Topic Name: Relationship of Maruti Suzuki India Ltd. with NIFTY.
Author: Mohammed Muizz Khalil Ahmed Surve, Roll No. :0222121
Introduction: Maruti Suzuki India Ltd is the largest car manufacturer in India, founded in 1981 as a joint venture between Maruti Udyog Ltd and Suzuki Motor Corporation of Japan. With its headquarters in New Delhi, the company has played a pivotal role in shaping the Indian automobile industry. Renowned for its affordable and fuel-efficient vehicles, Maruti Suzuki offers a wide range of cars, including hatchbacks, sedans, SUVs, and compact cars, catering to various segments of the market. The brand’s popularity stems from its strong distribution network, quality products, and consistent focus on customer satisfaction, making it a dominant force in the Indian automotive market.
Objective: To calculate beta of Maruti Suzuki India Ltd. and find out its significance.
Views & reviews: R.C. Bhargava(Chairman) Your Company has been financing all investments from internal resources. This has enabled us to be a strong and resilient Company. I believe our share price could never have crossed `10,000 if we had not followed prudent financial practices. One of the very valuable lessons I learnt from Osamu San was that the magic mantra for growth is to maximise earnings and to reinvest in growth. Your Company’s frugal style of management and financial policies, practiced for 40 years, have created the ability to withstand any kind of shocks from the market and make investments as necessary. As I am sure all of you are aware, we are now planning to increase our manufacturing capacity by another 2 million cars a year by FY 2030-31. The required investments will all come from internal resources. While we do not expect the car industry to grow in double digits, like what happened in China in the past, we do expect that a 6% growth rate will be maintained till FY 2030-31. In FY 2023-24, your Company expects to grow at a slightly higher rate. Along with the rising domestic demand, the prospects for exports are also expected to continue to improve. Our exports rose to 259,000 units last year. We expect the demand for exports to continue to grow and export volumes are projected at 750,000-800,000 cars by FY 2030-31. The domestic plus export requirements have made it necessary for your Company to add another 2 million manufacturing capacity. Work is progressing at the first site in Kharkhoda, Haryana, and it is expected that the first plant of 250,000 capacity will start production in the first half of 2025. Thereafter, one similar plant will be added each year to reach a capacity of one million. At the same time, we are in the process of selecting a second site for adding another one million capacity by FY 2030-31.
H.Takeuchi(Managing Director and CEO) The unexpectedly large success of Maruti created wide awareness in Japan about India and the exciting possibilities of the two countries working together in the manufacturing sector. Over the years the economic as well as political ties between our countries have continued to strengthen. All of us fully recognize that this situation has come about because of the trust that Mr. O. Suzuki showed in the Indian management, his love for this country and the continued help and support that SMC, and all members of that company have continued to give us. It has been demonstrated that when two countries work in the true spirit of partnership, with trust and confidence in each other, the outcome has to be wins for both partners. We look forward to reaching greater heights in the future with the support and guidance of SMC. To mark 40 years of this wonderful partnership your company is intending to launch a number of new initiatives. These will be announced at the appropriate time and place. I am confident that all of you will find them of great interest and value.
Data collection:
Data for the period(01-07-2022 to 30-06-2023) has been downloaded from NSE India site & weekly closing prices were found out then weekly returns of NIFTY & weekly returns of Maruti Suzuki India Ltd. were calculated. NIFTY returns were taken as “X” & equity returns were as “Y”. Y was regressed on “X”.
Data Analysis: Equation “Y= -0.3680 + 0.2347 (X)”
(tstat = 1.0108)
n = 50, R2 = 0.02084, F = 1.02170
The above equation shows the relationship between the closing price of Nifty 50 (x) and the closing price of Maruti Suzuki India Ltd. (y) the positive sign means a positive relationship meaning if “x” rises “y” rises and vice versa. If “x” rises by 1 unit, “y” rises by 0.2347, “n” means there are 50 observations. The t-stat for b is 1.0108, which means b is statistically significant at 5% level. R2 is 0.02084 means 2.08% of y is explained by x, balance 97.92% is error due to the variables which are not in model. As the calculated value of F =1.02170 is more than the tabulated F (F 0.05,1DF,48DF) = 4.043 , the overall model is not statistically significant at the 5% level.
So overall the model is not statistically significant at the 5% level.
Conclusion:
As Beta is 0.2346 which is less than 1, the share is good for long term.