creation advantage.

Maruti's exceptional EVA growth, potentially coupled with a lower cost of capital, paints a
picture of superior financial performance and value generation compared to Bajaj and Tata.

Understanding Maruti Suzuki's Grassroot Innovation Approach:

Maruti Suzuki's innovation strategies include the Maruti Suzuki Innovation initiative,
focusing on collaboration with startups for cutting-edge solutions. Programs like Nurture,
Incubation, MAIL, and the Intrapreneurship Challenge foster idea-stage startups, technology-
based ventures, and internal talent. These initiatives align with grassroots innovation by
engaging local start-ups, conducting state-level idea hunts, and promoting social
entrepreneurship. Through partnerships with institutions like IIM Calcutta and IIM
Bangalore, Maruti Suzuki nurtures, incubates, and co-creates innovative solutions, ensuring a
comprehensive approach that integrates diverse sources and encourages innovation at various
levels within and outside the organization.

The Power of Culture and Belief in Maruti Suzuki:

At Maruti Suzuki, a culture of excellence prevails, fostering innovation and technical
expertise across all levels. Our dedicated workspaces reflect our commitment to quality,
emphasizing individual project focus. Leadership shapes this culture, driving our vision for
affordable, quality, and innovative products. Core values like Customer Obsession and a
belief in individual excellence guide our customer-centric practices. We aspire to industry
leadership, offering aspirational products at affordable prices. Our competitive spirit drives
customer attraction and network expansion. Transparent stakeholder engagement reinforces
meaningful relationships. Maruti Suzuki's culture, marked by excellence and collaboration,
propels success in the automotive industry.
Competitive Strategies of Maruti Suzuki: An Overview:
Maruti Suzuki dominates the Indian auto market by offering diverse, affordable car models
with quality features. Strong dealerships, great aftersales service, and smart marketing ensure
an excellent customer experience. Heavy investment in marketing solidifies its position in the
competitive automotive industry.
Maruti Suzuki leads the Indian auto industry with a strong LTP of ₹10,697.75 and a massive
market cap of ₹3,20,324.12 Cr. Showing financial strength, it boasts a P/E ratio of 28.66 and
a net profit of ₹3,716.50 Cr. The company's 0.85% dividend yield and impressive
₹35,535.10 Cr. in sales highlight its robust market position. (EXHIBIT 1)
Despite Maruti Suzuki's prowess, it faces stiff competition from key players:
1. Tata Motors Ltd (TATAMOTORS):
 Offers a diverse range of vehicles, spanning budget to premium segments.
 Boasts a product portfolio encompassing passenger vehicles, commercial
vehicles, and electric vehicles.
 Interpretation: Tata Motors showcases a lower dividend yield and higher P/E
ratio, suggesting a different financial profile. The market capitalization and net
profit highlight the company's significant scale, while the book value indicates
the net asset value per share.
2. Mahindra & Mahindra Ltd (M&M):
 Recognized for its robust SUV lineup and initiatives in the electric vehicle
sector.
 Active in the agricultural and commercial vehicle segments.
 Interpretation: Mahindra & Mahindra demonstrates strength in net profit and
sales, with a moderate P/E ratio. The higher dividend yield adds an attractive
element for income-seeking investors.
3. Bajaj Auto Ltd (BAJAJ-AUTO):
 Specializes in two-wheelers, with a focus on motorcycles and scooters.
 Emphasizes innovation and has a significant presence in international markets.
 Bajaj Auto showcases a higher dividend yield and moderate P/E ratio. The
company's market capitalization and net profit reflect its significant presence
in the two-wheeler market.
4. Eicher Motors Ltd (EICHERMOT):
 Renowned for its Royal Enfield motorcycles and expertise in the premium
motorcycle category.
 Interpretation: Eicher Motors, with a higher P/E ratio and moderate dividend
yield, is positioned as a premium brand. The market capitalization and net
profit suggest strength in the premium motorcycle segment.
Maruti Suzuki is strong in the Indian auto industry, but competitors like Tata Motors,
Mahindra & Mahindra, Bajaj Auto, and Eicher Motors have unique strengths. Despite
challenges, Maruti Suzuki's solid market position and financial health show stability. To stay
on top, Maruti Suzuki keeps innovating and adapting to industry changes, ensuring continued
leadership in a market with diverse business models and changing customer preferences.
EXHIBIT 1:

Examining the Organizational Structure of Maruti Suzuki:

As of March 31, 2023, the organization's Board of Directors consists of 12 members. This
includes 5 Non-Executive Directors, 4 Independent Directors, and 3 Executive Directors. The
Board operates through key committees such as the Audit Committee, Nomination and
Remuneration Committee, Corporate Social Responsibility Committee, Risk Management
Committee, and Stakeholders' Relationship Committee. The governance structure adheres to
the Companies Act, 2013, and Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations, 2015. The Board, chaired by a Non-Executive
and Non-Independent Director, along with its committees, upholds principles of transparency,
fairness, and independence in decision-making for the benefit of all stakeholders. The
average tenure of Board members is approximately 9.96 years as of the specified date.
(EXHIBIT 2)
EXHIBIT 2:

The Role of Commitment and Belief in Driving Success at Maruti Suzuki:

Maruti Suzuki's success is rooted in unwavering commitment and shared beliefs. Every
employee is dedicated to excellence and customer satisfaction, propelling the company to the
top of the automotive industry.
Maruti Suzuki exemplifies commitment through financial aid for affected families,
prioritizing employee well-being. The company is dedicated to gender diversity with
initiatives like WINGS and emphasizes eco-efficiency through emission reduction and
recycling. Maruti Suzuki's increased financial engagements and adaptive international trade
methods underscore commitment to efficiency. Internally, aligning goals with principles
showcases a determined and focused approach to achieving objectives. (EXHIBIT 3)
EXHIBIT 3:

An Insight into Maruti Suzuki's Compensation Policies:

Maruti Suzuki emphasizes fair and satisfying compensation policies, including competitive
salaries, performance bonuses, and comprehensive benefits. The company values work-life
balance, offering wellness programs for employee well-being. These policies attract top talent
and motivate employees, contributing to Maruti Suzuki's overall success.
Maruti's compensation practices align with Goal 8, fostering inclusive growth, fair
employment, and a safe work environment while creating opportunities for skill development
and employment and also ensuring fair and equitable remuneration practices with best
employee compensation scheme and welfare measures in the industry.
The EXHIBIT 4 shows a trend towards reduced disparity, showcasing the company's
commitment to narrowing the compensation gap and fostering a more equitable pay structure.
EXHIBIT 4:

Envisioning the Future with Maruti Suzuki's VMB Metrics:

Based on the absolute values and the growth in EVA from 2022 to 2023, Maruti Suzuki India
Limited has the highest EVA, followed by Bajaj Auto and Tata Motors. Therefore, the
company chosen is Maruti Suzuki India Limited as it is the company with the highest
Economic Value Added, and it seems to be generating the most economic value compared to
the cost of capital. (EXHIBIT 5)
Maruti Suzuki's VMB metrices provide valuable insights into the company's future plans.
With a strong focus on grassroot innovation, a positive culture and belief system, and
competitive strategies, Maruti Suzuki is poised to continue dominating the automotive
market. The company's commitment to its organizational structure and employee satisfaction,
as well as its forward-thinking compensation policies, ensure a solid foundation for growth.
As we look to the future, Maruti Suzuki's VMB metrices will undoubtedly play a key role in
driving the company's success and maintaining its position as a leader in the industry.
EXHIBIT 5:
EVA
COMPANY GROWTH
BAJAJAUTO 1,085.82
MARUTI SUZUKI INDIA
LTD. 2,09,469
TATAMOTORS 21,827

By FY 2030-31, Maruti Suzuki expects internal combustion engine (ICE) vehicles including
CNG, biogas, flex fuel vehicles, ethanol and blended fuel to take up a share of 60% in its
sales. This will be followed by 25% hybrid electric vehicles (EVs) and 15% battery electric
vehicles (BEVs). (FIGURE 1 & 2)
FIGURE 1:

FIGURE 2: