[libranof1987]

India’s largest carmaker Maruti Suzuki hasn’t run out of incremental earnings-growth drivers despite the steep run-up in its stock. The latest trigger for earnings growth will likely be lower royalty fees to the Japanese parent and gradual localization at its Gujarat plant.

Maruti is working on a new royalty structure on car models launched after January 2017. In the December 2017 quarter, Maruti paid 5.3% of its net sales as royalty to its parent Suzuki Motor. The new rates, on a retrospective basis, will be applicable for models launched after January 2017, and even for the facelifted versions of Swift and Dzire.

New royalty rates are likely to be lower than the current structure as India’s R&D division has also started contributing to vehicle development. Maruti has put in place a new R&D facility at Rohtak in Haryana. It plans to invest a total of Rs 4,000 crore at the R&D facility.

https://economictimes.indiatimes.com...w/62660913.cms