Maruti Suzuki Shares Up 2% After Parent Increases Stake; What Investors Should Know

Maruti Suzuki Share Price: Shares of Maruti Suzuki India (MSIL) were up 2 per cent to Rs 8,700.65 on the BSE in Wednesday’s trade. This happened after Japanese auto major Suzuki Motor Corporation (SMC) increased its stake in Indian subsidiary Maruti Suzuki India Ltd (MSIL) to 56.48 per cent by purchasing shares from the open market.

As per SAST disclosures to stock exchanges, the promoter of MSIL, Suzuki Motor Corporation, has bought 3.45 lakh shares in the company from the open market during March 10-13, 2023.

The stake purchase represents 0.11 per cent stake with total stake purchase amount pegged at Rs 296 crore. Post this stake purchase, promoter holding in the company increased marginally from 56.37 per cent to 56.48 per cent.

An increase in stake from promoters usually increases the confidence of investors in stock.

According to ICICI Securities, this is sentimentally positive for the company and a confidence boosting measure. Suzuki Motor Corporation had last increased stake in the company by 0.1 per cent way back in June-September 2020. With impressive model launches in the SUV space, healthy pending order book and underpenetrated nature of domestic PV market, the brokerage firm expects MSIL to report healthy financials, going forward.

In the past six months, MSIL has underperformed the market by falling 8 per cent, as compared to 3 per cent decline in the S&P BSE Sensex, till Tuesday.

However, analysts at Nirmal Bang Equities remain confident about market share gains by MSIL as, historically also, it has demonstrated its ability to regain lost market share, led by new product launches and network expansion (Baleno and Brezza despite late entrants became market leaders in their respective category, facilitating market share gains).

Furthermore, it expects margin improvement of 220bps from the current level, aided by operating leverage benefits, cost-control initiatives, and an improving product mix (higher share of SUVs and premium variants). The brokerage firm sees demand for MSIL holding reasonably well, as indicated. On the EV front, we believe that MSIL is lagging its competitors and is trying to navigate the transition through Hybrids.

Maruti targets recovering back its lost market share in the UV segment with a focus to regain SUV market leadership in the next financial year.

The company’s recent launches of Grand Vitara, Jimny and Fronx are seeing good demand and are expected to aid its UV market share improvement.

What also augurs well for Maruti is the BS-VI Phase II transition, which is likely to further shift customer preference towards diesel variants.

Maruti is also targeting multiple fuels to achieve its emission targets with its first Electric Vehicle likely to be launched in 2025.

Brokerage firm Citi has highlighted Maruti Suzuki as its top pick in the auto sector. The brokerage believes that the company’s market share has bottomed out and that it would receive a boost from the new UV models.

Citi also expects the semi-conductor supply chain issues to ease over the slightly longer term. “However, the possible introduction of the mandatory 6-airbag norm (currently in draft stage) could result in higher costs for entry-level hatchbacks,” the note said.

EV launches from the financial year 2025, followed by hybrids, flex fuel and CNG, will be the key focus areas to reduce emissions, according to Citi. The brokerage has a price target of Rs 12,500 on Maruti.

Suzuki signed a joint venture agreement with Maruti Udyog, the predecessor of Maruti Suzuki in 1982 and rolled out its first car — Maruti 800 — in December 1983.

Disclaimer:Disclaimer: The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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