[SmartCat]

Originally Posted by .sushilkumar

Thanks for that smartcat. So I guess that major profit of MSIL is going back to majority share holder in japan & this profit is calculated after paying royalties (correct me pls if i am wrong). In nutshell parent suzuki is making a killing from indian JV thus leaving minority share holder high and dry. i wonder why minority share holders are not protesting against these hefty royalty payments. may be numbers are heavily stacked against them in board meetings.

Well, the law is on their side - foreign companies are allowed to charge a maximum of 7% of sales as loyalty. But I think Suzuki charging 5% of net sales - which works out to be an amazing Rs. 1,800 Cr! Do a Google search for "Maruti Suzuki Royalty" - there are more than murmurs of protest about this issue.

But this is all wrong. Suzuki owns a majority of shares in Maruti - they can show the profit earned by Maruti in their own balance sheet (consolidated accounts). If they were shareholder friendly, they wouldn't have taken a single penny as royalty for its own subsidiary. If they were shareholder friendly, they would have taken money out of the company by paying dividends.

Royalty payment makes sense only when the Indian unit is owned by somebody else, while technical expertise is provided by a foreign entity. Examples -

- Royalty payment made to Jockey International, Inc (the undie company) by the Indian company called "Page Industries".

- Royalty payment made to Domino's Pizza by the Indian company called "Jubiliant Foodworks".

[CARDEEP]

@smartcat, what are the Directors' Remuneration & Reimbursements for BoD Meetings expenses being paid out to the Jap bosses... do you have any idea/ figures?

[.sushilkumar]

Originally Posted by smartcat

But this is all wrong. Suzuki owns a majority of shares in Maruti - they can show the profit earned by Maruti in their own balance sheet (consolidated accounts). If they were shareholder friendly, they wouldn't have taken a single penny as royalty for its own subsidiary. If they were shareholder friendly, they would have taken money out of the company by paying dividends.

Agreed. Parent Suzuki are not investor friendly but than India is their only source of income IMO As they are not selling decently anywhere else including their own home market. I have stayed in tokyo for 3 -4 months and I could saw only 5-6 swifts and a cargo version called Suzuki every . Nothing else .

IMO if they take money out via dividends, that would mean that other share holders will also get same amount . why would they do that when they are after filling their own pockets , so royalty is the way out . still they are doing a favor by claiming just 5 % . imagine if they got greedy and start claiming 7 % .

[GTO]

Originally Posted by .sushilkumar

On a Share face value of re 5 , that counts to a hefty dividend. Some 150 % .

Of what use is the face value? It is merely symbolic.

Originally Posted by bblost

But Tata shares appreciate much better than Maruti.

Tata's turnover is such that it can eat Maruti for lunch. Remember, Tata is to expensive commercial vehicles what Maruti is to cheap hatchbacks. We only associate Tata Motors with the Nano, Indica & Indigo; fact is, the commercial vehicle category is the real Tata Motors.

Tata has the very profitable Jaguar-Land Rover too.

Tata pays Rs. 4 dividend on a share price of Rs. 200 odd. Maruti pays Rs. 7.5 on a share price of over Rs. 1000. Which one of the two would you invest in?

[.sushilkumar]

Originally Posted by GTO

Of what use is the face value? It is merely symbolic.

Not sure if i am correct or not but in reality dividends etc are paid based on face value only. I guess that;s reason why Parent Suzuki is keen on royalty of 5 % than dividend as they get more via way of Royalty.

Those into Financial markets Kindly correct me.

[CARDEEP]

^^^ Yes @.sushilkumar dividends are declared on face value. Stock price, on which trading in share market is done, need not be the same. So even of you buy MS Share for Rs.1000 (hypothetical value) you would end up earning 50 Paise on Share Price of Rs.10 is 5% dividends are declared. What is your Return on Investment = 0.05%?

[volkman10]

2013

Maruti Suzuki Profit Surges 49 % -cheaper yen lowers cost on parts imports, royalty to Suzuki are main contributors.

Thursday posted a 49% increase in its net profit for the fiscal first quarter as gains from strong sales of higher-margin-yielding Ertiga and Dzire models, and favorable currency movements outweighed weak demand in the automobile market.


http://online.wsj.com/article/SB1000...737691302.html