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Maruti Suzuki announces 47% higher capex for FY19

Carmaker to undertake Rs5,000cr capex for new product development, capacity expansion, and to buy land.
India’s leading passenger carmaker Maruti Suzuki India Limited (MSIL) announced a capex of Rs5,000cr for FY19. This is 47% higher than the Rs3,400cr that MSIL has spent in FY18. The amount will be used for new product development, capacity expansion, and to buy land.

Of this Rs5,000cr, Rs4,000cr will be invested in core operations such as new product development and capacity expansion. The remaining Rs1,000cr will be spent on land purchase for new dealerships and network expansion. In FY18, MSIL spent a total of Rs3,400cr, of which, Rs2,610cr was spent on core operations and the balance Rs790cr on land purchases.

MSIL stands to benefit from strong product portfolio backed by higher volumes. Its current capacity is 1.8mn units (1.55mn in old plants + 2,50,000 in Gujarat); Gujarat Phase-II will add another 2,50,000 units by January 2019.

The Gujarat land bank can support up to 15 lakh unit production capacity. The all-new Swift has received a strong response since its launch in February 2018 and has become the fastest-ever to reach 1 lakh bookings. A downward revision in royalty payment to Suzuki will boost profitability.

MSIL has a market share of more than 50% in passenger-vehicle (PV) segment in India (FY18). The company’s focus on premium passenger-vehicle segment via NEXA has improved its product mix. MSIL is also in the process of setting up a lithium battery plant in Gujarat for developing an ecosystem for electric mobility.

Maruti Suzuki India Ltd ended the week at Rs8,777.95, down Rs169.85, or 1.9%, from its previous close of Rs8,947.80 on the BSE. The scrip opened at Rs9,013 and touched a high and low of Rs9,142 and Rs8,721.10, respectively. A total of 20,02,903 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs2,65,164.31cr.

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