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Maruti Suzuki financial results Q2 (Jul-Sept) 2014-15

Board recommends hike in FII limit, approves Dividend Guidelines The Board of Directors of Maruti Suzuki India Limited today approved the financial results for the period July-September 2014-15 (Q2) and April-September 2014-15 (H1). Highlights Q2 The Company sold a total of 321,898 vehicles in Q2, a growth of 16.8 per cent. Of this, exports were … Continued

Board recommends hike in FII limit, approves Dividend Guidelines

The Board of Directors of Maruti Suzuki India Limited today approved the financial results for the period July-September 2014-15 (Q2) and April-September 2014-15 (H1).

Highlights Q2

The Company sold a total of 321,898 vehicles in Q2, a growth of 16.8 per cent. Of this, exports were at 34,211 units.
The Company’s net sales was Rs 119,963 million, a growth of 17.5 per cent over the same period of the previous year.
Net profit in Q2 stood at Rs 8,625 million, up 28.7 per cent compared to the same period last year.
Growth in domestic sales and cost reduction initiatives by the Company contributed significantly to bottomline growth during the quarter.

Highlights H1

The Company sold a total of 621,792 vehicles in H1 a growth of 14.7 per cent. Of this, exports were at 63,462 units, a growth of 15.2%.
The Company’s net sales was Rs 230,698 million in April-September 2014, a growth of 14.2 per cent over the same period last year.
Net profit stood at Rs 16,248 million, up 24.8 per cent.
Higher volume contributed to profits. Cost reduction initiatives helped to mitigate increase in raw material costs.

FII Limit

Background: Maruti Suzuki India Limited was listed in 2003. At that time, the Foreign Institutional Investors (FII) shareholding in MSIL was limited to 24% as per the Foreign Exchange Management Regulations, 2000 and the consolidated Foreign Direct Investment (FDI) Policy of the Government of India. This limit was reached about a year and a half ago.

As a result of this, Maruti Suzuki went out of the MSCI index where the availability of room to buy shares is a precondition in the Index. Many global funds benchmark with this index and their shareholding in a particular stock depends to some extent on the weightage of the stock in this index. This has a bearing on the stock price of the company also. Additionally, the FII limit is restricting the ability of both domestic and foreign investors to buy and sell shares of the company.

Board decision

The Board of Directors considered the matter and decided to recommend an increase in the FII limit to 40%, broadly the level of public shareholding in the stock. This is subject to shareholder approval in a general meeting and subsequently request to RBI for notification.

Dividend guidelines

Background: Many shareholders have opined that the company should provide a dividend policy in the interest of providing greater transparency to the shareholders.

The Board, at the time of approving the annual accounts in each year, also decides the dividend to be paid to the shareholders depending on the context of business in that year. A policy stated by the current Board cannot be binding on future Board. However, the current Board can form a guideline on dividend payout in future in the interest of providing transparency to shareholders.

Board approval

The Board accordingly approved the following guidelines for dividend payment:

The Company would endeavour to keep the Dividend payout ratio, except for reasons to be recorded, within the range of 18% to 30%. The actual dividend for each year would be decided by the Board taking into account the availability of cash, the profit level that year and the requirements of capital investments.

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