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Maruti Udyog, Goodlass Nerolac Paints, DCW

MARUTI UDYOG Smooth Drive Maruti Udyog (MUL), a joint venture between the government of India (GoI) and Suzuki Motors, Japan, is India

Companias

MARUTI UDYOG

Smooth Drive

M
aruti Udyog (MUL), a joint venture between the government of India (GoI) and Suzuki Motors, Japan, is India’s largest automobile company, with three plants located at Gurgaon in Haryana, and has a combined capability of 5,00,000 units per annum. The first car produced by the company was Maruti 800 in the small cars segment. Afterwards, it diversified into mid-size cars like Zen, Alto, WagonR, Esteem, Versa, the recently launched compact car Swift and also into the luxury segment with cars such as Baleno. All these models became market leaders in their respective segments, despite severe competition from rivals. The company holds a market share of 54.5 per cent in passenger cars and multipurpose vehicles. Recently, GoI divested 8 per cent shares in MUL and is now left with only 10 per cent.

During 2004-05, MUL posted strong financial results. Its net sales grew by 20 per cent to Rs 10,910 crore and net profit rose by 57 per cent to Rs 853 crore over 2003-04. For 2004-05, the company achieved its highest ever domestic sales volume of 4,87,402 units, a rise of 16 per cent. MUL exported 48,899 vehicles to around 50 countries, including 10,623 units to UK, 5,792 units to Algeria, 5,657 units to Hungary, 4,192 units to Denmark and 3,193 units to the Netherlands. Spare parts and accessories business witnessed a growth of approximately 16 per cent in 2004-05 over 2003-04. Maruti’s market share in utility vehicles rose marginally to

2.95 per cent in 2004-05 as compared to
2.5 per cent in 2003-04.

MUL in collaboration with Suzuki Motors Corporation has established a new company, Maruti Suzuki Automobiles India for setting up a new manufacturing plant with a total investment of Rs 1,524 crore and an initial capacity of 1,00,000 cars per annum. The company is also setting up a new factory for manufacturing diesel engines, petrol engines and transmission assemblies for four wheeled vehicles. This project is being implemented by the joint venture company namely, Suzuki Metal India. The total plant capacity will be 3,00,000 diesel engines per annum which would be developed in phases. The initial annual capacity will be 1,00,000 diesel engines, 20,000 petrol engines and 1,40,000 transmission assemblies with a total investment of Rs 1,748 crore.

On the back of strong research and development Maruti introduced upgraded versions of the Esteem, Maruti 800 and Omni, completely designed and styled inhouse. To modernise the spare parts warehouse MUL implemented bar coding and an advanced information technology system. In compliance with the superior emission norms for vehicles introduced across the country, MUL launched Bharat stage III variants. The company is offering fuel efficiency on its cars and in a month’s time it is expected to launch the dual-fuel version of the WagonR that can also run on liquefied petroleum gas.

For the nine months ended December 2005, MUL reported healthy financial performance. Its net sales in value terms increased by 11 per cent to Rs 8,743 crore over the corresponding period a year ago and net profit reported a 39 per cent rise to Rs 828 crore, riding on higher profits per car, surging sales and on account of lower interest payments and depreciation. For April-December 2005, the domestic sale of vehicles increased by 8 per cent to 3,80,763 units. However, export volumes dipped by 29.7 per cent to 26,656 units over the same period of the previous year. Maruti Udyog’s sales for the month of January 2006 stood at 48,526 units in the domestic market, a growth of 7.1 per cent and exports declined 51 per cent to 1,583 units as compared to January 2005. GOODLASS NEROLAC PAINTS

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Market Leader

G
oodlass Nerolac Paints (GNP), the Indian subsidiary of Japan-based Kansai Paints Company, is India’s secondlargest paint company. The company is the market leader in industrial coatings, with a dominant position as the paint supplier for the automobile and architectural coatings segment. The company has about a 14 per cent market share in the decorative paints segment. GNP has five manufacturing facilities spread across India. For the first time in India, GNP adopted acrylic cathodic electro deposition (ACED) technology for the industrial and automobile paints segment.

GNP registered a strong financial performance during 2004-05. Its net sales stood at Rs 879 crore, reflecting a growth of 15.6 per cent, and net profit surged by

58.6 per cent to Rs 92 crore, as compared to 2003-04. The company achieved healthy results on the back of better working capital management. During the year under review, the company successfully commissioned its greenfield plant with a capacity of 20,400 metric tonne per annum at Bawal in Haryana.

Kansai, the parent company of GNP, continues its support by providing inputs for the manufacturing process and latest technology. GNP also has a technical assistance agreement with a US-based company for automobile coatings, a Japanese company for manufacturing heat resistant paints and a German company for anodic electro deposition coating systems. GNP formed a joint venture with Japan’s Kansai Paint Company to acquire the paint business of a Malaysian company Sime Coatings Sdn Bhd. GNP holds a 55 per cent share in the joint venture company. GNP is targeting the premium paints segment by broadening its product portfolio. The company will introduce new products such as anti-bacterial finish paints. Another step in this direction is the launch of a new range of paints called ‘Nerolac Disney’ mainly aimed at children. The new product pack consists of two elements: paint for the wall and custom-made stencils of Disney cartoon characters, across all metropolitan cities in India.

GNP posted strong results for nine months ended December 2005. Its net sales rose by 14.6 per cent to Rs 776 crore and net profit jumped by 61 per cent to Rs 117.7 crore over the same period of the previous year.

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Economic and Political Weekly February 25, 2006

The Week’s Companies (Rs lakh) DCW
Maruti Goodlass DCW
Udyog Nerolac
Financial Indicators 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04
Income/Appropriations
1 Net sales 1091080 908120 87949 76046 67512 60578
2 Value of production 1102120 907980 85411 74254 66440 60852
3 Other income 38570 31940 1158 539 857 319
4 Total income 1140690 939920 86569 74793 67297 61171
Raw materials/stores and spares/
power and fuel consumed 870830 713350 52153 45161 51235 44443
6 Other manufacturing expenses 0 0 697 719 1294 2792
7 Remuneration to employees 19600 29750 4930 5251 3314 3481
8 Other expenses 76220 74610 13977 12890 7010 6063
9 Depreciation 45680 49490 2070 2204 2074 2312
Gross profit 128360 72720 12741 8568 2369 2079
11 Interest 3600 4340 77 132 72 309
12 Operating profit 124760 68380 12664 8436 2297 1770
13 Non-operating surplus/deficit 5730 8600 1062 440 71 158
14 Profit before tax 130490 76980 13726 8876 2368 1929
Tax provisions 45130 22770 4530 3080 264 -209
16 Profit after tax 85360 54210 9196 5796 2103 2138
17 Dividends (includes tax on dist profit) 5780 4330 2933 1913 414 345
18 Retained profits 79580 49880 6262 3883 1689 1793
Liabilities/assets
19 Paid-up capital 14450 14450 2551 1530 3451 3451
Reserves and surplus 423430 344670 29789 24963 18568 16987
21 Long-term loan 7000 10000 8365 6914 3721 3735
22 Short-term loan 23000 20000 349 128 3449 735
(i) of which, bank borrowings 760 1190 349 128 3449 735
23 Gross fixed assets 509520 464160 32360 25492 55745 51594
24 Accumulated depreciation 317940 273590 16163 14515 26872 24980
Inventories 66660 43980 11456 10721 7986 9647
26 Total assets/liabilities 236466 560190 62134 51083 47193 42222
Miscellaneous items
27 Excise duty 238060 193840 13683 11452 9455 8559
28 Gross value added 155750 120560 19131 16103 7509 8189
29 Total foreign exchange earnings 98300 94180 96 30 7271 3645
Total foreign exchange outgo 190180 131200 12204 9171 30742 24169
Key financial and performance ratios
31 Turnover ratio (sales to total assets) 3.3 2.0 1.8 1.8 1.7 1.7
32 Gross value added to gross
fixed assets (%) 32.0 26.3 66.1 68.4 14.0 16.2
33 Return on investment (gross profit
to total assets) (%) 32.2 13.5 22.5 17.9 5.3 5.1
34 Gross profit to sales
(gross margin) (%) 11.8 8.0 14.5 11.3 3.5 3.4
Operating profit to sales (%) 11.4 7.5 14.4 11.1 3.4 2.9
36 Profit before tax to sales (%) 12.0 8.5 15.6 11.7 3.5 3.2
37 Tax provisions to profit before tax (%) 34.6 29.6 33.0 34.7 11.2 -10.8
38 Profit after tax to net worth
(return on equity) (%) 21.4 16.2 31.3 23.5 9.9 10.9
39 Dividend (%) 34.3 26.1 98.7 109.0 10.4 8.7
Earnings per share (Rs) 29.5 18.8 36.1 37.9 6.1 6.2
41 Book value per share (Rs) 151.6 124.3 126.8 173.1 63.8 59.2
42 P/E ratio (multiple) 15.8 31.5 15.1 12.7 5.7 5.1
43 Debt-equity ratio (adjusted for
revaluation) 0.07 0.08 0.27 0.27 0.33 0.22
44 Short-term bank borrowings
to inventories (%) 1.1 2.7 3.1 1.2 43.2 7.6
Sundry creditors to sundry
debtors (%) 77.3 58.7 134.1 108.8 25.1 32.9
46 Total remuneration to employees
to value added (%) 12.6 24.7 25.8 32.6 44.1 42.5
47 Total remunerations to employees
to value of production (%) 1.8 3.3 5.8 7.1 5.0 5.7
48 Gross fixed assets formation
(% growth) 9.8 2.6 26.9 18.0 8.0 3.7
49 Growth in inventories (%) 51.6 -9.7 6.9 6.3 -17.2 23.6

Lagging Behind

D
CW, formerly known as Dhrangadhra Chemical Works incorporated in 1939, is a manufacturer of basic chemicals such as caustic soda, soda ash, PVC resins, ammonium bicarbonate and other chemicals. It has diversified operations with three segments, namely, PVC contributing 55 per cent to its revenue followed by chlor alkali and soda ash with 28.5 per cent and 16.5 per cent shares, respectively. The soda ash plant is situated at Dhrangadhra, while the caustic soda division, PVC division and chlor division are located at Sahupuram in Tamil Nadu. The company continues to be a major player in south India with a market share of approximately 15 per cent in caustic soda.

Despite a rise of 11.4 per cent in net sales to Rs 675 crore during 2004-05, DCW’s net profit declined marginally by 1.6 per cent to Rs 21 crore over 2003-04. The company’s export registered a whopping 101 per cent increase to Rs 72 crore during the year under review. The sales turnover of the PVC division rose by 14 per cent to Rs 426 crore as compared to 2003-04. The caustic soda division registered a growth of 12 per cent in sales to Rs 217 crore during the year under review and soda ash reported a marginal increase of

1.6 per cent to Rs 122.8 crore over the same period of the previous year.

Seven out of DCW’s 14 new windmills in Tamil Nadu with a capacity of 11.2 mega watt, have commenced production and are selling power to Tamil Nadu Electricity Board. The remaining seven are expected to be commissioned by the end of 2006. In order to utilise the unfiltered waste effluent at the soda ash unit, the company has undertaken a project to manufacture calcium chloride, edible salt and regenerate water.

Despite a decline of 7.6 per cent in net sales to Rs 444 crore for first nine months ended December 2005, DCW posted an 11 per cent increase in net profit to Rs 17 crore, over the same period of the previous year. Division-wise soda ash’s sales revenue grew by 21 per cent to Rs 87 crore during April-December 2005; the caustic soda division reported a marginal 0.1 per cent rise to Rs 137 crore over the same period of the previous year. However, the PVC division’s revenue dipped by 20 per

Notes: P/E multiples are the latest with corresponding last year’s figures. cent to Rs 215 crore.

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Economic and Political Weekly February 25, 2006

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