Maruti Suzuki has accomplished a feat that none of the Indian manufacturers with a foreign parent has managed to do so far. Market Value of Maruti has surpassed that of Japanese parent company Suzuki. The leading automobile manufacturer in the country has outshined Suzuki Motor, its parent company in the country in terms of market value. The stock of Maruti surged 65 percent in the last year increasing its market capitalization to about 19.73 billion translating to Rs 1.26 lakh crore as per the closing stock price on Tuesday of Rs 4,158.80 on BSE (Bombay Stock Exchange).
The stellar operational and financial performance of the sluggish automobile market alongside the rosy outlook has helped Maurti drive its stock rally. Suzuki experienced a bumpy ride in the past few years with the sales of its vehicles weakening in almost all the prominent markets other than Asia. The brightest spot for the Japanese manufacturer is its Indian unit that has transitioned into the company’s biggest money spinner resulting in a quarter of the revenue along with a large chunk of profit.
Other than Maruti, none of the other constituents of the CNX MNC that is an index that captures the stock performance of the leading MNC subsidiaries haa a market cap that is close that of its parent company. For instance, the market value of Hindustan Unilever is 22 percent of its parent Unilever that is an Anglo Dutch company. Also, the market value of Castrol India is only 3 percent of its parent company Bharat Petroleum. Likewise, Maruti’s parent Suzuki also had an upper hand over in the past.
As per the data compiled by the ETIG show, Suzuki’s market cap was $5.6 billon more than Maruti on an average ever since the listing of the Indian unit of the company in the year 2003. As Maruti has taken a lead over Suzuki now, there are increased chances for the same to widen further. Even the investors and analysts are bullish on the Indian manufacturer more than its parent. The analysts have been upgrading their earning consistently and they estimate that Maruti on multiple triggers including failing discounts that adds to higher efficiency and margins as more vehicles roll out from the factories. This will add more volume growth with new launches and enhanced economy.
It is expected that the earnings per share of Maruti will be around Rs 278 in the fiscal year 2018, while the same is Rs 126 this year. On the other hand, Suzuki’s earnings performance is weakening in Japan and market out of Asia. The company reported a 4 percent decrease in the operating profit for the fourth quarter of the 2015 fiscal year and it is estimated to increase by 6 percent in the 2016 fiscal.
