Maruti Suzuki raises capex to Rs 5,500 crore this fiscal

The capex guidance is Rs 1,000 crore higher than the earlier guided capex of Rs 4,500 crore at the beginning of the fiscal. The company plans to spend Rs 3,000 crore in the ongoing last quarter of the fiscal alone, almost twice the capex last year, said people aware of the matter.

In response to ET’s queries, Rahul Bharti, executive director, corporate affairs at Maruti Suzuki India, said the full-year capex is estimated to be more than Rs 5,500 crore. “The capital expenditure is divided among the new models, R&D (research and development), maintenance capex, facilities in existing plants, land purchase, etc,” he said.

Analysts said a significantly higher capex requirement in the last quarter could be related to the initial payment to the Haryana government for land for a new plant in Sonipat.

The company has announced an investment of nearly Rs 18,000 crore in the new plant in Sonipat which is likely to be commissioned by 2025 and will have installed capacity of about one million units a year. It will help the company transition from its primary hub from Gurgaon in a phased manner.

The land acquisition for the Sonipat factory is being seen as the company’s first major investment in capacity addition for more than half a decade. The last significant investment was undertaken by its parent, Suzuki Motor, when it committed more than $1 billion to set up a 0.75 million unit capacity in Gujarat.

Maruti Suzuki has incurred an annual capex of Rs 3,100 crore on average in the past 12 years. But capex requirements are moving up amid a sustained demand for new models and the need to invest in R&D to meet future regulations.

At the end of September 2021, the company was sitting on cash and cash equivalent of about Rs 38,872 crore.

Having missed out on a two million annual output target in 2019-20 due to a slowing economy and the Covid-19 pandemic, the company aims to get closer in 2022-23 with an output plan of 1.9-2 million despite continuing semi-conductor shortage.

In the past few quarters, it suffered a 3-5 percentage points loss in market share, primarily owing to shortage of parts and lack of sport utility vehicles (SUV) in its portfolio. At the end of December 2021, it had a 44% market share. The company continues to rule the roost in almost all the segments of the passenger vehicle market, including hatchbacks, sedans, multipurpose vehicles and vans, with market share ranging from 50-80%. In the SUV segment, however, it lacks models, a gap it plans to fill in the next two years.

In the next fiscal alone, Maruti Suzuki plans to launch about half a dozen new models to wrest back market share.

From 2022-23, it plans to roll out SUVs and crossovers in the Rs 6-20 lakh range, including the high-volume mid-size SUV segment.