Go Back   Team-BHP > BHP India > The Indian Car Scene


Reply
 
Thread Tools Search this Thread
Old 1st September 2010, 19:20   #76
BHPian
 
Equus's Avatar
 
Join Date: Sep 2006
Location: Bangalore
Posts: 872
Thanked: 158 Times
Default

Quote:
Originally Posted by nkrishnap View Post
Agree on this to an extent just as a consumer. But what about something known as the shareholder value? Agree that Suzuki has a stake, but does that mean they can take away the shareholders wealth under the name of royalty and not letting the Indian counterparts develop and launch its own product. Whats the need for such restriction if Suzuki is not really worried about taking away the money under the name of royalty?

Maruti with its current breed of engineers are more than capable of providing a car which is equivalent to the Suzuki's technology if not better.
The way I see it - if MSIL engineers were capable of developing a K-series engine themselves, MSIL wouldnt need to source it from parent Suzuki. If Suzuki could come up with a Multi-jet equivalent/better, they wouldnt source from Fiat!

India auto industry is still pretty nascent and "baking". Its only a matter of time when the tables are turned. MSIL Chairman, Mr Bhargava mentioned that the reverse would happen around 2015 when Suzuki "buys" technology from MSIL!

One could argue that the shareholder value possibly increased due to the sourcing of these technologies from Suzuki, and its a small price to pay for the benefits!

Cheers!

Last edited by Equus : 1st September 2010 at 19:27.
Equus is offline   Reply With Quote
Old 1st September 2010, 19:40   #77
Senior - BHPian
 
Gilead's Avatar
 
Join Date: May 2009
Location: Chennai
Posts: 2,140
Thanked: 20 Times
Default

Quote:
Originally Posted by Equus View Post
One could argue that the shareholder value possibly increased due to the sourcing of these technologies from Suzuki, and its a small price to pay for the benefits!
Cheers!
Really! Then why is the stock price down in the dumps ever since they released their latest results (where the royalty info was disclosed)? Think about that.
Gilead is offline   Reply With Quote
Old 1st September 2010, 19:58   #78
BHPian
 
Equus's Avatar
 
Join Date: Sep 2006
Location: Bangalore
Posts: 872
Thanked: 158 Times
Default

Quote:
Originally Posted by Gilead View Post
Really! Then why is the stock price down in the dumps ever since they released their latest results (where the royalty info was disclosed)? Think about that.
I thought that was more about losing market share? A knee jerk reaction maybe? Maybe some LOSER brokers rigging and wanting to buy cheap? Maybe whatever (I am no expert here!)
Sounds like it has a lot more to, than just royalty!

On the diesel, Suzuki pays royalty to Fiat for the multi-jet and they would want to cross-charge the Indian subsidiary as well - sounds fair to me!

Without the K-series, would MSIL be where they are today with so much competetion? I highly doubt it.

For the record - I own Maruti shares for the past 2+ yrs. No I wont sell just yet.

Last edited by Equus : 1st September 2010 at 20:04.
Equus is offline   Reply With Quote
Old 1st September 2010, 20:28   #79
Senior - BHPian
 
Gilead's Avatar
 
Join Date: May 2009
Location: Chennai
Posts: 2,140
Thanked: 20 Times
Default

Quote:
Originally Posted by Equus View Post
I thought that was more about losing market share? A knee jerk reaction maybe? Maybe some LOSER brokers rigging and wanting to buy cheap? Maybe whatever (I am no expert here!)
Sounds like it has a lot more to, than just royalty!
Please let's not start conspiracy theories like in the Nano burning thread.

The case here is purely financial. The stock price is down because profitability levels are down. Profits are down because of increasing competition and an open ended royalty scheme that's sucking money from the company. These are the two main reasons cited by the analysts who downgraded the stock immediately after the results were released. And the stock was downgraded by all the well known names. You should read their reports.

Why was a decision made to install the K series engine in the Alto when sales with the older engine (that was made BS4 compliant) are showing no signs of dropping. More royalty.

This is simply a case of a majority shareholder screwing minority shareholders like us. I am an investor too and I will be holding on to the stock as well because there is no point selling at these levels. This can't be good for the long term health of a company. Let's not bring our brand loyalties into this discussion.

Maruti is likely to tackle shrinking margins by squeezing the suppliers even more. And this can't be good for quality levels either.

Last edited by Gilead : 1st September 2010 at 20:34.
Gilead is offline   Reply With Quote
Old 2nd September 2010, 09:09   #80
Distinguished - BHPian
 
supremeBaleno's Avatar
 
Join Date: Dec 2005
Location: Weekdays@Chennai, Weekends@Kerala
Posts: 5,164
Thanked: 1,635 Times
Default

@Equus, I agree with most of what you mentioned - royalty payment being an internal affair, K-series adding to the sales etc. But I think Gilead is right when he says that the royalty payment was a reason for the stock tanking.

Anyway looks like a good time to buy MSIL stock. Actually when my Dad (who manages my stocks) bought MSIL some weeks ago, I did wonder why. Looks like he had a 'royal'ty reason. :-)
supremeBaleno is online now   Reply With Quote
Old 2nd September 2010, 09:13   #81
Senior - BHPian
 
sandeepmdas's Avatar
 
Join Date: Feb 2005
Location: Varkala
Posts: 1,125
Thanked: 614 Times
Default

Quote:
Originally Posted by Gilead View Post
Why was a decision made to install the K series engine in the Alto when sales with the older engine (that was made BS4 compliant) are showing no signs of dropping. More royalty.
This is correct only if MSIL has to pay royalty on a PER engine basis.
That is $10 per engine X 100 engines = $1000 as royalty.

But it can be a slab-based agreement also; number of engines used per quarter for example:
Engine 1-100 @ $10
Engine 101-500 @$9
Engine 501-1000 @$8...

In this case the K-10 should be seen as an attempt by MSIL to reduce the royalty. Just my 2c, maybe
sandeepmdas is offline   Reply With Quote
Old 2nd September 2010, 09:44   #82
Senior - BHPian
 
Join Date: Jul 2008
Location: Bangalore
Posts: 2,031
Thanked: 381 Times
Default

@Equs : As I learnt Suzuki does not pay any royalty for 1.3 MJD because once it was part of consortium which payed FIAT to create engines and has rights to manufacture this engine. It need to pay royalty if it decides to use any other FIAT engine ( 1.9 Tjet for example). Also as Royalty payout is much more then what a typical engine design company would be worth I do not think that can be cited as fare.


well purely from stock point of view I think one need to exit Maruti stock at good price point. I already exited the stock in July.

It does not mean that it will bite dust but just movement with index rather then outperforming it. The Stock tanked due to extremely low operating margins ( read the outlook money article) and poor dividend yield of the stock.

As per pure fundamentals a stock commands premium not exactly for past and current performance but for future growth potential. Seeing that Maruti market can only slide seeing growing competition and operating margins are quite thin compared to peers any higher PE multiple does not look justified.

In Automobiles these days component vendors are looking good and
Ashok Leyland , Tata Motors and M&M are good bet IMHO.

Tata Motors has already appreciated quite so there will be profit booking corrections. M&M may be a good gamble if the Ssangyang takeover payes off just like JLR did for tata motors.

Last edited by amitk26 : 2nd September 2010 at 09:48.
amitk26 is offline   Reply With Quote
Old 2nd September 2010, 09:57   #83
Senior - BHPian
 
Gansan's Avatar
 
Join Date: May 2009
Location: Chennai
Posts: 3,427
Thanked: 875 Times
Default

I don't think Maruti and Hero Honda have any choice when it comes to technology. One reason why we buy Maruti cars is the Japanese pedigree, that it is a Suzuki product. I don't think I will be too keen to buy a product born out of their indigenous R & D.

Ditto with hero Honda. As their own ad line once read, "It is the Honda in it that makes it a Hero"!
Gansan is online now   Reply With Quote
Old 2nd September 2010, 10:03   #84
Senior - BHPian
 
Join Date: Jul 2008
Location: Bangalore
Posts: 2,031
Thanked: 381 Times
Default

Quote:
Originally Posted by Gansan View Post
I don't think Maruti and Hero Honda have any choice when it comes to technology. One reason why we buy Maruti cars is the Japanese pedigree, that it is a Suzuki product. I don't think I will be too keen to buy a product born out of their indigenous R & D.

Ditto with hero Honda. As their own ad line once read, "It is the Honda in it that makes it a Hero"!
Well TVS was in a similar soup few years back , but they somehow managed to do R&D and part ways with Suzuki. Hero Honda can do it similarly if Munjals are pushed to corner but due to Suzuki being majority share holder that is impossible for Maruti.
amitk26 is offline   Reply With Quote
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search


Similar Threads
Thread Thread Starter Forum Replies Last Post
How costly are Ford Fusion spares ? shobhit15 The Indian Car Scene 38 31st December 2014 23:08
Accessories prices for Swift in pune: Cheap or Costly? eminemence Modifications & Accessories 3 9th July 2007 18:13
Proving my signature.....!! binz Modifications & Accessories 31 10th September 2006 12:54
Maybach Learning Some Costly Lessons _Crazi4Speed_ The International Automotive Scene 6 26th July 2004 16:01


All times are GMT +5.5. The time now is 13:06.

Copyright ©2000 - 2017, Team-BHP.com
Proudly powered by E2E Networks