Maruti Suzuki India Ltd 532500
Q4 2013 Earnings Call Transcript
Transcript Call Date 04/26/2013

Ambrish Mishra - JM Financials: Thanks a lot Marina. Good afternoon, everyone. On behalf of JM Financial Institutional Securities Private Limited, I welcome you all to the Fourth Results Conference Call of Maruti Suzuki India Ltd. I also take this opportunity to welcome the management team from Maruti Suzuki today.

Without wasting much time, I would now like to invite Mr. (Nikhil Vyas) who will take it from here. Over to you, Nikhil.

Nikhil Vyas: Thank you, Ambrish. Ladies and gentlemen, good afternoon once again. May I introduce you to the management team from Maruti Suzuki? Today we have with us our Chief Operating Officer, Supply Chain, Mr. S Maitra; Chief Operating Officer, Marketing and Sales, Mr. Mayank Pareek.

Mayank Pareek - MEO, Marketing & Sales: Good afternoon.

Nikhil Vyas: From finance, we have our CFO, Mr. Ajay Seth.

Ajay Seth - CFO: Good afternoon.

Nikhil Vyas: Vice President, Mr. (Pradeep Garg).

Pradeep Garg - VP: Good afternoon.

Nikhil Vyas: And Mr. (Diggy Goel), and other team members from the finance. From corporate, we have General Manager, Corporate and Government Affairs, Mr. (Rahul Bharti).

Rahul Bharti - GM, Corporate and Government Affairs: Hi.

Nikhil Vyas: The conference call will begin with a brief statement of the performance and outlook of our business by Mr. Seth. Afterwards, we will be happy to receive your questions. May I remind you of the Safe Harbor? We may be making some forward-looking statements. They have to be understood in conjunction with the uncertainty and the risk that the Company faces. And I may also like to inform you that the call is being recorded and the transcript will be

available at our website.

I would now like to invite our CFO, Mr. Seth. Over to you, sir.

Ajay Seth - CFO: Thank you, Nikhil. Good afternoon, ladies and gentlemen. Welcome once again to Maruti Suzuki and thanks for your interest in our annual financial results. You would be aware that the year 2012-13 was a challenging year for the passenger vehicle industry on account of weak economic growth and weak consumer sentiment. The domestic passenger vehicle industry grew by 2.2% in unit sales in 2012-13.

Maruti Suzuki was able to achieve a growth of 4.4% and improved market share by about 1% to 39.5%. This growth was led by the popularity of our new and refreshed model launches and better availability of diesel engines during the year. The market distortion between petrol and diesel vehicles continued for the most part in 2012-13.

The share of diesel vehicles in total percentage of vehicle sales increased from 48% in 2011-12 to 58% in 2012-13. Petrol vehicle sales continued to decline for the second successive year. In contrast to the rest of the market, utility vehicles posted a robust growth of 52% and the share of this segment increased to 21% of the percentage of vehicle market. A part of this growth was contributed by the Company's new utility vehicle, Ertiga, launched in April 2012.

The small car segment of industry was hit the most by inflation, low income growth and high interest rates. Industry sales in this segment declined by 13% in the year. We would like to share that this is not a case of customers shifting to bigger cars; it is just that the small car customer is buying less and the big car customer is buying more. Indian customers rated us number one in customer satisfaction for the 13th consecutive year in the J.D. Power Asia Pacific Survey.

Exports to Europe was adversely impacted (owing) to the slowdown in the region. The Company was able to increase presence in Africa and Latin America and (indiscernible) declined to 5.5% over the previous year. A strong yen continued to put pressure on the Company's bottom line in the first half of the year. Since then, it has turned positive and has given us some benefit in the fourth quarter results. The uncertainty about the yen will continue in the year '13-'14 also.

We will continue our program of localization for cost reduction and derisking from foreign exchange fluctuations. Commodity prices remains largely stable.

In the year, there was a merger with Suzuki Powertrain India Limited, a supplier of diesel engines and transmission to the Company. This was achieved through a share swap. The equity base of the Company has gone up from approximately 289 million shares to 302 million shares.

With the merger, the Company has brought all its diesel and petrol engine manufacturing in a single entity under direct and integrated management control. This will help in better synergies, cost management, and response to market. The result of the fourth quarter include the effect of the merger of SPIL for the full year. Hence a simple comparison of our fourth quarter results over the same period last year will not show a like-to-like comparison. However, the year – or the year comparison will be like-to-like.

In the fourth quarter, including the effect of the merger of SPIL, for the full year, the Company registered net sales of INR130,562 million and net profit of INR12,396 million. This was made possible by a better average realizations of good sales of our new models like the Swift, DZire and Ertiga, a benefit of foreign exchange rate and cost reduction and localization efforts.

For the full financial year, the Company post-merger registered net sales of INR426,125 million. Net profit for the year post merger stood at INR23,921 million.

I now come to our outlook for the financial year 2013-2014. While there are short-term concerns about the Indian economy and the growth of the automobile industry, the Company remains positive about the long-term opportunity in India. Also, what we feel from a customer's perspective, it is the best time to buy a car. Most of the capital projects, including Manesar C line with a capacity of 250,000 cars and a new facility for diesel engines in Gurgaon, with a capacity of 150,000 engines are on schedule to come up in the second half of 2013-2014. We have procured 700 acres in Gujarat and we are planning the next phase of expansion to come up sometime in 2015-16.

We will keep you updated on this plan. The exchange rate has been recently favorable, but it's always uncertain, and therefore, the focus on our localization program will continue to be strong. We hope that the year 2013-14 comes out better for the Indian economy, auto industry and for Maruti Suzuki.

We can now take your questions or observations that you may have. Thank you.

Transcript Call Date 04/26/2013

Operator: Kapil Singh, Nomura Securities.

Kapil Singh - Nomura Securities: Congrats on a very good set of numbers; clearly, surprised us. Just had a couple of questions. Firstly, on the hedging, if you could give some clarity as to for Q4, what was the hedging positions you had at what rates and what is it that you have for the next financial year?

Ajay Seth - CFO: So Q4 hedges were close to JPY90 to $1. These were the hedges that we had on an average rate for the quarter. The hedges for the next year that we've taken are about 30% of the total exposure for the next year, and these hedges have been taken at various rates, but the average blended rate would be about JPY95 to $1.

Kapil Singh - Nomura Securities: So sir, this is for total exposure or only the direct exposure?

Ajay Seth - CFO: Total exposure; total exposure.

Kapil Singh - Nomura Securities: Nothing direct plus royalty?

Ajay Seth - CFO: Absolutely.

Kapil Singh - Nomura Securities: And for Q4, what percentage was hedged?

Ajay Seth - CFO: Q4 we had hedged almost full over a period; I think a very small portion of about 2 billion was unhedged, but all the balance was hedged.

Kapil Singh - Nomura Securities: Okay, including the royalty as well?

Ajay Seth - CFO: I mean, royalty is paid only twice in a year, so the hedging of royalty would depend on the period. So it's paid in May and it's paid in November.

Kapil Singh - Nomura Securities: What I wanted to get was that was there any MTM gain on royalty for the previous quarter as well?

Ajay Seth - CFO: The MTM of royalty was created based on what the (reference aid) on 31st March was, and therefore there was some gain on account of that mark-to-market that we provided, which is not very large; which is a small gain. I think it's about INR50 crores odd. The MTM was provided on 31st March.

Kapil Singh - Nomura Securities: And on the – I also wanted to check on SPIL. Is it possible to give the sales, EBITDA, and PAT numbers for FY '13?

Rahul Bharti - GM, Corporate and Government Affairs: PAT for SPIL is INR92 crores and sales around INR6,000 crores.

Kapil Singh - Nomura Securities: And EBITDA?

Ajay Seth - CFO: EBITDA is about…

Rahul Bharti - GM, Corporate and Government Affairs: EBITDA standalone for DZire would be INR700 crores.

Kapil Singh - Nomura Securities: It should be around INR670 crores as per my calculation?

Ajay Seth - CFO: INR671.2 crores.

Kapil Singh - Nomura Securities: Sir, so basically your EBITDA has increased from INR550 crores last year to INR670 crores, but the profit after tax for SPIL has not gone up. So, just wanted some color on that, and how should we look at it going forward?

Ajay Seth - CFO: Now where did you pick up the number INR550 crores from?

Kapil Singh - Nomura Securities: Last year's number that you shared was around INR550 crores.

Ajay Seth - CFO: Yeah, so profits have not gone up because the depreciation would have gone up from the levels of last year to this year.

Kapil Singh - Nomura Securities: So, sir, going forward, should we expect full year PAT for this entity to remain at around INR100 crores? Or will there be any changes in margins et cetera because of import content or anything of that sort?

Ajay Seth - CFO: There will be changes to the extent of more localization that happens or cost savings that happens, but other than that, I think the overall numbers would remain, on a constant basis, the same as (indiscernible) but if there are some value-add that is done on localization and cost reduction that will further increase the margins.

Operator: Pramod Kumar, IDFC Securities.

Pramod Kumar - IDFC Securities: My first question pertains to your direct and indirect royalty exposure at this point of time, and also if you can throw some light on your localization program, as to how much has the exposure come down in terms of your imports, and how do you see it in the light of the movement in currencies of late?

Ajay Seth - CFO: So, last year our import content, direct and indirect put together was about 26% of our net sales, which is now down to about 19.5% of our net sales. This is as of 31 March, 2013. We will continue to work towards further improving this number in 2013, '14. So, as we said, we have a target of reducing our import content by about, between 8% to 10% over three years. We're working on that. So, you will all see that number coming down further in 2013, '14.

Pramod Kumar - IDFC Securities: So there's no rethink on this strategy because of the way the currency's supposed to move, in terms of yen has been largely talked about remaining at – or structurally settling at around 100 kind of a level, so there's no rethink on…?

Ajay Seth - CFO: When we go in for localization, it's actually a total activity of investing into equipments, and then manufacturing it locally and once that decision has been taken, there is no question of going back on this. So, therefore obviously, this is a long gestation period. So once the decision has been taken probably the real localization happens after about 1.5 years or 2 years. So therefore, this process is already on and there is no question of going back on this.

Pramod Kumar - IDFC Securities: My second question would be, how would you view your market share and margin as a balance for FY '14, because FY '13 we did extremely well. We gained favorable market share in the car segment, but lost some in the MPV, even Ertiga did help us there, but Omni and Eeco we have lost market share, and margins are now settled or coming above, much about 10 percentage points, so what would be the ideal market share margin balance, what you would like to maintain for FY '14?

Ajay Seth - CFO: Yeah, and as you said about the market share; market share, yes, you're right, we gained market share by 1% last year and it stands at 39.5%. Our endeavor will be to hold on to that type of market share.

Pramod Kumar - IDFC Securities: And margin, any – because, will you be investing more in marketing initiatives and all that, as in – I'm looking at what could be the probable margin range which you'll be comfortable with?

Ajay Seth - CFO: See, whatever is required to be done for the purpose of marketing, we'll spend the requisite money there for sure, but at the same time we'll also work towards our own internal targets on various cost reduction initiatives that we keep running every year. So, whether it's localization, value engineering, value analysis, or it is on other areas of cost reduction, so we will work towards those efficiencies to make sure that the margins are protected, but we will invest requisite amounts wherever they're required to be invested.

Pramod Kumar - IDFC Securities: Finally, on the new fuel efficiency norms by the government, which is supposed to be mandated very soon, how comfortable are we in terms of achieving it in the next three years, just so…?

Rahul Bharti - GM, Corporate and Government Affairs: The fuel efficiency norms are for a long-term, they go up to 2015, '17, '20, and even '22. So, we are looking at all the right technologies to be the best in fuel efficiency which is a USP of Maruti Suzuki.

Pramod Kumar - IDFC Securities: So, (Rahul) just wanted to understand – will it be dramatically difficult for companies like you to achieve it or you see in the normal course of business you should be able to achieve it without any significant jump in CapEx and investment in technology?

Rahul Bharti - GM, Corporate and Government Affairs: No, it's a normal program – normal course of progress that we keep doing, and it's for the good of the customer, it's for the good of the environment also.

Operator: (Govind Chinappa), Jefferies.

Govind Chinappa - Jefferies: I had a couple of questions. One was on the export market. Could you give us some details on what the total kit exports was for the fourth quarter, as well as, could you comment on all the initiatives that you have right now on the export side?

Mayank Pareek - MEO, Marketing & Sales: Yeah, I'll talk about the initiatives first. About three years back, we took a conscious call that Europe was slowing down, which accounted for almost 75% of our sales. We needed to develop alternate markets and we went on to develop markets in Latin America, as well as Africa and ASEAN countries. So in three years from dependence on Europe, which was 75%, it's come down to now, 25%. That means 75% of our sales is going to non-European markets. We got extremely encouraging response from our markets in Africa and Latin America and even ASEAN, and for this, naturally, we need to develop new markets, need to do product matrixes there, penetrate deeper there, understand the customer, all the work that are required for marketing. The subtotal, the result of this is that our export to non-European market has done really well. Our kit exports this year were at INR626 crores.

Govind Chinappa - Jefferies: INR626 crores for the full year?

Ajay Seth - CFO: Right.

Govind Chinappa - Jefferies: Second question, can you give the actual realized currency both on JPY for the fourth quarter, as well as on the export side the USD and also average discounts for cars?

Ajay Seth - CFO: On the JPY, our net rate in the fourth quarter was 0.64. That's yen to rupee. On dollar rupee, our realization of the export side was at 54.40.

Govind Chinappa - Jefferies: And discounts?

Ajay Seth - CFO: Discounts in the fourth quarter were at INR10,500.

Govind Chinappa - Jefferies: This is INR10,500 as compared to INR12,000 in the third quarter?

Ajay Seth - CFO: That's right. That's right. It's gone down. It's actually gone down.

Operator: Rashi Talwar, Ashmore Investment Advisors.

Rashi Talwar - Ashmore Investment Advisors: Just taking off from where (Govind) kind of left off was on the discounts on the cars. So is has that movement really working between petrol and diesel versus last quarter, and again incrementally, what are you seeing on petrol sales versus diesel sales and what's your outlook on that front?

Ajay Seth - CFO: See discounts have, as we mentioned that in quarter four, discounts have actually come down compared to quarter four of last year. Now, it's partially because of also the fact that we had a larger diesel mix in Q4 of this year compared to Q4 of last year and on diesel we have no discount. So, on an average the discounts actually came down. On the petrol cars, the discounts have been high and I think they are at a level which they were at in the third and the second quarter.

Rashi Talwar - Ashmore Investment Advisors: So, no improvement there?

Ajay Seth - CFO: No.

Rashi Talwar - Ashmore Investment Advisors: And incrementally on sales, incrementally mix between petrol and diesel?

Mayank Pareek - MEO, Marketing & Sales: Yeah Rashi, this is Mayank. If you see dieselization of passenger car industry happened around – started happening around three years back. At that time, 25% of total sales was diesel, which stands at more than 58% in the last fiscal. Now, of course there's some movement in terms of diesel price and raw materials, now that every month there is an increase in the diesel fuel price, but we think that basically this should settle at around 50-50; 50, petrol, 50, diesel. I don't think it will go below that.

Rashi Talwar - Ashmore Investment Advisors: Like April or incrementally what are you – what is the mix you are seeing? Has it improved from the 58 that you reached? Have you started to – is the inflection happened or with the diesel price increases happening or is it still there only?

Mayank Pareek - MEO, Marketing & Sales: No, as of now, we've not seen any change at the shop level. At the showroom level, it's still the same.

Operator: Mahantesh Sabarad, Fortune Equity.

Mahantesh Sabarad - Fortune Equity: I just wanted to know what was the royalty for the quarter. In December quarter it was about 5.6%. So, compared to that what was it this quarter, sir?

Ajay Seth - CFO: This quarter it was at 4.8% on a standalone accounts.

Mahantesh Sabarad - Fortune Equity: And in absolute amount terms, sir?

Ajay Seth - CFO: In terms of absolute amount, royalty in this quarter was at – standalone is INR605 crores.

Mahantesh Sabarad - Fortune Equity: That brings me to the second question as the merged entity, how should we look at the royalty expenditure now? Because your topline (when as) the merged entity remains the same, that means it doesn't grow larger, but the royalty expenses would tend to grow higher, right?

Ajay Seth - CFO: No, the topline would not grow, but at the same time the material cost will significantly come down, so the effect really is coming on to material cost and corresponding effect of the conversion cost will come in respective line items. Royalty will go by about 50 basis points for the full year. And so, for example, if you were to compare quarter four, royalty will go up from 4.8% to 5.3%.

Mahantesh Sabarad - Fortune Equity: And considering that the end remains where it is right now around the 100 mark to the $1?

Ajay Seth - CFO: About – this competition would have been at a slighter lower yen. It would not be at the current levels. So this would have been at the levels of March 2013, whatever the level of yen was. I think it was 94 that time.

Mahantesh Sabarad - Fortune Equity: In terms of material cost that you mentioned, once the merger happens it will be, of course, reduced. But then, what would be the total import content then with SPIL merger for you; A, as a standalone? And I remember you answered one call saying that the total import content is 19.6% of sales. That's indirect plus direct put together, am I right? And what would be the direct out of that?

Ajay Seth - CFO: See the indirect import content would be at about 11% – 11.6%, and the direct import content would be at about 8%.

Mahantesh Sabarad - Fortune Equity: And that would be more or less the space as we move forward into the next year, barring the cost localization efforts that you would write?

Ajay Seth - CFO: Right.

Mahantesh Sabarad - Fortune Equity: And that target, you mentioned was 7, 8 percentage points you would like to reduce and that's by in one year's time, sir, or should we look it at a three-year's time?

Ajay Seth - CFO: Three years' time.

Mahantesh Sabarad - Fortune Equity: It's a three-year target. Right, sir. I think that fairly answers my question. Thank you very much.

Operator: Hitesh Goel, Kotak Equities.

Hitesh Goel - Kotak Equities: In this quarter versus last quarter, have you seen most of the benefit on the indirect and direct side in this quarter at JPY90, basically? And some benefit will obviously come through because you are at JPY95 for FY '14. But just wanted to get a clarity, because we were not taking the indirect benefit in this quarter. So had the benefit on the indirect imports also come through on a q-on-a basis in this quarter?

Ajay Seth - CFO: See, direct benefits would have more or less come through; royalty benefits would have come through. Indirect is on a quarter lag. So you have not seen equal impact of the indirect import benefit, which I think will – it does in the first quarter of next year.

Hitesh Goel - Kotak Equities: And how is that discount train moving in April basically? Has there been an increase? Because most of the discounts, I think, would have started increasing in February end of March, right? So, is there an increase from this INR10,500 level that you envisaged in the first quarter?

Ajay Seth - CFO: So, discount is more or less same as last quarter.

Hitesh Goel - Kotak Equities: So it will be INR10,500 only?

Ajay Seth - CFO: Yeah, around that.

Operator: (Raghu Nandan, Asian Market Securities.)

Raghu Nandan - Asian Market Securities: Congratulations on a good set of numbers. Sir, the impact of currency benefit, as I understand, is spread across various line items. What would be the cumulative impact?

Ajay Seth - CFO: The cumulative impact in this quarter over last year on account of currency is about 130 basis points. So this is spread across royalty, indirect imports, and direct imports.

Raghu Nandan - Asian Market Securities: And just like – there has been a significant jump in other income. Is there any extraordinary there?

Ajay Seth - CFO: So, it is no extraordinary. It is the way we invest our surplus funds; most of it is invested into fixed maturity plans. And large portion of it was falling due for – we retired a large portion of it in this quarter, so therefore, the income accrued in this quarter.

Raghu Nandan - Asian Market Securities: And sir, on the tax part, again, the tax rate seems to be lower compared to the – like, previous quarter. How would you see it going forward?

Rahul Bharti - GM, Corporate and Government Affairs: The tax rate would be around the same levels going forward also, because the tax years that we have for tax-free income and certain capital expenditure would continue going forward.

Raghu Nandan - Asian Market Securities: So, what would that rate be, sir? Would it be about 24%, 25%, or would it be lower?

Rahul Bharti - GM, Corporate and Government Affairs: It would be slightly lower. It would be in the vicinity of 21%, 22%.

Raghu Nandan - Asian Market Securities: And sir, on the CCI inquiry of exclusive supply arrangement of parts and diagnostic tools, any comments on the same?

Rahul Bharti - GM, Corporate and Government Affairs: The case is sub judice, so we would not like to comment.

Raghu Nandan - Asian Market Securities: If I can have one small clarification, like do you see a recovery in the petrol vehicle sales? Like, a couple of financiers have mentioned that the demand of petrol vehicles is returning, and I think one of your peer also commented that they're seeing an increase in the contribution of petrol vehicles in the overall sales. Are you seeing any such trend in your sales mix?

Mayank Pareek - MEO, Marketing & Sales: I think too early to comment on that. As of now, we're not seeing a real significant movement in that direction.

Operator: Pramod Amthe, CIMB.

Pramod Amthe - CIMB: Two questions. One is, what has been the impact of mark-to-market of the hedges on your P&L this quarter?

Ajay Seth - CFO: There has been a 40 basis point impact (indiscernible) of mark-to-market on various hedges.

Pramod Amthe - CIMB: And second, considering that this quarter has been surprising to many analysts, going forward in terms of your market share strategy or the way you want to position your new products, what will be the thought process when the yen is at 100 versus might be at around 80, 85 to position your products versus the competition, or do you want to reevaluate some of the products which might be doing poorly into the market?

Mayank Pareek - MEO, Marketing & Sales: I think products are not positioned considering what are the exchange rates. Products are positioned considering what the customers want and where do we want to take our product. So that's something that really does not change with respect to exchange rate, and thank god for that. (Very clear); (we) would be changing our strategy every day. So, we continue to offer customers products and services which are superior in value and that's what is our core strength and we continue to do that.

Operator: Binay Singh, Morgan Stanley.

Binay Singh - Morgan Stanley: Congratulations for a good set of numbers. Just actually going back to some of the questions asked earlier, discounts have reduced from INR12,000 in December quarter to around INR10,500 in the March quarter, but when I look at diesel contribution, your diesel share was higher in December quarter versus the March quarter. So, on a sequential basis, what really led to the discount reduction?

Ajay Seth - CFO: So when we are seeing that discounts have gone up from INR10,000 to INR12,000, this is comparing Q4 of last year versus Q4 of this year. So we're not really comparing – but yes, even from quarter three of this year, discounts have come down, from INR12,159 they have come down to INR10,597.

Binay Singh - Morgan Stanley: Which is actually a bit surprising because diesel as a proportion of sales was higher in December quarter; so this quarter diesel share has actually gone down for you. So you were around 40% of sales in December quarter; you're 36% of sales this quarter, which means that either petrol discounts have come down, which are – so just wanted to understand that. Maybe I have some data (wrong).

Ajay Seth - CFO: Are you looking at the percentage or are you looking at absolute volumes of diesel in third quarter and fourth quarter? Because sales in fourth quarter are much larger than sales in third quarter? So, therefore, absolute volumes would be different, and therefore, discounts therefore would on an average vary. Let me just – so, diesel proportion has actually gone up from Q3 to Q4. In Q3 we sold – the total number that we sold in Q3 were 1,07,000; now we have sold 1,12,000. So, there will be some impact on the basis of that per vehicle discounts on this (coming out).

Binay Singh - Morgan Stanley: Secondly like we have been talking about localization plans. Earlier we used to mention that localization will actually lead to benefit for us in terms of components will be cheaper if you make domestically. When yen is at, 100, does the benefit still remain?

Ajay Seth - CFO: Yeah, yeah, definitely. It will remain.

Binay Singh - Morgan Stanley: So, could you quantify like earlier, we used to say that it could be almost – sort of, it could be close to 100 basis point plus of margin gain eventually, when you're able to do an entire 6%, 7% drop in exposure. What will be that number at these rates?

Ajay Seth - CFO: So, I mean, to quantify that in terms of margin (it's a little bit) difficult, but we can say that at least 10% to 15% saving would still be possible when yen is at 100 on whatever we localize.

Binay Singh - Morgan Stanley: Moving on to SPIL, will the depreciation charge on an annual basis in SPIL drop in FY '14 because that's been – because your assets must be going through that eight-year cycle. If so, what is the percentage drop?

Ajay Seth - CFO: So, we will get back to you on the exact amount. That will drop, but yes, the eight years get complete in 2014, '15, that's when the initial plan is capitalized and once that's over, then you will see a drop in depreciation.

Binay Singh - Morgan Stanley: Lastly, just a question for Mr. Mayank Pareek, earlier this month, he gave a comment that, he's seeing some bit of improvement at the ground level, just to hear his thoughts more on that, what exactly sort of drove that commentary?

Mayank Pareek - MEO, Marketing & Sales: Yeah, actually, what we're seeing on the ground level is that customer inflow is a little better than what it used to be last year and that's why the industry which grew only 2% last year, this year we are forecasting 5% also, so that means that we're almost of double of what happened last year, percentage growth.

Binay Singh - Morgan Stanley: So, it wasn't just a March phenomenon, because March generally sees a pickup in customer footfalls and all?

Mayank Pareek - MEO, Marketing & Sales: No, no, March is just one month, but overall I think this year, (indiscernible), we should see a growth of 5% to 6%, which will be almost double of what happened last year, more than double actually.

Operator: Chirag Shah, Axis Capital.

Chirag Shah - Axis: First question is a follow-up on this lowering of import content, this 19% would also be because of merger of SPIL from 26% last year to 19%, is it like-to-like comparison or…?

Ajay Seth - CFO: Chirag, it is exactly like-to-like comparison because when we take import content, we take both direct and indirect import content.

Chirag Shah - Axis: And this is in rupee term, we're talking about or it would be in yen denomination?

Ajay Seth - CFO: This is in rupee term that I'm talking about.

Chirag Shah - Axis: In terms of yen denomination would it be at similar levels, what would be the drop over there?

Ajay Seth - CFO: Part of it would've come because of the yen improvement, so, from 26%, half of it, the deduction that we see half of it would've come because of the currency improvement and half of it would've come because of the localization efforts put in.

Chirag Shah - Axis: The second point was on depreciation, percentage, the growth for SPIL, can you just share that number?

Ajay Seth - CFO: Depreciation percentage of gross block?

Chirag Shah - Axis: Yeah.

Ajay Seth - CFO: We'll get back to you on that. We don't have that exact number.

Chirag Shah - Axis: Because in Maruti standalone is now at 4.5%...

Ajay Seth - CFO: I can give you the total depreciation charge on SPIL. It's INR481 crores for the year.

Chirag Shah - Axis: Is it possible to say the gross block of SPIL?

Ajay Seth - CFO: We will get back to you on that number. We don't have it.

Chirag Shah - Axis: One question on this discount that you've highlighted. Even if I take the number that is shared on the diesel mix between Q3 and Q4 and I proportion the entire discounts for the year for the quarter only on petrol vehicles, even then there is a reduction in discount sequentially from something like INR18,700 to something like INR15,700. Would it be because of new Alto or some new products were launched and can you run through what introductions you did in 1Q in terms of product?

Mayank Pareek - MEO, Marketing & Sales: Yeah Chirag, I'll take that, see, when we say discount on petrol, there are some petrol models where there's no discount. For example, DZire petrol and Swift petrol, we don't give any discounts. So, while their numbers have increased there's no discounts, so you'll find the net change and of course, new Alto when we launched on 16 October last year, that also gave us benefit. The discounts on that are much relatively lesser than what it used to be earlier.

Chirag Shah - Axis: Last question would be on Ertiga; can you just share some thoughts because discounts on Ertiga are coming back, and while discounts month on month we have seen reduction across products for Maruti except for Ertiga, and also volumes of Ertiga are now stagnating in a sense. What is your thought process on Ertiga, and what is the kind of potential you have for Ertiga?

Mayank Pareek - MEO, Marketing & Sales: Yeah, as you know Ertiga was launched on 24 April, 2012 and the first year it has sold more than or around 80,000 vehicle and is among the top 10 selling cars. So, that proves that it has really created a place for itself in Indian market. As far as discount, it is actually function of the overall market and what competitors are doing and naturally you need to respond to that, but still if you see, discount on Ertiga are actually, very, very well controlled and product is doing really well and it is bringing incremental sale to us.

Chirag Shah - Axis: Just wanted to understand what is the kind of opportunity you see for Ertiga in current form, in terms of growth opportunity, in terms of customer diversification and in terms of product reach. Is it well reached to all the interior in terms of acceptance or there are still opportunities to explore for you?

Mayank Pareek - MEO, Marketing & Sales: Yeah, acceptance wide, I think it has got all India, otherwise it wouldn't have sold 80,000 in the first year itself. Naturally it's an ongoing process, we continue to find new niches and new areas to promote the brand.

Operator: Jamshed Dadabhoy, Citigroup.

Jamshed Dadabhoy - Citigroup: Could you give us a sense of what your cash CapEx was in FY '13 and what it'll be like for FY '14 and FY '15?

Ajay Seth - CFO: The cash CapEx this year was INR2,700 crores and we will, we've said and we will be incurring about INR3,000 crores CapEx next year.

Jamshed Dadabhoy - Citigroup: This is including SPIL right?

Ajay Seth - CFO: This does not include SPIL.

Jamshed Dadabhoy - Citigroup: No, including SPIL since it's now consolidated in the books, how much would it be?

Ajay Seth - CFO: I will have to get back to you on the exact number on that account.

Jamshed Dadabhoy - Citigroup: Would it be a meaningful number?

Ajay Seth - CFO: No, it will not be a very big number.

Jamshed Dadabhoy - Citigroup: Could you give some sense in terms of your model – not model lineup, but how you all are planning to utilize the diesel capacity or the diesel engines once they've come through? I guess, the question is that you will have about 700,000 diesel engines and then you'll have petrol capacity of another 700,000 odd. So, how do you look to balance this, assuming that, petrol, diesel, the mix shift's slightly back in favor of petrol.

Mayank Pareek - MEO, Marketing & Sales: See Jamshed, if you see overall market, (indiscernible) total in the industry, 58% has been the diesel demand, against that, our share of diesel is only 37% of our sales. So, we are still catching up, so I think we have enough demand and wherewithal in the market to absorb the additional capacity we are creating. In fact, this is a reacting capacity not a proactive capacity in anticipation of something, even with what numbers which we say will be below what the market ratio of diesel is. So, we are quite confident about what is coming and we'll be able to absorb it.

Jamshed Dadabhoy - Citigroup: Is there any sense that, let's say that, the petrol demand swings back sharply from say, 80-20 or 70-30 to say 60-40 or 50-50, you all would have a neutralized diesel capacity. Is there any plan or thought process that you'll have, a model which will plug this for example a crossover or an SUV or something?

Mayank Pareek - MEO, Marketing & Sales: This looks like a very hypothetical question and actually answering to a hypothetical question is asserting a guess. So, let's wait for some other time to discuss this.

Operator: (Govind Chinappa), Jefferies.

Govind Chinappa - Jefferies: It's a follow-up question to the few questions that have come earlier. So, we've seen huge movement across segments of the car industry, now between small cars, large cars and UVs, between petrol and diesel. Now, over the next three years, how have you planned your new model launches; where is most of your focus in terms of both the fuel option as well as in terms of which segment you'll be focusing on?

Mayank Pareek - MEO, Marketing & Sales: Yeah, see, as a market leader, our stance is that to maintain and sustain the leadership. We need to be present in all the segment. And this is what we continue to do. We follow basically three product strategies; one is to continue to reinforce our existing lineup by bringing new technologies. Like, a couple of years back we introduced K-series engine to really revamp all the products. Second strategy is to launch new products in existing segments. (In the) segment, and we reinforce, as you know, we follow multi-model strategy in each segment. So, K – although (F8) was there, we launched K10. So this is the second strategy. And third strategy is to continue to launch new products in new segments; create new segments. Example of that is Ertiga. And needless to mention, we need to follow all the three strategies going forward, which we'll keep on doing.

Govind Chinappa - Jefferies: Yeah, but is it fair to say that right now while you've done extremely well with Ertiga and the UV segment, your market share in mid-teens is much below where it is for the small car segment? And would it be fair to say that you would be targeting market share in UV similar to what you have in small cars?

Mayank Pareek - MEO, Marketing & Sales: Yeah, see, there are some obvious conjectures which you can make, but as a Company policy, we'll not like to talk about future product lineups.

Govind Chinappa - Jefferies: Okay, I am asking for the direction over the next three years; I mean, I'm not interested in the next one year?

Mayank Pareek - MEO, Marketing & Sales: Direction, I gave you; we'll follow this three-pronged strategy for new product development, and as you know, in the car industry product lineups are developed much in advance. We work almost on 10-year rolling program for new products and we are working on that. But more than that, please appreciate, it'll not be fair to share product-specific information at this stage.

Operator: Sonal Gupta, UBS.

Sonal Gupta - UBS Securities: Could you just run – because there is a very sharp margin improvement; you had 8.1% EBITDA margin last quarter and 10.6% this quarter. So on a sequential basis, I mean what – can you just break down how much is coming because of price increases, how much is FX, how much is MTM gain? Can you just break that down for us?

Ajay Seth - CFO: See, variety of reasons, as we mentioned. There has been actual material costs reduction from Q3 this year to Q4 of this year. Of course…

Sonal Gupta - UBS Securities: But would that be yen benefit or that's something else additional?

Ajay Seth - CFO: They will be both; some yen benefit. And, in fact, in material cost, only a small portion of yen benefit would have come, because indirect compensation is the (quarter less), so indirect rates are still of the third quarter. So I'll come to the specifics. So, second is, of course, that we had a January price increase, so there was some correction because of that. Third, of course, is on account of exchange rate on direct imports as well as on the royalty. So you see immediate effect on royalty going down. And then there are other reasons; small reasons, but material cost reduction has been 130 basis points, which is partially because of the yen and largely because of the cost reduction and localization. Exchange rate impact from the third quarter to the fourth quarter is favorable by 120 basis points.

Sonal Gupta - UBS Securities: Sorry, and the raw material cost you said was 130?

Ajay Seth - CFO: Yeah. That's 2.5. Selling price is giving us about 1%. Other operating income is lower by about 30 basis points, so that makes up for that increase.

Sonal Gupta - UBS Securities: If you would just give – this as a housekeeping question. I mean, in terms of your rural sales for the full year, how much was that and just the industry, how much did the petrol cars decline by in FY '13?

Mayank Pareek - MEO, Marketing & Sales: As far as rural market's concerned, our rural sales increased by almost 15% last year and it accounts for around 28% of our total sales.

Sonal Gupta - UBS Securities: What is the industry growth of diesel and petrol? Would you be able to share those numbers?

Mayank Pareek - MEO, Marketing & Sales: Industry actually in petrol has shown a de-growth. Industry has declined by 17%, and petrol – and diesel has grown by 23%.

Operator: Amyn Pirani, Deutsche Bank.

Srini Rao - Deutsche Bank: This is Srini here. My question is particularly on the demand side, the entry level demand. Are you seeing any signs of it even strengthening minimally or footfalls increasing at your dealerships, any feedback on that would be useful.

Mayank Pareek - MEO, Marketing & Sales: No Srini. We're not seeing that demand up.

Srini Rao - Deutsche Bank: So, it still continues at the same trends which we saw in the last two to three quarters…

Mayank Pareek - MEO, Marketing & Sales: You're right.

Srini Rao - Deutsche Bank: So, more generally on the discounts which you're seeing from the competition, are you seeing stability or you're seeing potentially increasing in pockets?

Mayank Pareek - MEO, Marketing & Sales: Actually they're stable only for the reason because they are at the peak actually.

Srini Rao - Deutsche Bank: Fair enough. There's very little room to actually to go up.

Operator: Anish Shah, Quantum Advisors.

Anish Shah - Quantum Advisors: I just had two questions; one was on the labor situation. Can you just comment on how stable is that and what are their current demands or grievances? And the second question is pertaining to – if we generally observe, it looks like many of the commodities will still see weaker prices going ahead. So does that in any way change your strategy of procuring? Would you be buying more of your future requirements now, and how does it actually affect the margins? If you can briefly comment on these two?

Rahul Bharti - GM, Corporate and Government Affairs: I'll take the first question. The labor situation is quite peaceful, and we have good relations and communication on the shop floor.

Mayank Pareek - MEO, Marketing & Sales: And as far as the commodities are concerned, I mean, we basically do a three-monthly or a six-monthly contract. Whenever the prices are down, then we generally tend to make a contract at that point in time, so therefore, definitely, going forward we see that probably our expenses will be marginally down.

Anish Shah - Quantum Advisors: Sorry, your expenses will be?

Mayank Pareek - MEO, Marketing & Sales: Marginally down.

Anish Shah - Quantum Advisors: But from a labor issue point, now things are stable there are no fresh demands and you don't – at least foreseeable, you're not seeing any challenges over there?

Mayank Pareek - MEO, Marketing & Sales: No, nothing of the sort.

Operator: Ladies and gentlemen, that was the last question. I would now like to hand over the conference back to Mr. Ambrish Mishra for closing comments.

Ambrish Mishra - JM Financials: Thank you, Marina. On behalf of JM Financial Institutional Securities, I would like to thank the senior management team of Maruti Suzuki India Limited for taking their time out for this call. I would also like to thank the participants for their participation. Thanks all and have a nice day.

Ajay Seth - CFO: Thank you.