TITLE: Relationship of Nifty 50 and Maruti Suzuki India Limited
AUTHOR: Marilyn Sequeira
INTRODUCTION
Maruti Suzuki India Limited (MSIL), a subsidiary of Suzuki Motor Corporation, Japan, is India’s largest passenger car maker. Maruti Suzuki is credited with having ushered in the automobile revolution in the country. The Company is engaged in the business of manufacturing and sale of passenger vehicles in India. Making a small beginning with the iconic Maruti 800 car, Maruti Suzuki today has a vast portfolio of 16 car models with over 150 variants. Maruti Suzuki’s product range extends from entry level small cars like Alto 800, Alto K10 to the luxury sedan Ciaz. Other activities include facilitation of pre-owned car sales fleet management, car financing. The Company has manufacturing facilities in Gurgaon and Manesar in Haryana and a state-of-the-art R&D centre in Rohtak, Haryana.
The Company, formerly known as Maruti Udyog Limited, was incorporated as a joint venture between the Government of India and Suzuki Motor Corporation, Japan in February, 1981. Presently, Suzuki Motor Corporation owns equity of 56.2%. The Company’s shares are traded on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
OBJECTIVE –
To calculate beta of the company and find its significance
DATA VIEWS AND REVIEWS –
1) Price Hikes and Discounts: The company took a weighted average price hike of 2% in Jan’22 [Jan’21 (1.3%), Apr’21 (1.6%),
Jul’21 (small increase), Sep’21 (1.9%)] – the full impact of this will reflect in Q4FY22. Discount per vehicle declined to Rs 15,200 in
Q3FY22 from Rs 18,567 in Q2FY22 and Rs 20,185 in Q3FY21. Maruti’s Q2FY22 retails stood at 392k.
2) CNG Penetration: The CNG penetration for MSIL is over 15% YTD FY22 with a high waiting period across models. In models with
the CNG option, the share is over 30%. FY22 CNG volumes are expected at over 235,000 units in comparison with ~160,000 units
in FY21. Out of the order book of 264k units, 44% is for CNG models. MSIL offers CNG in 8 out of its 15 models. The company
launched the new CNG variant of all-new Celerio, which is receiving a good response from its customers. Rising gasoline prices
and mileage benefits are the key drivers for this CNG variant.
3) Exports Demand: The management expects export to be a key growth driver going forward, given the improving scenario in other
geographies. The company exported the highest ever volumes in CY21 and management expects to sustain the run-rate going
forward. Export growth is being driven by the expansion of products and entry into newer markets. Q3FY22 export revenue stood at
Rs 3,343 Cr.
4) Focus on SUV segment: MSIL is planning new model launches in the SUV segment over the next two years to regain its market
share. We understand the company is looking to launch 4-6 new models across entry and mid-size SUVs to address white spaces
in the portfolio and strengthen its product portfolio. However, it remains to be seen how the models fare given the highly competitive
scenario in the SUV segment and high diesel penetration in the mid-size SUV segment (58% currently).
5) SMG Plant: Gujarat plant production stood at 1.4 Lc units in Q3FY22 as compared to 1.2 Lc units in Q2FY22. MSIL’s current full
capacity is at 0.55 Mn vehicles per quarter or 2.2 Mn per annum including SMG Plant.
6) Other takeaways:
Capex guidance for FY22 stands at Rs 5,500 Cr out of which Rs 2233 Cr has been incurred in YTD. The Capex will be towards
production development/R&D efforts, plant-related investments and strengthening of marketing infrastructure.
Royalty for the quarter stood at 3.6% of sales.
MSIL’s Retail market share stood at 49.9% in Dec’21. MSIL is targeting a market share of 50% in the coming years, supported
by new products. It expects to fill whitespaces in SUVs going ahead.
MSIL and Toyota have jointly set up a scrapping facility with a capacity of 24,000 units annually.
MSIL has the lowest CO2 emissions is focused more on CNG (~25% lower CO2) and hybrid (40% lower CO2) and remains
best placed for the upcoming CAFÉ-2 norms.
On the regulation about 6 airbags, MSIL is engaging with the ministry as it is not just about costs, but also about feasibility and
supply chain issues. The company has not yet done any cost analysis on this.
DATA COLLECTION –
Data of index and equity were collected from https://www1.nseindia.com/ and https://www.nseindia.com/ respectively. Daily returns from 1st March-2021 to 28 Feb-2022 were downloaded in excel format from these websites and it was sorted into weekly format. Then weekly returns were calculated for both index and equity and then regression analysis was done.
DATA ANALYSIS –
Predicted Y = -0.1765 -0.35117X
( -1.79297)
N=46, R Square= 0.068087, F= 3.214731
Tstat(beta) = -1.79297
The above regression equation tells us the relationship between X and Y. Where X is NIFTY’s weekly returns and Y is Maruti Suzuki India Ltd.’s weekly returns.
The negative sign tells us the that there is an inverse relationship between them. If X rises, Y falls. From the equation, it can be seen that if X rises by 1 unit, Y will fall by 0.35117 units.
Figure in bracket is t-stat of β which is which is less than the table value which means β is not statistically significant at 5% level.
R^2 is 0.068087 which means 6.809% of Y (Maruti Suzuki) is explained by X and the balance is explained by error.
F is 3.214731 which is more than table value which means model is statistically significant at 5% level.