Maruti Suzuki looks to invest in real estate in India

Maruti Suzuki is exploring the possibilities to set up an assembly facility in Africa and investing in real estate in India to develop sales and marketing infrastructure.

"We have a team in place now for land acquisition. We have allocated Rs 800 crore for building sales and marketing infrastructure. If required, we can step this up further," Chairman RC Bhargava said, after the auto maker announced its fourth-quarter results. The company is looking at acquiring land and leasing it out for future dealerships amid rising real estate prices in the country.

Maruti Suzuki is sitting on cash reserves of about Rs 17,000 crore as of end-March. The company has more than 1,800 outlets and workshops in 1,450 cities and towns, a network estimated to be worth over Rs 11,000 crore. It aims to take the distribution network to 4,000 outlets to achieve its target of selling 2 million units a year by the end of the decade.

Maruti, which had been mandated by parent Suzuki Motor to produce and market vehicles for the African West Asian and some South Asian markets, has commenced feasibility studies to evaluate the potential of setting up a unit in Africa. But a final decision has not been taken yet, MD Kenichi Ayukawa said.

Maruti exported 1,23,897 vehicles in fiscal year ended on March 31. About 8-10 per cent of these were shipped to Africa. Its pending plans follow the approval accorded by its minority shareholders to a proposal permitting parent Suzuki to set up manufacturing units in Gujarat. Maruti could sell the products manufactured at these facilities, an arrangement that the company says will allow it to use cash reserves on expanding its market instead of spending on manufacturing facilities.

Under the 2014 plan, Suzuki would infuse initial capex of Rs 3,000 crore on the plants while the expansion would be funded via an incremental capex cost or a mark-up on cars over the production cost (to be borne by Maruti Suzuki), depreciation costs and fresh equity brought in by the parent.

SOURCE: ETRealty.com