MARUTI UDYOG LIMITED

A Due Diligence for the Government of India

GROUP NO. 1

Priya Aggarwal PGP-05-001Alok Samtaney PGP-05-056Deepak Miglani PGP-05-111

Hem Singh Tanwar PGP-05-141Pradeep K PGP-05-121

Background

• Maruti Udyog Ltd started as a JV between the Government of India and Suzuki Motor Corporation in a 74:26 proportion

• Success of the JV led to Suzuki increasing its stake in the company to over 51% and the Government of India diluting its stake

• Presently the Government of India holds 10.27% stake in Maruti

Objective of the Diligence

Our Objective

Advising the Government of India to divest its stake in Maruti Udyog Limited

Agenda

Indian Automobile Industry Maruti Udyog Limited Financial Diligence

Valuation

Indian Automobile Industry Maruti Udyog Limited Financial Diligence Valuation

Agenda

• Largest 3 wheeler market in the world• 2nd Largest 2 Wheeler Market in the world• 4th Largest Passenger Vehicle market• 4th Largest Tractor Market in the world• 5th Largest commercial vehicle market in the world

India’s share is a mere 1.2% as

compared with US which is appx 17% Huge potential for India to grow

Indian Automobile Industry

Total Automobile Market

2 Wheelers (12**) (77%)

3 wheelers (4) 4 Wheelers

Commercial/ Passenger Vehicles (9)

Passenger Car Market (12)

1.105 mn units

Major Players

•Bajaj Auto

• Peugeot

Major Players

• Hero Honda

• Bajaj Auto

• TVS

• Tata Motors

• Mahindra

• Maruti

• Tata Motors

• Hyundai( **Figures in brackets are no of

manufacturers)

Size and Structure of the Industry

• Domestic market growing @ 14.5% CAGR (2000-01 to 2004-05)• Industry contributes 4% to national GDP (2003-04)• 0.45 million direct employment and 10 million people indirectly• To meet Bharat III norms:

– Appx 250 bn required for investment till 2010 by automobile companies– Appx 120 bn required for investment till 2010 by oil domestic oil

companies– Govt has given certain incentives in this respect

• Total 10 mill. Car/UV parc in India at present• Low Car Density of 8 cars per 1000 households• Explosive Growth forecasted for next half decade: 16.2% CAGR• Demand to zoom past 2 million by 2009-10

Industry Statistics

• To grow from 0.75 million in 2000 to 1.9 million in 2010 (Growth rate of 51%)

• Small cars account for 70% of revenues• 1/3rd of customers go for replacement within the first three

years• Replacement demand at 35% of annual demandPlayers:

Maruti Udyog Limited Tata Motors Limited Fiat India Limited General Motors India

Ltd. Hyundai Motors India

Ltd. Ford India Limited Hindustan Motors Honda SIEL Cars India

Ltd. Daimler Chrysler India

Ltd. Skoda Auto Motor Ltd. Toyota Motors

Passenger Car Market

(per cent)1999-2000

2000-01

2001-02 2002-03 2003-04 2004-05

Cars 100.0 100.0 100.0 100.0 100.0 100.0

A1: Mini 35.6 29.6 28.2 26.2 24.0 14.2  Maruti Udyog Ltd 100.0 100.0 100.0 100.0 100.0 100.0

A2: Compact 49.8 51.4 54.2 54.7 52.9 60.5

  Fiat India Ltd 6.1 2.7 7.3 7.8 2.6 0.8

 General Motors India Ltd - - - - 0.9 0.5

 Hyundai Motors India Ltd 26.2 24.6 24.3 27.7 27.1 22.8

  Maruti Udyog Ltd 33.2 39.4 42.2 40.3 47.7 54.7

  Tata Motors 20.6 16.6 22.9 24.3 21.7 21.3

A3: Mid-size 14.5 18.8 16.3 16.9 20.0 21.8

  Fiat India Ltd 5.9 2.2 1.1 2.8 0.5 0.8

  Ford India Ltd 10.4 18.7 17.4 16.2 15.0 13.7

 General Motors India Ltd 3.7 8.5 10.1 8.8 10.2 7.5

  Hindustan Motors 31.5 26.4 23.3 19.7 10.7 8.2

  Honda SIEL India Ltd 12.6 10.4 11.4 13.0 13.2 18.3

 Hyundai Motors India Ltd 8.1 16.6 21.0 20.7 20.2 12.9

  Maruti Udyog Ltd 24.0 15.4 15.3 12.0 10.2 16.6

  Tata Motors - - - 6.9 20.1 22.0

Maruti’s Market Share

Segment-wise Market Shares

Segment-wise Market Shares

(per cent)1999-

002000-

012001-

02 2002-03 2003-042004-

05

A4: Executive 0.0 0.0 0.3 1.4 2.4 2.7

  DaimlerChrysler India Ltd - - 55.7 8.2 4.7 3.5

  General Motors India Ltd - - - 1.8 1.6 0.1

  Hindustan Motors 100.0 100.0 2.7 0.6 0.2 0.0

  Hyundai Motors India Ltd - - - - - 21.2

  Skoda Auto India Pvt Ltd - - 41.6 72.3 35.8 30.8

  Toyota Kirloskar Motor Ltd - - - 17.1 57.7 44.3

A5: Premium 0.1 0.1 0.9 0.7 0.8 0.7

  DaimlerChrysler India Ltd 100.0 100.0 9.7 10.1 14.3 14.1

  Ford India Ltd - - 10.7 11.0 2.9 0.6

  Honda SIEL Cars India Ltd - - 29.8 31.7 39.1 51.0

  Hyundai Motors India Ltd - - 49.8 35.9 22.9 14.5

  Skoda Auto India Pvt Ltd - - - - - 5.2

  Toyota Kirloskar Motor Ltd - - - 11.3 20.9 14.5

A6: Luxury 0.0 0.0 0.0 0.0 0.0 0.0

  Daimlerchrysler India Ltd - - 100.0 100.0 100.0 100.0

Source: CRIS Infac Auto Industry Annual Review (2005) 

Major shift from A1 segment to A2 segment [ A2-segment (Wagon-R, Santro, Indica) taking over A1 (M800) as the largest and fastest growing segment ]

Changing Profile of Segments

• Increase in the disposable incomes of families• Easy Availability of Finance • Lower Equated Monthly Installments• Frequent introduction of new models• Growth in demand for second car in a family• Reduction in holding period of a car (from 7-8 years to

3-4 years)• Increase in distribution / dealership of cars• Aggressive growth (20%) in exports of Indian vehicles

abroad

Key Demand Drivers

Company Capacity in 2006Likely Capacity in

2010

Maruti Udyog+ 600,000 1,000,000

Tata Motors/Fiat* 225,000 325,000

Hyundai Motors India 300,000 600,000

Honda Siel 60,000 200,000

Toyota Kirloskar 60,000 200,000

GM India 85,000 215,000

Ford India 60,000 100,000

M&M/Renault/Nissan 100,000 500,000

Daimler Chrysler 2,000 2,000

Skoda/Volkswagen 30,000 140,000

Total Capacity 1,522,000 3,280,000

Total Demand (Domestic)

1,400,000 2,300,000Companies plan to bridge the gap between Demand and supply in 2010 by Exports

+ Based on sales projections, *Only announced expansion Source: BW 29 Jan, 07

Industry Capacities

Investments planned

New Car Models expected

• Mahindra Logan• Chevrolet Spark• Hyundai’s Hatch• New Fiat Palio• Tata Indigo LBW• Maruti’s Swift

Diesel

• Hyundai Sonata Diesel

• Bentley Continental• Maruti’s New

Baleno

• Chevrolet Captiva

Segment A2

Segment A3

SUV

Indian Companies doing well Compared to US Counterparts

CompanyNet Profit Per car (in

USD)

India 2005-06 2004-05

Maruti 354 365

Honda Siel 797 787

Hyundai 447 403

Tata Motors* 748 688

M&M+ 853 540

US

Ford 293 515

GM (938) 311

Japan

Nissan 1,207 1,257

Toyota 1,432 1,315

* Includes Passenger Vehicles & Trucks,

+ Includes passenger Vehicles & LCV’s Source: BW Jan 29, ‘07

Global Scorecard

• India’s comparatively cheap and skilled workforce can be effectively utilized to set up large low cost production base

• Huge investments from the companies for capacity expansion, R&D etc.

Factor Conditions

Government

• Liberalized policy regime• Automatic approval for 100% FDI• The customs duty on inputs and

Raw materials has been reduced from 20% to 15%.

Firm Strategy, structure & rivalry

•A large number of domestic and multinational players

•Highly competitive industry

Demand conditions

Related & supporting industries

• Strong industry associations to promote industry’s interest

• Well established components industry support OEM’s

• High demanding consumers

• Rapid urbanization, increasing literacy

Porter’s Diamond – An analysis of the industry

Summing up

Opportunities in the auto sector look good- Sales expected to grow at a CAGR of 15%- Income levels expected to continue to rise leading to a demand

increase - Excise duty cuts to fuel growth

- Easy availability of cheap finance to continue- India, though under penetrated, its GDP expected to grow at 8% till

2060

However, factors such as- Liberalised government policies- Intense Competition and entry of new foreign players- Planned Capacity increases- Slew of new models in the pipeline- Competition in the export market from foreign companies- Products like the Rs 1 lac car by the Tata’s expected to change

sector dynamics

could be a threat to the sector from an investment perspective

Indian Automobile Industry Maruti Udyog Limited

Financial Diligence Valuation

Agenda

• Largest player in the passenger car segment in India (mkt share of over 50%)

• Established in 1981 as JV between GOI and Suzuki Motor Corporation• Credited for bringing the automobile revolution in India• Brought in the latest technology, more fuel efficient cars and brought down

the prices• First vehicle roll out in 1983 – M800, now offers 13 models.• First Indian company to sell 1 million vehicles (1994), and has produced over

5 million vehicles (2004)

MUL fuels Automotive Growth

• MUL’s emphasis on localization and indigenization led to development of component industry

• Started with a dozen JV’s with India entrepreneurs, got them foreign collaboration

• This led to development of component industry as a whole with more such JV’s and influx of technology

• It brought in better financing means enabling more people to buy cars

Maruti Udyog Limited

Segmentwise volumes

16%

12%

59%

6% 1% 6%A1

C

A2

A3

MUV

Export

Segment ModelsAvg Prices(Ex Factory)

FY06 Sales(Volume)

A1 Maruti 800 164,270 89,223 C Omni, Versa 176,034 66,366

A2Alto, Wagonr, Zen, Swift 264,114 335,136

A3Baleno, Esteem 389,921 31,939

MUV Gypsy, Vitara 352,818 4,374 Export 227,731 34,781

Total Sales 561,819

Maruti Car Models

Maruti Sales and Market Share

Maruti Sales and Market Share

0

2000

4000

6000

8000

10000

12000

14000

FY00 FY01 FY02 FY03 FY04 FY05 FY06

Net

Sal

es (

Rs.

cr)

48.0%

49.0%

50.0%

51.0%

52.0%

53.0%

54.0%

55.0%

56.0%

Mar

ket

Sh

are

(%)

Net Sales Market Shares

While Sales have growth at an 8% CAGR, Market share has dropped as new players have entered the market

Location Assembly Plant

Assembly Lines

Installed

capacity

Manufactured

Gurgaon 3 5 600,000 M800, Omni, Gypsy, W-R, Alto, Zen Estilo

IMT Manesar

1 1 300,000 Swift and new sedan to be launched in 07

IMT Manesar

1 diesel engine plant

- 300,000 engines

For domestic and export consumption

Production Capacities

Segment wise production pattern

Production segment wise1999-2000

64%

30%

6%

A1 A2 A3

Production Segmentwise 2005-06

20%

73%

7%

A1 A2 A3

Clear shift in production focus from A1 segment to A2 in line with the market dynamics

• Largest and strongest dealer network in India• 182 Authorized dealers, 243 sales outlets in 161

cities• 342 dealer workshops, 1545 MASS’s

FY’95

FY’98

FY’01 FY’02 FY’03 FY’06

Dealers 54 130 185 189 182 -

Sales outlets 108 166 221 253 243 405

Dealer workshop

135 215 302 333 342 558

Auth. Workshops

608 995 1382 1576 1545 1730

Cities covered

- 468 695 799 898 1140

Sales and Service Network

Maruti’s Strategy

New Plant at Manesar to cater to the growing demandProduction of Swift to be shifted to ManesarMaruti to launch diesel varients of all existing products (priced higher with higher margins)

New Products and MarketsLike the Estello and New Baleno to drive sales growthPlan to test running vehicles on LPG as against CNG by other playersNew model to cater to the European export market

Productivity and Margins

Improved technology with more automation at the new plant, saving in usage of power and utilities, younger workforce will improve productivity and margins

Indian Automobile Industry Maruti Udyog Limited Financial Diligence

Valuation

Agenda

• JV between GOI (74%) and Suzuki Motor Corporation (26%)

• Success of JV led SMC to increase the stake to 40% in 1987 and further to 50% in 1992

• GOI decided to divest its stake under the disinvestment policy

• 2003, GOI offered 25% of its holding as public offering

• Due to oversubscription GOI increased the offering by 10%

• Current shareholding : GOI (10%), SMC (55%) and Retail & Institutional investors (35%)

Present Shareholdings

10%

55%

31%

4%

Government Suzuki

Institutional Holding Non Institutional Holding

Shareholding Pattern

Summary Financials – Profit and Loss A/c

P&L Account - in Crs Mar-06 Mar-05 Mar-04Net Sales 12,015.90 10,923.80 9,104.40 Other Income 429.20 403.20 377.60 Total Income 12,681.10 11,468.70 9,485.20 Total Expenditure 10,625.30 9,671.00 8,177.10 PBDIT 2,055.80 1,797.70 1,308.10 Depriciation 285.40 456.80 494.90 Interest 20.40 36.00 43.40 PBT 1,750.00 1,304.90 769.80 PAT 1,189.10 853.60 542.10

EBIDTA Margins increased from 14.4% in FY04 to 17.1% in FY06

Summary Financials – Balance Sheet

EFinished Goods Inventory holding period doubled from 8 days in FY05 to 16 days in FY06

Balance Sheet - in Crs Mar-06 Mar-05 Mar-04Share Capital 144.50 144.50 144.50 R&S 5,308.10 4,234.30 3,446.70 Loans 71.70 307.60 311.90 Total Liabilities 5,524.30 4,686.40 3,903.10 Net FA 1,695.20 1,873.70 1,830.80 Investments 2,051.20 1,516.60 1,677.30 Capital WIP 92.00 42.10 91.20 Current Assets 3,749.60 2,972.00 2,018.90 Current Liabilities 1,505.80 1,218.80 1,211.40 Net Current Assets 1,763.80 1,364.00 487.10 Net Deferred Tax Liability (77.90) (110.00) (183.30) Total Assets 5,524.30 4,686.40 3,903.10

Summary Financials – Key Ratios

Activity ratios FY06 FY05Total Asset Turnover 1.44 1.68Debtors Turnover 17.86 17.82Collection Period in Days 20.43 20.49Creditors Turnover 14.04 17.41Payment Period in Days 26.00 20.97

Profitability Ratios FY06 FY05Current Ratio 2.04 1.85Debt:Equity 0.12 0.07RONW(%) 21.83% 19.69%ROCE(%) 29.04% 28.98%BVPS(Rs) 192.90 154.69EPS(Rs) 42.11 30.46Dividend% 8.31% 6.57%

Financial Diligence Findings

Category Findings Implications

Revenue Recognition

Revenue is recognized at the time of generation of invoice ie when cars are dispatched from the factory to

the dealer

Though treated as sales, a part of this actually represents cars in inventory

with dealers.

SalesThough Sales have grown at a healthy rate, A1 and exports segments could drag down the overall growth rate in

the future as in the past

InventoryFinished goods t/o gone down from

48 times in FY05 to 22 times in FY06. In terms of no of days

inventory with the Co, its up from 8 days to 16 days in FY06

Amount of cash required for holding inventory has doubled. If this

continues, it would reduce cash flows

Litigation provision

Amount of Rs. 68 cr in FY05 increased to Rs. 83 crores in FY06

Reason for claims not given as may prejudice the interests of Maruti

Warranty Claims

Reduced from 77 cr on 31 Mar 05 to 71 cr on 31 Mar 06

Difficult to estimate, hence the actual could be higher than provided

Inter co deposits

Worth Rs. 31 crores considered doubtful

Approvals for granting inter company deposits may not be satisfactory

Segment % of Total % fall in 05-06

A1 16 23

Exports 6 29

Financial Diligence Findings

Category Findings Implications

Contingent Liabilities

Maruti has outstanding litigation expenses to the tune of Rs. 1094 crores on 31 Mar 06. Guarantees and other commitments also there

to the tune of Rs. 2180 cr

It has deposited Rs. 281 cr against the litigation claims, the balance could be

payable if decision goes against Maruti. Against other commitments

591 cr is treated as contingent liability

Research & Development expenditure

Revenue R&D expenditure is charged off in the year while capital

R&D expenditure has been capitalised

The basis of classification between capital and revenue is not explained. This could imply an overstatement or understatement of profits to the extent of incorrect classification

Other items found out, but which may not have be of a material nature:

1. Financial Statements of subsidiaries, joint ventures and associates have been audited by otherauditors whose reports were furnished to PWC, Maruti’s auditors who have relied entirely uponthe reports of the other auditors.

2. Ownership of assets worth about Rs. 4 crores yet to be registered in the name of the company. Also for assets jointly owned by Maruti and other subsidiaries, pro rata cost has been taken

Indian Automobile Industry Maruti Udyog Limited Financial Diligence Valuation

Agenda

Assumptions

Category AssumptionCapacity Existing Installed capacity at the plant at Gurgaon is 600,000 cars p.a.

The new engine and assembly plant at Manesar will commence production in FY07 with a capacity of 100,000 cars p.a. but this will be increased to 450,000 cars by FY10

New Product Launches

Maruti will introduce the following new products as per its business plan

• Zen Estilo in Dec 2006 (already out in the market)• Swift Diesel in Jan 2007 (recently launched)• Introduce new diesel varients for all its existing car models• New Baleno in FY08

Sales growth Segment A2: The A2 segment will be the primary driver of sales growth with the new product launches such as the Swift diesel and the Zen Estilo. Segment A1: The Maruti 800 share will shrink as income levels rise and preferences change to comparatively higher level cars such as the Alto. The new Rs. 1 lac car by the Tatas in this segment will also result in Maruti 800 sales fall.Segment A3: Though Maruti is expected to launch the new Baleno, which will drive sales in this segment, its share in the total sales will increase only marginally

Excise duty The Excise duty rate which was at 24% for all cars was reduced to 16% in last year’s budget for small cars only. This year it is expected to be further reduced to 8% while for large cars it will remain at 24%. This duty cut to be passed on to the customers will increase growth.

Assumptions

Category AssumptionMargins Margins improve as product mix changes in favour of higher value and

higher margins cars.The introduction of newer models like the Zen Estilo, new Baleno, Swift Diesel and other diesel varients along with the effeciencies at the new plant and the shift in preferences from the A2 segment to A3 will increase margins.

Capex As per the Q207 Earnings Conference Call with analysts on Oct 26, 2006, Maruti plans to invest Rs. 9,000 (including working capital) upto FY10 on setting up the new Assembly Plant as well as the Diesel Engine at Manesar. Our of this, capex in FY07 is only Rs. 375 crores.

Loans Investment for the new assembly plant as well as diesel engine plant will be from internal accruals (as well as cash profits earned each year till FY10) which are worked out to be sufficient for the entire investment.

Working Capital Requirements

Average collection period is taken to be 18 daysInventory holding period is taken to be 20 daysWorking capital for the new plant as per the

Dividends Dividend per share expected to be retained at current level of 70% per share (ie a total payour of Rs. 100 crores) for the next two years till FY08. After which it is assumed to be increased to 85% per share in FY09 and FY10 and 100% in FY11 and FY12.

DCF Valuation

DCF Valuation Parameters

– Risk Free Rate: 7.5%– Beta: 1.22– Market Risk Premium: 5%– Cost of Capital: 13.62%– Terminal Growth Rate: 6%

Financial Projection – Profit and Loss A/c

P&L Forecast - in Crs FY07 FY08 FY09 FY10 FY11 FY12Net Sales 15,546.95 19,530.05 22,481.34 25,367.28 28,712.55 31,286.66 EBIDTA Margins (%) 17.61% 18.11% 18.31% 18.11% 18.11% 18.11%EBIDTA 2,737.66 3,536.70 4,116.11 4,593.76 5,199.56 5,665.70 Interest 22.07 - - - - - Depreciation 312.30 670.91 966.85 807.90 924.49 1,027.04 PBT 2,403.29 2,865.78 3,149.26 3,785.86 4,275.06 4,638.66 Tax 770.29 918.52 1,009.38 1,213.42 1,370.22 1,486.76 PAT 1,633.00 1,947.26 2,139.88 2,572.44 2,904.84 3,151.90 Dividend 100.00 100.00 125.00 125.00 150.00 150.00

Profitabilty Forecast FY07 FY08 FY09 FY10 FY11 FY12PBDIT / NetSales 17.61% 18.11% 18.31% 18.11% 18.11% 18.11%PAT / NetSales 10.50% 9.97% 9.52% 10.14% 10.12% 10.07%EPS (Rs.) 56.52 67.40 74.07 89.04 100.54 109.10Net Cash Accruals - in Crs 1,370 (257) 882 (395) 2,879 3,229 RONW 23.38% 22.05% 19.73% 19.35% 18.10% 16.54%

Financial Projection – Profitability

Financial Projection – Balance Sheet

BS Forecast - in Crs Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12Share Capital 144.50 144.50 144.50 144.50 144.50 144.50 Reserves & Surplus 6,841.10 8,688.36 10,703.24 13,150.68 15,905.52 18,907.43 Loans - - - - - - Total Liabilities 6,985.60 8,832.86 10,847.74 13,295.18 16,050.02 19,051.93 Gross Fixed Assets 5,421.60 7,421.60 8,921.60 11,321.60 11,821.60 12,321.60 Net Fixed Assets 1,849.90 3,178.99 3,712.14 5,304.24 4,879.75 4,352.71 Investmenrs 2,619 2,893 4,086 4,861 7,760 11,302 Current Assets 4,246.37 4,933.27 5,540.52 5,940.98 6,589.25 6,857.24 Current Liabilities 1,639.88 2,060.02 2,371.32 2,675.73 3,028.58 3,300.10 Net CA 2,606.49 2,873.25 3,169.20 3,265.25 3,560.67 3,557.14 Net Deferred Tax (90.00) (112.00) (120.00) (135.00) (150.00) (160.00) Total Assets 6,985.60 8,832.86 10,847.74 13,295.18 16,050.02 19,051.93 D:E Ratio 0.00 0.00 0.00 0.00 0.00 0.00Current Ratio 2.59 2.39 2.34 2.22 2.18 2.08

Base case value – Rs.965Average value – Rs.958Max value – Rs.1165Min value – Rs.806

Share Value in Rs. Terminal Value Growth Rate4.50% 5% 5.50% 6% 6.50% 7%

WACC 12% 899 940 986 1038 1097 116513% 861 899 943 992 1048 1113

13.62% 838 875 917 965 1019 108114% 824 851 902 949 1002 1063

14.50% 806 842 882 928 980 1039

Intrinsic Value per share

Comparable Multiples

Company

Share price EBITDA Margin (%) PAT Margin (%) ROCE (%) P/E (x) EV / EBITDA (x)

Jan 19, 07 06 07E 08E 06 07E 08E 06 07E 08E 06 07E 08E 06 07E 08E

Mahindra & Mahindra

933.814.0%

14.4%

14.6%

8.4%

8.3%

8.4%

17.7%

17.0%

17.9%

21.0 18.8 15.5 12.6 10.2 8.5

Tata Motors

950.712.9%

12.5%

12.9%

7.3%

6.7%

6.7%

28.4%

25.7%

27.1%

21.1 19.4 15.3 12.0 10.0 7.7

Industry Average

 13.4%

13.4%

13.7%

7.8%

7.5%

7.6%23.0%

21.4%

22.5%

21.0 19.1 15.4 12.3 10.1 8.1

Maruti Udyog

912.313.5%

13.7%

13.9%

9.9%

10.0%

10.0%

26.3%

26.2%

24.9%

22.2 18.3 15.6 16.2 13.5 11.2

Premium/ Discount

  0% 2% 2% 26% 35% 32% 14% 23% 11% 5% -4% 1% 32% 33% 38%

Note: Hindustan Motors has not been considered as it is a loss making company

At Par Premium Premium At Par Premium

Multiples Analysis

Industry MultiplesAuto companies historically traded at a 11 – 13 times 12 – 18 month

forward earningsPresently all auto companies trading at about 15.5 times FY08

earningsCurrent valuations look stretched, have never reached these levels in

the last 5 years

Maruti v/s CompetitionMaruti’s EBIDTA growth for FY08 is lower than competition Maruti’s EPS growth for FY08 is also lower than competition However, Maruti still trades at industry average levels for P/E

multipes and a significant premium no an EV / EBIDTA multiple

It is unlikely that Maruti will be able to sustain these valuations as these are at peak in terms of a P/E compared to the historicals of the industry. That too at a time when Maruti’s EPS growth is expected to be lower than the industry.

Summing up

• Though Maruti’s sales have grown at a CAGR of 8%• Its market share has dropped as new players have entered the

market

• Though Maruti’s margins are expected to increase in the future• The entry of new foreign players and new model launches will be a

threat to Maruti to retain its market share

• There is not much of an upside between Maruti’s current price and its intrinsic value

• Maruti still trades at par with competition even though its EBIDTA and EPS growth is less than competition

• At a time when new foreign players are setting up manufacturing facilities in India and existing players are expanding capacities

• This seems to be the right time for the Government of India to offload its 10.27% Maruti stake in the market

Thank You