A project report on does maruti finance helps mul increase its sales

Does Maruti Finance Helps MUL increase its sales
Maruti Finance

INTRODCTION TO Indian Auto Industry

The automobile industry in India offers significant employment opportunities. The
automobile industry including component industry employs 0.45 million people directly and
around 10 million people indirectly.

The auto industry recorded a turnover of US$ 10 billion while the auto-component industry
recorded a turnover of US$ 2.7 billion in 1999-2000.

Many international auto majors entered the country post liberalisation in 1991.

India’s largest car-maker Maruti Udyog Ltd (MUL) was recently privatised with Suzuki Motor
Corporation moving into the driving seat after acquiring a majority stake and management
control in the Maruti Suzuki joint venture in early 2002.

Policy Initiatives

Auto policy announced by the government in 2002 has opened the automobile sector to 100
per cent foreign direct investment and removed the minimum capital investment norm for
fresh entrants. This will benefit manufacturers who are planning to enter the Indian market,
particularly in the burgeoning motorcycle market.

The new policy has taken into account the need to address emerging problems and make the
auto sector WTO compatible.

The policy is also in favour of providing excise duty concessions to small cars, multi-utility
vehicles and low emission vehicles. It envisages India becoming a major hub for the
manufacture of small cars and a global supplier of components. The policy also includes
incentives to facilitate R&D.

Import tariffs are to be fixed in a manner so as to promote manufacturing in India, as opposed
to mere assembly, without giving undue protection to domestic industry. While ensuring a
balanced transition towards open trade, the automotive tariff structure will be reviewed
periodically to prevent India from becoming a ‘dumping ground’ for international rejects.

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Opportunities

India enjoys a distinct cost advantage with respect to auto-ancillary manufacturing
capabilities. While developed nations’ labour cost component is 30-35 per cent of sales, Indian
labour cost is only around 8-9 per cent of sales.

The number of vehicles manufactured in India has risen from 3 million units annually in 1999
to 5 million units in 2002. This has also led to an increase in domestic demand for automotive
components.

Other global players in component manufacturing

Japanese and British component manufacturers are already operating JVs in India. American
companies, which have or are planning to set up plants in India, include Delphi (an
automotive components division of General Motors, USA), Delco Electronics, Textron and
Magna International of Canada.

Auto majors such as DaimlerChrysler, Volvo, Renault, Toyota and Honda are planning to
outsource their requirements from India.

Automotive components manufactured in India are of top quality and used as original
components for vehicles made by top international companies such as General Motors,
Mercedes and IVECO among others

The industry encompasses commercial vehicles, multi-utility vehicles, passenger cars, two
wheelers, three wheelers, tractors and auto components. There are in place 15 manufacturers
of cars and multi utility vehicles, 9 of commercial vehicles, 14 of Two/Three Wheelers and
10 of Tractors besides 5 of engines. With an investment of Rs.50,000 crores, the turnover was
Rs. 59,500 crores in Automotive Sector during 1999-2000. It employs 4,50,000 people
directly and 100,00,000 people indirectly and is now inhabited by global majors in keen
contention.

India manufactures about 38,00,000 2-wheelers, 5,70,000-passenger cars, 1,25,000 Multi
Utility Vehicles, 1,70,000 Commercial Vehicles and 2,60,000 tractors annually. India ranks
second in the production of two wheelers and fifth in commercial vehicles.


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India’s automotive component industry manufactures the entire range of parts required by the
domestic automobile industry and currently employs about 250,000 persons. Auto component
manufacturers supply to two kinds of buyers – original equipment manufacturers (OEM) and
the replacement market. The replacement market is characterised by the presence of several
small-scale suppliers who score over the organised players in terms of excise duty exemptions
and lower overheads. The demand from the OEM market, on the other hand, is dependent on
the demand for new vehicles.

There has been a slowdown in the automobile sector in the past two years. However, the
component industry maintained a low but positive growth rate mainly due to its export
performance. Over the years, the component industry has maintained a 10% - 12% share of
exports in the total production.

Roads occupy an eminent position in transportation as they, as per the present estimate, carry
nearly 65% of freight and 87% of passenger traffic. Although, India has 3.3 million
kilometers of road network, which is the second largest in the world, the Indian highways are
getting overpopulated. Traffic management and road sense also need attention.

Improving Road Infrastructure

Traffic on roads is growing at a rate of 7 to 10% per annum while the vehicle population
growth for the past few years is of the order of 12% per annum. Poor road infrastructure and
traffic congestion can be a bottleneck in the growth of vehicle industry. A balanced and
coordinated approach will be undertaken for proper maintenance, upgradation and
development of roads by encouraging private sector participation besides public investment
and incorporating latest technologies and management practices to take care of increase in
vehicular traffic.

For the convenience of traveling public the Government shall also promote multi-modal
transportation and the implementation of mass rapid transport systems.

Incentive for Research and Development


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The Government shall promote Research & Development in automotive industry by
strengthening the efforts of industry in this direction by providing suitable fiscal and financial
incentives.

The current policy allows Weighted Tax Deduction under I.T. Act, 1961 for sponsored
research and in-house R&D expenditure. This will be improved further for research and
development activities of vehicle and component manufacturers from the current level of
125%.

In addition, Vehicle manufacturers will also be considered for a rebate on the applicable
excise duty for every 1% of the gross turnover of the company expended during the year on
Research and Development carried either in-house under a distinct dedicated entity, faculty or
division within the company assessed as competent and qualified for the purpose or in any
other R&D institution in the country. This would include R & D leading to adoption of low
emission technologies and energy saving devices.

Government will encourage setting up of independent auto design firms by providing them
tax breaks, concessional duty on plant/equipment imports and granting automatic approval.

Allocations to automotive cess fund created for R&D of automotive industry shall be
increased and the scope of activities covered under it enlarged


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FINANCE COMPANIES – THE PRESENT SCENARIO

Rapidly falling interest rates have made loans affordable to more people, which means there's
still plenty of room left for growth. Disbursements are expected to increase at an annualized
34% over FY2003-FY2007,taking outstanding retail loans to $130bn by FY2007. This
translates to a growth in outstanding loans from the current $36bn to $130bn, which would
represent 33% of bank credit and 18% of GDP in FY2007. The market penetration at this
level would still leave ample room for growth. The boom in financing would spuran increase
in spends on consumer durables such as two-wheelers and cars. Sales growth in two-wheelers
would accelerate from an annualized 10-11% over the past ten years, to 15.6% over

FY2003-2007; Car sales, which have grown at an annualized 11% over the past three years,
would rise at an even faster 20%.

Retail loans would form a third of banks' asset books in FY2007, and add Rs130bn to their
earnings over the next three years.

Fuelled by the free fall in interest rates and intense competition, especially from state-owned
banks, the availability of finance has expanded rapidly, and EMIs have fallen more steeply,
than was expected.

Consequently, the target population for financing has expanded by 18-20% for assets like
cars, twowheelers and mortgages. The following exhibit shows growth of consumer finance
over the years. The growth has been on a very high base, fuelled by the rapid fall in interest
rates and the aggressive entry of many banks. The market would remain under penetrated
even at high projected growth in future.


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Falling Interest Rates
Falling interest rates, coupled with increasing loan durations, have substantially reduced the
EMIs on retail loans, thereby making them affordable to more people than ever before. The
table below shows the fall in Interest Rates.
Year to 31 March 1999 1999 2002 Current
rates
Cars
Basic IRR (%) 18 13.5 9.5
Less manufacturer subventions (%) 1-1.5 1-1.5 1.5
Dealer (%) 1.5 1.5
DSA (%) 1 1
Net rate to customer (%) 16.5-17 9.5-10 5.5
Impact of Consumer Finance Growth on
Passenger Cars and Two-Wheelers
Sales of passenger cars increased by 26.5% yoy in the first half of this fiscal, owing to the
lowering of excise duties in the general budget. The two-wheeler industry grew by 8.9%
during this period, much slower than the heady high-teens growth over the past two years, as
the agricultural slowdown last year hit rural incomes. Two-Wheeler sales are expected to
increase at a compounded 15.6% over FY2003-FY2007 Car sales would rise at an even faster
20% over the same period.
Consumer Preferences

Indian consumers identify ease and speed of the loan application and approval process, as well as
flexibility of evaluation procedures, as the key drivers of financing satisfaction.
Consumer Financing Satisfaction Performance is measured by four factors:
• Application process (44 percent);
• Approval and documentation (22 percent);
• Finance advisor (18 percent); and
• Loan value (16 percent).

Customers who obtained their loans from a nationalized bank are relatively more satisfied than
those choosing a non-banking finance company (NBFC) or a foreign bank.


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Low interest rates and the reputation of the finance company are among the key reasons for
customers who opted either for an NBFC or a foreign bank. In comparison, past experience and
personalized service are the main reasons indicated by those opting for a nationalized bank.

Furthermore, more than 50 percent of NBFC and foreign bank customers obtained their
financing at an automobile dealer or through a direct selling agent of the finance provider. In
contrast, more than 90 percent of nationalized bank customers obtained their financing directly
through the bank.

The car finance market has reached a new level of maturity, so much so that the car-maker, the
automobile dealer and the financier now work together to provide better features and funding
options for the buyer. Depending on the manufacturer, tenure of the loan and credit history of the
car buyer, interest rates, on a reducing balance basis, now hover in the 10-13.5 per cent range for
new cars compared to 13-16.5 per cent till early last year. There is an increased preference for
financing car purchases through loans.


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Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to
meet the growing demand of a personal mode of transport caused by the lack of an efficient
public transport system.

Suzuki Motor Company was chosen from seven prospective partners worldwide. This was
due not only to their undisputed leadership in small cars but also to their commitment to
actively bring to MUL contemporary technology and Japanese management practices (which
had catapulted Japan over USA to the status of the top auto manufacturing country in the
world).

A licence and a Joint Venture agreement was signed between Govt of India and Suzuki Motor
Company (now Suzuki Motor Corporation of Japan) in Oct 1982.

The objectives of MUL then were:
Modernization of the Indian Automobile Industry.
Production of fuel-efficient vehicles to conserve scarce resources.
Production of large number of motor vehicles which was necessary for economic growth

Vision—“The Leader in The Automobile Industry, Creating Customer Delight and
Shareholders Wealth; A pride of India.”

Core values
CustomerObsession
Fast,Flexible and First Mover
Inovation and Creativity
Networking and Partnership
Openness and Learning

COMPANY BACKGROUND


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Maruti collaborated with Suzuki of Japan to produce cars in 1983. At this time, the Indian car
market had stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983. With
MUL’s entry, the passenger car market saw a spurt in demand.
The sector registered 18.6% CAGR growth in sales during 1981-90.The company reached a
total production of one million vehicles in March 1994, becoming the first Indian Company to
cross this milestone. It crossed the two million mark in 1997. In 2001, it launched new
businesses – ‘True value’, ‘Maruti finance’,
‘Maruti Insurance’ and ‘N2N’. In 2003, the company listed on BSE & NSE after its public
issue.

Business profile

MUL is the leading automobile company in the passenger car segment with over 50% market
share in FY04. It has a presence across many segments in automobiles. It is the leader in the
mini and the compact segment with its brands like ‘800’, ‘Zen’,‘Alto’, ‘Wagon R’. It also has
a presence in the mid-size segment with its ‘Esteem’and ‘Baleno’ brands and the ‘Omni’,
‘Vitara’, ‘Versa’ models.

Industry scenario

The passenger vehicles industry comprises passenger cars, utility vehicles (UV) and multi-
purpose vehicles (MPV’s). The fortunes of the auto sector are strongly correlated to macro-
economic parameters and the performance of the industrial sector. In India, around 80% of all
new cars are financed. The increased availability of finance at low rates and strong GDP
growth translated in a healthy growth for the industry.


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Passenger car sales account for over 77% of total passenger vehicle market and
UV’s account for the balance. Infact, UV’s have a higher share than what they did in the
earlier years. It is still lower compared to some of the developed countries. In USA for
instance, UV’s account for 50% of the total Passenger vehicles market and in Indonesia they
account for 80% of the market.
Length based classification (introduced by SIAM in April 2002):

Passenger cars
Segment A1 (mini) – cars having a length of up to 3,400mm
Segment A2 (compact) – cars having a length of 3,401-4,000mm
Segment A3 (mid-size) – cars having a length of 4,001-4,500mm
Segment A4 (executive) – cars having a length of 4,501-4,700mm
Segment A5 (premium) – cars having a length of 4,701-5,000mm
Segment A6 (Luxury) – cars having a length of more than 5,000mm

SWIFT A2 Mid-size B


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In FY04, vehicle sales contributed for 94.6% of the gross sales and the balance 5.4% was
contributed by sales of spare parts, dies and moulds and components. The company registered
sales volumes of 472,122 units including exports in FY04. Net sales increased by 31.3% to
Rs93.7bn in FY04 from Rs71.4bn in FY03. Income from services stood at Rs278mn in FY04
from Rs136mn in FY03, a rise of 104%. Other income primarily included returns on treasury
operations, scrap sales, sales tax benefits and provision write back. It increased by 36.6% to
Rs3.8bn in FY04.

EXPORTS
MUL exported 51,175 units in FY04, a growth of 59% yoy. Its FOB value is Rs9.4bn in
FY04 compared to Rs6.2bn in FY03, registering a 51.7% rise yoy. This growth as mainly due
to ‘Maruti 800’ which grew 56.8%. The A2 category registered a 60.5% growth. The Alto and
the Zen have done well for the company. The company registered good growth in Algeria,
Belgium, Bhutan, Chile, Denmark, Germany, Hungary, Nepal, Sri Lanka and UK.

Raw material costs
Steel sheets, castings, forgings, alloy steels, steel tubes, saw steep rises in prices, which added
to the raw material costs of the company in FY04. Consolidated buying of steel and long term
contracts helped counter this problem to some extent.
Even under such a scenario where raw material prices were rising, the company saw its cost
of raw material go down by 4.8 percentage points to 74.5% of net sales in FY04 due to its
operating efficiencies. The company enjoyed a royalty waiver on some of its models from
Suzuki, and paid 10% less on components sourced from Suzuki, which helped reduce raw
material costs further. Operating profit margins (OPM) for the company improved to 10% in
FY04 from 5.3% in FY03.


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Voluntary Retirement Scheme (VRS)
The company has 3,334 employees as on March 31, 2004. It offered VRS to its employees in
FY04 and 1,251 employees accepted the same. Rs1.2bn were accounted in the income
statement to VRS in FY04. This was additional to the VRS offer in FY02, which was
accepted by 1,050 employees.

Initiatives taken
Vendor rationalization was done and number of vendors was reduced to 220 in FY04 from
over 350 two years prior to FY04. This helped enhance the supply chain efficiencies.
MUL’s tie-up with SBI and its associate banks enabled it to reach smaller towns and cities
where financing for purchase of vehicles was provided. Largely driven by this initiative, the
company witnessed a 17% growth in its ‘800’ sales. The ‘Alto’ too, with its reduced prices
saw a 130% growth, the highest by any car in the year. MUL has 142 outlets covering over
100 cities.
The company, realizing that presence across segments is a key factor, launched the ‘Grand
Vitara’ a top-end SUV for the Indian market.
It extended its ‘true value’ scheme and now accepts old cars of any manufacturer for a new
MUL car.

R&D
The objective of R&D by MUL was two-fold. One was to reduce product costs and the
second is to become the regional R&D hub for Suzuki operations. The R&D spend for FY04
stood at Rs390mn which is 0.35% of total turnover.
R&D operations include, face lifts and body changes – styling, clay modeling, computer
aided design, proto-type making, dies designing and so on. In FY04, the company introduced
new Zen due to its R&D efforts.

No capacity constraint
MUL has three fully integrated facilities with a combined production capacity of 500,000
units pa. However, the company produced around 1.4lac cars in Q4 FY04 without a third
shift. Annualizing this figure makes it 5.6lac cars annually, which is higher than the 4.7lac
cars produced by MUL in FY04. Therefore, MUL will not be constrained by capacity in the
near future.


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MUL also reduced the number of hours required to produce a vehicle. From a high of 100
hours in FY01 to 46.1 hours in FY04, it has come a long way in improving its productivity
and efficiency.

Depreciation
MUL revised the estimated life of dies and jigs from a uniform eight years to periods ranging
from 29 months to five years depending on the model. This was done wef April 1, 2003 based
on technical evaluation. This resulted in higher depreciation to Rs4,949mn in FY04 from
Rs3,221mn in FY03.

Investments worth Rs15.7bn were made during FY04. The major chunk of the investments
are in debt mutual funds that account for 88.4% of the investment portfolio in FY04
compared to bank fixed deposits which accounted for 98% of the total investments in FY03.
Investment in bank fixed deposits is included under cash &
bank balances in the annual report.

Working capital management
The company follows just-in-time (JIT) inventory principles. The net working capital of the
company fell 62.7% yoy in FY04 to Rs4.9bn. This was mainly due to a fall in the debtor days
to 26.8 days from 34.3 days in the previous year. Inventory holding days declined to 17.1
days in FY04 from 24.9 days in FY03.
Approximately 70% of MUL’s components are outsourced. The creditor days reduced too to
47.3 days from 58.1 days in the previous years. The company states that it does not desire to
delay payments to component manufacturers and therefore has not stressed on increasing
average payable period.


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Due to high sales growth and improved efficiency in operations caused the EPS to more than
triple to Rs18.8 in FY04 from Rs5.1 in FY03. The debt to equity ratio declined to 0.09 in
FY04 from 0.15 in FY03. This shows that RONW increased with lower level of risks. Cash
flow from operating activities increased by 32% yoy to Rs10.5bn in FY04.


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Outlook and future strategies
Robust economic growth, favourable regulatory framework, affordable finance and
improvements in infrastructure favor growth of the passenger vehicles segment. The low
penetration levels at 7 per thousand and rising income levels will augur well for the auto
industry. However, rising oil prices and input raw material costs remains a concern.
MUL expects the compact cars, which currently constitute around 80% of the market, to be
the engine of growth in the future.
About 18% of cars sold in India run on diesel. MUL does not have a presence in this segment.
It is therefore, setting up a capacity to offer diesel cars. It will be investing Rs3,500mn on this
plant that will be operational by 2006.

CHALLENGES

 Wafer thin margins for financiers.
 Intense competition for the market share.
 Financiers exiting from the car loan sector
 Standard Chartered , ABN Amro exited from Maruti Finance.
 ICICI and HDFC reached to share of 80% in Maruti Finance


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We have introduced the superior 16 * 4 Hypertech engines across the entire Maruti Suzuki
range. This new technology harnesses the power of a brainy 16-bit computer to a fuel-
efficient 4-valve engine to create optimum engine delivery. This means every Maruti Suzuki
owner gets the ideal combination of power and performance from his car.
Our other innovation has been the introduction of Electronic Power Steering (EPS) in select
models. This results in better and greater maneuverability. In other words, our cars have
become even more pleasurable to drive.]

Spread over a sprawling 297 acres with 3 fully-integrated production facilities, the Maruti
Udyog Plant has already rolled out over 4.3 million vehicles. In fact, on an average, two
vehicles roll out of the factory every minute. And it takes on an average, just 14 hours to
make a car. More importantly, with an incredible range of 11 models available in 50 variants,
there's a Maruti Suzuki made here to fit every car-buyer's budget. And dream.

MILESTONES

2005
 Launch of Swift
 The fiftieth lakh car rolls out in April, 2005
 Growth in overall sales by 15.8%

2004
 New (non A/C) variant of Alto
 Alto becomes India's new best selling car
 LPG variant of 'Omni Cargo'
 Versa 5-seater, a t
 Baleno LXi, a new variant
 Maruti closed the financial year 2003-04 with an annual sale of 472122 units, the highest
ever since the company began operations 20 years ago


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2003
 New Suzuki Grand Vitara XL-7
 Redesigned and all-new Zen
 New upgraded WagonR
 Enters into partnership with State Bank of India
 Production of 4 millionth vehicle. Listed on BSE and NSE after a public issue
oversubscribed 10 times

2002
 WagonR Pride
 Esteem Diesel. All other variants upgraded
 Maruti Insurance. Two new subsidiaries started: Maruti Insurance Distributor Services
and Maruti Insurance Brokers Limited
 Alto Spin LXi, with electronic power steering
 Special edition of Maruti 800, India’s first colour-coordinated car
 Maruti True value in Mumbai
 Maruti Finance in Mumbai with 10 finance companies
 Suzuki Motor Corporation (SMC) increases its stake in Maruti to 54.2 percent

2001
 Zen LXi
 Maruti True Value launched in Bangalore and Delhi
 Maruti Versa, India’s first luxury MPV
 Alto Spin LXi, with electronic power steering
 Alto Vxi
 Customer information centers launched in Hyderabad, Bangalore and Chennai
 Launch of versa

2000
 First car company in India to launch a Call Center
 New Alto
 Altura, a luxury estate car


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 IDTR (Institute of Driving Training and Research) launched jointly with the Delhi
government to promote safe driving habit

1999
 Maruti 800 EX ( 796cc, hatchback car)
 Zen LX (993cc, hatchback car)
 Zen VXi (993cc, hatchback car with power steering
 Omni XL ( 796cc, MUV, high roof)
 Baleno (1600cc, 3 Box Car)
 Wagon R
1998
 Maruti launches website as part of CRM initiatives
 Zen D (1527 cc diesel, hatchback car)
 Zen VX & Zen VX Automatic
 New (Omni & Omni E) (796cc, MUV)
 Launch of website as part of CRM initiatives

1997
 Esteem (1299cc, 3 box car) LX, VX and AX
 New Maruti 800 (796cc,hatchback Car) Standard and Deluxe
 Produced the 2 millionth vehicle since the commencement of production

1996
 Gypsy (E) (970cc, 4WD 8 seater)
 Omni (E) (796cc, MUV, 8 seater)
 Gypsy King (1298cc, 4WD, off road vehicle)
 Zen Automatic (993cc, hatchback car)
 Esteem 1.3L (1298 cc, 3 box Car)AX
 Launch of 24-hour emergency on-road vehicle service

1995
 Esteem 1.3L (1298 cc, 3 box car)VX
 With the launch of second plant, installed capacity reached 200,000 units


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1994
 Esteem1.3L (1298cc, 3 box car)LX
 Produced the 1 millionth vehicle since the commencement of production

1993
 Zen(993cc, hatchback Car), which was later exported in Europe and elsewhere as the Alto

1992
 SMC increases its stake in Maruti to 50 percent

1991
 Reaches cumulative indigenisation of 65 percent for all vehicles produced

1990
 Maruti 1000(970cc, 3 box), India’s first contemporary sedan

1988
 Installed capacity increased to 100,000 units

1987
 Exported first lot of 500 cars to Hungar

1986

 Maruti 800 ( New Model-796cc, hatchback Car)
 Produced 100,000 vehicles (cumulative production

1985
 Launch of Maruti Gypsy (970cc, 4WD off-road vehicle

1984
 Omni, a 796cc MUV


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 Installed capacity reached 40,000 units

1983
 Maruti 800, a 796 cc hatchback, India’s first affordable car.
 Production was started under JVA

1982
 License and JV agreement signed between Maruti Udyog Ltd. and SMC of Japan

1981
 Maruti Udyog Ltd was incorporated under the provisions of the Indian Companies Act,
1956

AWARDS

2005
 Maruti Suzuki was No. 1 in Customer atisfaction, No. 1 in Sales Satisfaction No.1 in
Product Quality (Esteem and Alto) and No. 1 in Product Appeal (Esteem and Wagon R)
by JD Power
2004
 No. 1 in Total Customer Satisfaction (Maruti 800, Zen and Alto)
 Business World ranked us among the country's five most respected companies
 Business World ranked us the country's most respected automobile company
 Voted Manufacturer of the year by CNBC
 Voted one of India's Greenest Companies by Business Today-AC Nielson ORG-MARG

2003
 Maruti 800, Maruti Zen and Maruti Esteem make it to the top 10 automotive brands in
"Most Trusted Brand survey 2003"
 J D Power ranked 3 models of Maruti on top: Wagonr, Zen and Esteem
 Maruti 800 and Wagonr top in NFO Total Customer Satisfaction Study 2003
2001
 MUL tops in J D Power CSI (2001) for 2nd time in a row: another international first ow


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2000
 Maruti bags JD Power CSI - 1st rank; unique achievement by market leader anywhere in
the world
1999
 MSM launched as model workshop in India; achieves highest CSI rating.
 Central Board of Excise & Customs awards Maruti with "Samman Patra", for
contribution to exchequer and being an ideal tax assessee

1998
 CII's Business Excellence Award
1996
 Maruti wins INSSAN award for "Excellence in Suggestion Scheme"
 Awarded the Star Trading House status by Ministry of Commerce
1994-95
 Engineering Exports Promotion Council's award for export performance
1994
 Best Canteen award among Haryana Industries as part of employee welfare
1992-93
 Engineering Exports Promotion Council's award for export performance
1991-92
♦ Engineering Exports Promotion Council's award for export performance

The Quality Advantage

Maruti Suzuki owners experience fewer problems with their vehicles than any other car
manufacturer in India (J.D. Power IQS Study 2005). The Alto was chosen No.1 in the
premium compact car segment and the Esteem in the entry level mid - size car segment across
9 parameters.
The J.D. Power APEAL Study 2005 proclaimed the Wagon R no. 1 in the premium compact
car segment and the Esteem No.1 in the entry level mid - size car segment. This study
measures owner in terms of design, content, layout and performance of vehicles across 8
parameters.

A Buying Experience Like No Other


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Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a
workforce of over 6000 trained sales personnel to guide our customers in finding the right car.
Our high sales and customer care standards led us to achieve the No.1 nameplate in the J.D.
Power SSI Study 2005.

Quality Service Across 1036 Cities
In the J.D. Power CSI Study 2005, Maruti Suzuki scored the highest across all 7 parameters:
least problems experienced with vehicle serviced, highest service quality, best in-service
experience, best service delivery, best service advisor experience, most user-friendly service
and best service initiation experience.
92% of Maruti Suzuki owners feel that work gets done right the first time during service. The
J.D. Power CSI study 2005 also reveals that 97% of Maruti Suzuki owners would probably
recommend the same make of vehicle, while 90% owners would probably repurchase the
same make of vehicle.

One Stop Shop
At Maruti Suzuki, you will find all your car related needs met under one roof. Whether it is
easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to provide
a single-window solution for all your car related needs.

The Low Cost Maintenance Advantage
The acquisition cost is unfortunately not the only cost you face when buying a car. Although
a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of
its regularly used spare parts may be priced quite steeply. Not so in the case of a Maruit
Suzuki. It is in the economy segment that the affordability of spares is most competitive, and
it is here where Maruti Suzuki shines.

Lowest Cost of Ownership
The highest satisfaction ratings with regard to cost of ownership among all models are all
Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni.
We are proud to have the lowest cost of operation/km (among petrol vehicles) - the top 5
models are all Maruti Suzuki models : Maruti 800, Alto, Zen, Omni and Wagon R.


Maruti Finance

Quality System

At Maruti, our approach to quality is in keeping with the Japanese practice--"build it into the
product". Technicians themselves inspect the quality of work. Supervisors educate and
instruct technicians to continually improve productivity and quality. The movement of quality
indicators is reviewed in weekly meetings by the top management.

In 2001, Maruti Udyog Ltd became one of the first automobile companies anywhere in the
world to get an ISO 9000:2000 certification. AV Belgium, global auditors for International
Organization for Standardisation(ISO), certified Maruti after a four day long audit, covering
varied parameters like Customer Focussed organization, Leadership, Involvement of people,
Process approach, System approach to Management, Continual improvement, etc.

In May 1995, Maruti got ISO 9002 certification. The audit for this covered quality assurance
in production, installation, marketing and sales as well as after sales services. We were also
one of the first companies in the world to pioneer ISO 9000 certification for our dealers.

In October 1993, MUL passed the Conformity Of Production (COP) Audit, which is based on
a European Union Directive. This authenticated our quality systems and testing facilities for
export to Europe.

Our emphasis on total quality has meant that today we are in a position to guide vendors and
dealers in establishing and consolidating their individual quality systems. This commitment to
quality has ensured a consistently satisfying product and world-class sales and after-sales
services.

A new feather was added recently in Maruti’s cap in the field of quality when the Quality
Management System of its Press Shop & associated functions (collectively termed as Press
Function) got certification for conformance to the requirements of TS16949:2002 standard.

The need for TS certification of Press Function had its genesis in the prestigious project that
Maruti earned for the supply of stamped panels to General Motors India for one of its
forthcoming models.


Maruti Finance

As a part of Quality system requirements, GM requires all its suppliers to be certified to either
ISO TS 16949 or QS 9000.

These standards address Quality System requirements, which are particularly specific to the
automotive industry and requires an organization to be in compliance with ISO 9000 systems
as a basic requirement. However, whereas QS 9000 would become defunct and cease to exist
after Dec 2006, TS 16949 is going to be the standard of the future.

The TS 16949 standard, brought out by ISO in the year 1999, is an extension of the ISO
9001:2000 standard that prescribes Quality management system requirements that are
specifically applicable to the automotive industry.

TS 16949 has gained high popularity and almost all major automobile players across the
globe including GM, Ford, Daimler Chrysler, Nissan, Honda are embracing & promoting it

It incorporates a series of continuous small and simple improvements, which aim at involving
employees at all levels.
The Suggestion Scheme is based on the same principle. Under this scheme, employees are
encouraged to make suggestions for improvement in any area of our operation. Over 50,000
suggestions are received from employees every year.
Maruti has won the First place in "Excellence in Suggestion Scheme Contest 2003", which is
the 6th consecutive award won in as many years. This contest is organized by Indian
National Suggestion Schemes Association (INSSAN). Since 1998 Maruti has won this award
10 times.
"Quality Circles" are groups of five to eight members from a particular work area who work
as a team to identify priorities and solve work related problems in the area.
We believe that it is this unwavering commitment to quality that will lead to the further
growth of the organization as competition increases.
Kaizen is based on the concept of making incremental improvements in our products

About N2N Fleet Management
Car maintenance is a time-consuming process, especially if you own a fleet. Maruti’s new
N2N Fleet Management Solutions for companies, takes care of the A-Z of your automobile


Maruti Finance

problems. These services include end-to-end backups/solutions across the vehicle’s life:
Leasing, Maintenance, Convenience services and Remarketing.
When companies lease a fleet from us, they get vehicles in prime running condition plus an
attractive lease EMI. They also take responsibility for the reliability and performance of your
entire fleet throughout the lease period. There state-of-the art maintenance services ensure
that our vehicles are in excellent shape and give a great ride each time you are on the go

Besides Fleet Solutions for company owned cars, Maruti also offers this service for
employee-owned cars. With N2N on board, car problems are things that happen to other
people. So just sit back, relax and race ahead with the times. With Maruti, your car is in good
hands.

♦ Corporate buyers now enjoy the following benefits
♦ Single window processing for delivery at multiple locations
Since vehicle prices differ from place to place we will coordinate the delivery of
these vehicles at different locations for you
♦ Total customer solutions
You can avail of
♦ A wide variety of financial options through our joint-venture finance companies
♦ Extended Warranty
♦ Annual Maintenance Contract at select dealerships
♦ Comprehensive lease packages
♦ CNG fitment in cities where CNG is available
♦ Bulk incentive schemes
♦ You are also entitled to incentives on bulk sales, which may differ from time to
time and from one model to another

Maruti at a considerably lesser price is an opportunity you wouldn't want to miss. Now you
can book your Maruti at any CSD Area Depot, anywhere in the Country, and buy a Maruti at


Maruti Finance

considerably less the market price. One more reason to be the proud owner of India's most
sought after car!
Who can book?
All commissioned officers -- either retired or currently serving in the Indian Army, Navy or
Air Force -- can avail of a sales tax exemption on the purchase of a Maruti Gypsy or indeed
any Maruti vehicle. All you have to do is, select your preferred model from the entire range of
Maruti Cars and book right away!

Sales tax relief for the Armed Forces
You can avail of a sales tax exemption in various states across the country. In a few states, the
sales tax is considerably lower than the rest of India. Which means, if you book your Maruti
through the CSD Depot in Punjab, Bihar, Gujarat, Maharashtra, Goa, Andhra Pradesh, Kerala,
Tamil Nadu, Nagaland, etc, you will get a considerable tax relief.
The sales tax exemption pertains to Maruti vehicles purchased through the Canteen Stores
Department (CSD).
Your reliable Maruti…delivered promptly. Before you know it, you will be driving away with
your Maruti in no time. Now you can look forward to many pleasurable moments on the road!


Maruti Finance

Introduction

One company that redefined the way people looked at cars, Maruti Suzuki. In the past 23
years Maruti Suzuki has emerged as the undisputed leader in the automobile industry,
bringing more cars, more technology and more satisfaction. Today, Maruti Suzuki gives
another reason to smile. Maruti Finance, empowers to buy the car we want, on our terms.

Maruti has partnered with leading Finance companies in India to provide highly attractive
finance deals to its customers through its authorized dealers. Maruti finance is the program
under which these deals are being offered exclusively to customers of Maruti vehicles.

Features:

Best Interest Rates
Maruti Finance offers the best rates of interest. The installment schemes are designed to suit
customers convenience and other requirements. The interest rate offered for car financing
depends on the credit evaluation of the customer by the Finance company. However, the rates
offered by Maruti Finance are 0.25% to 0.5% lower than those available in the market across
all credit profiles

Value Added Services
Extended warranty:
Maruti Finance gives us the privilege of extended warranty that goes up to four years! This
means four years of hassle-free maintenance. we can get up to 30% discount on extended
warranty under Maruti Finance.

Customized loan schemes
They have a number of customized loan schemes. Their finance advisor will help in choosing
the one that best suits the needs of customers. So the customer can either have a initial down
payment or low EMIs.

Loans for Insurance and Accessories


Maruti Finance

Loans for insurance and accessories are built into the EMI's, keeping the whole deal simple
and hassle free.

Transparent transactions
Maruti Finance is reliable, transparent and convenient. We simply need to walk into an
authorized Maruti Suzuki dealership, for the best cars and the best finance options!
After all it is a better way to buy a car!

One Stop Shop
From Finance to Insurance. From used cars to genuine accessories. When it comes to car
elated needs all we have to do is to contact nearest Maruti Suzuki Dealer.

MARUTI FINANCE PARTNERS

Earlier, Maruti has tied up with 8 finance companies to form a consortium. This consortium
comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra,
Sundaram Finance, ABN Amro Bank, & Standard Chartered Bank.
But now in current year 2005-06 Maruti Finance has 6 finance companies excluding ABN
Amro & Standard Chartered bank.


Maruti Finance

Structure of Maruti Finance Partners

CITI
CORP
MARUTI
FINANCE
LTD

MARUTI
COUNTR
YWIDE
ICICI
AUTO
BANK
FINANCEINTRODUCTION TO MARUTI FINANCE PARTNERS
BRIEF
LTD MARUTI
FINANCE

SUNDAR
AM
ICICI Bank is India's second-largest bank with total assets of about Rs.1,67,659 crore at
HDFC FINANCE
March 31, 2005 and profit after tax of Rs. 2,005 crore for the year endedLTD 31, 2005 (Rs.
BANK KOTAK March
MAHIND
1,637 crore in fiscal 2004). ICICI Bank has a network of about 560 branches and extension
RA
counters and over 1,900 ATMs. ICICI PRIMUS Bank offers a wide range of banking products and
LTD.
financial services to corporate and retail customers through a variety of delivery channels and
through its specialised subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital and asset management.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in
the private sector, as part of the RBI’s liberalisation of the Indian Banking Industry in 1994.


Maruti Finance

The bank was incorporated in August 1994 in the name of ‘HDFC Bank Limited’, with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995

Maruti Countrywide was set-up when GE Capital and Maruti Udyog Limited formed a
captive finance company in 1995

A professionally managed company, they share the ideals and work culture of the parent
companies. Their prime objective is to cater to the needs of Maruti car buyers by offering
innovative finance schemes for the purchase of Maruti cars.

GE Countrywide. Help Indian consumers fulfil their aspirations with quick and easy loans.
Set up in 1994 and currently operating out of 62 locations in the country, GE Countrywide
pioneered the Consumer loan revolution in India.


Maruti Finance

Citicorp Maruti Finance Limited was formed when Maruti joined hands with Citibank in May
1998.
Located in 52 cities, CMFL is the first company that provides services to finance the purchase
of secondhand cars nationally. They also offer a wide range of flexible and customized
financing options at affordable rates to individuals buying a Maruti car.

Citibank understands that every car buyer's needs are different. This is the reason why they
offer car loan schemes that suit customer requirements.
Citibank Auto Loan makes paying back a car loan easy by offering you a loan that stretches
your payments upto 60 months.
Citibank Auto Loan gives you a benefit of making a down payment of only 10%.
They also offer you the most competitive interest rates.

With a Citibank Auto Loan customers can acquire a loan with minimum fuss and maximum
assistance. If you are salaried, all you require is a salary certificate from your company, copy
of your CPR & Passport and your bank account statement for the last three months.

If your are self employed all we require is a copy of your CR, a copy of your CPR, and bank
statements for the last three months

Citibank offers you a unique opportunity to Cash-in-your-car.

Arranging a loan can often prove difficult and inconvenient. At best, it can be a time-
consuming and lengthy process, unless the bank is Citibank.

Kotak Mahindra Primus Limited (KMPL) is a joint venture between Kotak Mahindra Bank
Ltd. (KMBL) and Ford Credit International Inc. (USA)(FCII) formed to finance all non-Ford
passenger vehicles. The Joint Venture is dedicated to financing and supporting automotive


Maruti Finance

and automotive related manufacturers, dealers and retail customers. The Company was
incorporated on 28th February 1996 and commenced it's operations on 1st November 1996.
After incorporation and subsequent commencement of the business by the joint venture, the
business of financing non-Ford passenger cars and it's related activities, previously carried out
by KMFL, is being undertaken by KMPL. The Company has immensely benefited from the
brand equity of "Kotak Mahindra" who were market leaders in the auto finance sector.

Kotak Mahindra is one of India's leading financial institutions, offering complete financial
solutions that encompass every sphere of life. From commercial banking, to stock broking, to
mutual funds, to life insurance, to investment banking, the group caters to the financial needs
of individuals and corporates

The group has a net worth of over Rs.1,800 crore and employs over 4,400 employees in its
various businesses. With a presence in 82 cities in India and offices in New York, London,
Dubai and Mauritius, it services a customer base of over 5,00,000.
Kotak Mahindra has international partnerships with Goldman Sachs (one of the world's
largest investment banks and brokerage firms) and Old Mutual (a large insurance, banking
and asset management conglomerate).

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance
Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &
Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and
that's when the company changed its name to Kotak Mahindra Finance Limited

Kotak Mahindra Primus Limited (KMPL) is a joint venture between Kotak Mahindra Bank
Ltd (KMBL) and Ford Credit International Inc. (USA) (FCII) formed to finance all non-Ford
passenger vehicles.

SUNDARAM FINANCE


Maruti Finance

Sundaram Finance has grown over the past decades on the foundations of dedicated customer
service, fair business practices, efficient, safe and trusted financial policies.
The Company was incorporated in 1954, with the object of financing the purchase of
commercial vehicles and passenger cars.
The company was started with a paid-up capital of Rs.2.00 Lakhs and later went public in
1972.
The Company's shares were listed in the Madras Stock Exchange in 1972 and in the National
Stock Exchange in January 1998

Subsequently, the equity shares of the Company have been delisted from Madras Stock
Exchange Limited (MSE) with effect from January 27, 2004, in accordance with SEBI
(Delisting of Securities) Guidelines, 2003, for voluntary delisting
Sundaram Finance Ltd registers Rs. 75.99 Cr. Net Profit for FY05
Disbursements rise to Rs. 2887 Cr.
Net NPA halves to 0.45%

Leading Financial Services company Sundaram Finance Limited (SFL) has announced that it
has registered a Net Profit of Rs. 75.99 Cr. for the year ended 31st March 2005. The company
had ended 31st March 2004 with a Net Profit of Rs.55.62 Cr.. However, the numbers (relating
to FY04 and FY05) are not strictly comparable on account of the merger of Lakshmi General
Finance (LGF) with SFL during the year.

Finance options for new car
Sundaram Finance Group provides car finance for all models of cars through 100 plus
locations that are spread all over the country. The documentation required is minimal and
there are no hidden costs. Our procedures are transparent and hassle free. Details of some of
the schemes that have been designed with you in mind are given below.

Finance options
The maximum finance period is for 36 months and this also depends on the model and the age
of the car being financed. The age of the car including the financing period is generally
maintained at a maximum of 5 years. The maximum amount of finance that is given would be
60% of the assessed value


Maruti Finance

PROFILE

Bimal Auto Agency (Bangalore) – A Maruti-Suzuki authorized dealer –is among the few ISO
9001 certified dealerships in the country. Spread over 125000 sq ft, the Bimal campus is one
of the biggest in India and is designed with customer convenience in mind. All facilities –
Sales, Service, Body Repairs and Spares are in the same premises. Moreover, there are
facilities for accessories, extended warranty, insurance, finance and pre-owned cars.
Bimal auto agency, the flagship company, was established in the year at Guwahati(Assam). It
started with Bajaj Tempo and Hindustan Motors spare-parts dealerships and in 1984
established the Maruti dealership.sodsequently, it went on to become dealers for Yamaha and
LML range of two-dealers. In the year 2002, Bimal started the Maruti-Suzuki dealership at
Bangalore. With combined sales of over 6000 cars, it is among the largest Maruti Dealership
groups in the country. It is fully owned and managed by the Sarawagi family members. Other
family business interests include Petroleum outlets, transport business and coffee plantations.

Bimal Auto Agency - located on Whitefield Road, Bangalore’s IT hotspot is the Maruti
dealership that has created waves in Bangalore. The success comes from our keen eye for
detail, quality and the standards & policies that is based on satisfying the customer’s every
need. We intend to make our dealership, a byword for quality and customer delight in
Bangalore.


Maruti Finance

Bimal has been honoured with the following at the All India Maruti Dealer onferences:
Sales Infrastructure – All India Best New Showroom 2003
Service Infrastructure – All India Best New Workshop 2002
Service Infrastructure – All India Best New Body Repairs Workshop 2003
Leadership – Young Entrepreneur Of The Year Award for Mr. Naveen Sarawgi, CEO
Innovation – All India Best Practices on Product Customization 2003


Maruti Finance

BEST PRACTISES IN BIMAL AUTO AGENCY WORK SHOP

 Regular morning meetings and exercise.
 Identifying the weaker areas and training in-house.
 Training process to improve their efficiency.
 Same Service Advisor for receiving and delivering vehicles.
 Every customer complaint is taken for detailed study, the concerned are educated.
 Analysis of final inspection report by Works Manager on weekly basis.
 Weekly meeting with washing supervisor to improve washing quality.
 Random check of vehicle before delivery.
 Works manager does special customer’s service vehicle follow-up
 Free pickup and drop for all customers on request.
 Welcome drink to all customers’ refreshment at lunchtime for wait and take customers.
 All managers from service is present while receiving and delivering vehicles.
 Regular camps are conducted in corporate houses and housing complexes.
 Marketing teams with photo album to authenticate the facility available.
 Every employee of Bimal is a spokesman of dealer and trained to market the services
 Discount and free wash coupons are distributed during the camps.
 24hours MOS operations on free of cost basis for Break Down Repairs.
 8 a.m to 8.p.m service and Sunday working for customer convenience.
 Visiting customers, to build relationship.
 Dedicated Mobile numbers for pickup and drop
 Monthly Customer Interactive Meet for collecting the feedback.
 Bonus on service is offered as a tool for retaining customer.
 Hotlines for services, pick up & drop, insurance renewals & breakdown.
 All service vehicles are polished.
 All vehicle interiors are cleaned by vacuum cleaner
 Special highly skilled team to resolve customer complaints identified through PSF,
Feedback Card etc.,


Maruti Finance

SERVICE MARKETING
Initially we started brand building through Marketing Executives by conducting camps at
Corporate Houses, Housing Colonies, Business Centres etc,.
Now we appointed a Business Development officer to improve our penetration in the area of
service and selling special products like Insurance, Extended Warranty etc,.
We have one exclusive person who does the SMR .
SMR has been a very important tool to improve our service load over a period of time.
Through SMR an average of 800 customers are contacted per month.
The enforcement ratio is approximately 85%.
The enforcement ratio through SMR is around 55%

PICK UP & DROP FACILITY
We had introduced the pick up & drop facility right from the beginning, which has provided
maximum convenience to our customers.
Hotline for picks up & drops.
An average of 35% vehicles are picked up for service & dropped back at customer’s place
which constitutes to 18 to 20 vehicles per day.
This facility has been one of the factor in building our service load.
One person is in charge of controlling the drivers who are utilised for pick up & drop.


Maruti Finance

SWOT Analysis

STRENGTHS
 Infrastructure
 Processes & Systems
 Leadership
 Industry Experience
 Bimal Edition Vehicles (Customization of Cars)

WEAKNESSES
 Location
 Parking Space

OPPORTUNITIES
 Field Sales
 ITPL

THREATS
 Competition Branche
 Bimal DC


Maruti Finance

OBJECTIVE OF THE STUDY:
Primary Objectives:
1. To study the loan approval procedures of all finance companies, which come
under MARUTI FINANCE consortium.
2. To Study of Market Shares of Maruti Finance Partners & Bimal Auto Agency
Secondary
1. Study of Maruti Udyog Ltd in general and Maruti Finance in Particular.FL
2. Study of Indian Auto Industry in general and Auto financing in Indi

METHODOLOGY OF THE STUDY
 Observing the actual working of various departments mainly finance department
and also marketing dept.
 Analyze the functions performed by finance & marketing departments
 Study the objectives, growth and achievements of each department in particular
and the organization as a whole.
 Visiting the banks to study the approval procedure with the finance executive.

The research design is divided into two parts
PART 1 Loan Approval Procedural study of Maruti Finance Partners

PART 2 Study of Market Shares of Maruti Finance Partners & Bimal Auto Agency

Collection of data –
There are different methods by which data can be collected. The following methods
were adopted in collecting the information required for the project study –
Primary source – different documents of the company like official records, manuals
face-to-face interview with officials were done to collect information . In the face-to-
face interview officers where highly knowledgeable and experienced were met to get
extensive information about the concerned topic.


Maruti Finance

Secondary data – in this Method Company’s Brochure, Magazines, manuals and
Annual Reports were studied to collect data. The Official Records will give detail
information about the past, present and future plans of the company. Accurate vital
statistical information can also be collected from such records.

Limitations of the study –
 The data collected was informal. The working executives inside the organization
did not reveal much information for the study.
 The study is limited to Maruti cars buyers only
 The study tells only about Maruti finance & its consortium.


Maruti Finance

PART 1

Loan Disbursement procedure at Maruti Finance

Step by Step approval procedure of Car loan
Step 1 Car Loan Products

Step 2 Deciding Customer Requirements

Step 3 Collection Of Pre Documents

Step 4 File Logins In Banks

Step 5 Field Verification & Tele Verification

Step 6 Loan Approval & Deviation On Approval

Step 7 Rate Approval & Deviation On Rate Approval

Step 8 Collection Of Post Documents

Step 9 Disbursements

Step 10 Issue Of Delivery Order To Dealership

Step 11 Delivery Of Cars To Customers

Step 1
CAR LOAN PRODUCTS:

Each banks/finance companies are having different schemes /products. Following are
the some products


Maruti Finance

ICICI :

 Loan On Phone (for existing icici customers)
 8 yr Product for M800
 100% loan scheme
 90% loan scheme – A3 Segment (esteem, baleno, versa)
 No Income Proof Scheme

HDFC:

 On road 85% for 7 yrs on M800 & alto
 100% loan scheme
 90% loan scheme – A3 Segment (esteem, baleno, versa)
 Step Up EMI Scheme up to 7 yrs

MCW:

 Special Offer for GE Employees (Quick approval)
 Step Up scheme up to 7 yrs (launched by MCW first time) )(here initially EMI
will be lesser & gradually rises till the tenure ends).
 100% funding

CMFL :

 90% funding
 Suvidha Existing customers Scheme(Quick approval)
 Special Scheme for gold Card holders & Dinus Club members

KMPL :


Maruti Finance

 Margin money-- This is a regular scheme wherein you pay a minimum margin of 25%
on the cost of the car. The balance cost is financed and you repay with finance charges in
equated monthly instalments (EMI).
 Advance EMI-- In addition to margin money, based on your cash flow, you can pay 2-3
instalments in advance. The advantage here is that the finance charges will be less than
the above margin money scheme
 Security deposits-- Here you place a refundable security deposit (of about 10% to 25%
of the cost of the car) with us, which carries an interest at an agreed rate. The finance
charge is payable on the total cost of the car.
 100 % finance-- Here we provide 100% finance on the cost of the car for varying
tenures. This is a facility provided under the lease option for medium and large corporates
 No Income Proof Scheme
 Bullet payment Scheme(in this scheme customer can repay as much as he can as there
is no fixed emi, but last installment must be lumpsum)
 90% funding
 5 yrs Tenure Scheme

SFL:
 Flexible Scheme :You decide Your Emi Scheme (customer has to choose their
emi which suits their pocket, max 48 months, it should be step up , remaining
amount they have to pay at 48th installment lump sum. If they are not affordable to
pay on 48th installment, they can extend loan for further 2 yrs)
 Asset Proof Scheme: (asset must)(applicable for low income individuals)
 Guarantor Scheme ( outside guarantor also)

Note: The above funding products is not constant. It depends on customer profile &
criteria’s. As they match according to bank criteria his funding will rise otherwise it
declines.

Step 2
DECIDING CUSTOMER REQUIREMENTS:


Maruti Finance

Once customer approaches for Car Loan, Concerned Dealer Sales executives will give
various options and quotations to the customers. Sometimes customers ask for exact
loan amount and loan tenures according to their requirements. Otherwise Sales
executives have to give various options of finance facilities as below.

♦ Lesser loan amount for lesser tenure. (75 to 80% loan for 1 to 4 yrs.)
♦ Lesser loan amount for Maximum tenure.(75 to 80% loan for 5 to 7 yrs)
♦ Maximum Loan amount for lesser tenure (90 to 100% loan for 1 to 4 yrs)
♦ Maximum loan amount for maximum tenure. (90 to 100% for 5 to 7 yrs)

Now customers are required to select any one of the above options according to their
need. At present most of the customers are asking least down payment schemes, i.e.
Maximum Loan amount for maximum Tenure with least rate of Interest. Finalization
of loan amount and tenure is mainly based on customers profiles.

Since loan approval is the sole discretion of finance companies,

In practice, Credit is the sole discretion of finance companies; each finance company
will have different criteria. Some of the criteria are as follows.
♦ Income tax returns
♦ Residential Status
♦ Job Continuity
♦ Salary drawings
♦ Repayment track of existing loan
♦ Bank transactions copy

Customers have to give all supporting documents in connection with above criteria’s.
If any deviations are there in the above-mentioned criteria, the required loan amount
or the Tenure will be affected proportionately.

Step3


Maruti Finance

COLLECTION OF PRE DOCUMENTS

Once customers accept the finance quotation made by Dealer Sales Executive, he has to
provide same basic documents for taking loan approval. These documents are called Pre
approval Documents. Normally these documents remain to same in most of the financiers.

Sl. Documents For Salaried For Self For For Private/
employed partners Public Ltd
No
hip companies
Firms

1 Application Form duly filled and
YES YES YES YES
signed by customer
2 1 Photo YES YES YES YES
3 Residence Proof (Copy of
Electricity bill or Telephone bill or
laminated driving license or Voters
YES YES YES YES
identity card or Ration card or
passport or Rental Agreement. (any
one)
4 Signature proof (Pan Card, Driving
License, Passport, Bankers YES YES YES YES
Verification.
5 Identity proof & Age Proof
(Passport, Pan card, Driving
Licence , Voters Identity card, YES YES YES YES
Photo Credit Card, Photo ration
Card.)
6 Proof of Latest Bank Statement
YES YES YES YES
for Last 3 to 6 months
7 Latest Salary Slip YES NO No YES
8 Form No 16 for Last Year YES NO NO NO
9 Income Tax Returns for Last 2 yrs. NO YES YES YES
10 Computation Copy with Profit & loss
NO YES YES YES
account for Last 2 years.
11 Partnership Deed NO NO YES NO
12 Memorandum & Article Of
NO NO NO YES
Association
13 Board Resolution authorizing One
NO NO NO YES
Director to execute the agreement.

Step4
FILE LOGINS IN BANKS


Maruti Finance

Once the collection of pre documents is over, Finance executives will LOGIN the file in
concerned banks for Approval. Since Different banks are having different procedures to
LOGIN, the detailed summary of each Financier furnished below.

ICICI BANK:

In ICICI Bank, there is one Outsourcing Unit called CPA (Credit Processing Authority)
which is owned & maintained by leading Chartered Accountants situated in the same
premises. After collection of Pre-documents, concerned finance executive has to prepare
customer File and they have to submit such files to CPA. It is the duty of CPA to check all the
collected documents and verify the accuracy of the documents like below.

♦ Whether application s dully filled or not,
♦ Whether all attached documents are self attested by customer or not,
♦ Incomplete files not accepting in CPA
♦ If any discrepancy found, CPA will communicate to customers through
concerned executives and ensure that discrepancy is overcome.
♦ Allotment of file numbers,
♦ Updating files in MIS
♦ Updating of approval Status in MIS
♦ Sending File Status (MIS) to dealer thrice in a day by email

HDFC BANK
HDFC also appointed a Chartered Accountant Firm as CPA and the office was not situated in
same premises. Like ICICI, here also systems & procedures are more or less same. Daily once
they are sending MIS to all channels.

MARUTI COUNTRYWIDE AUTO FINANCE LTD:-
The System is entirely different here. There is no CPA here in MCW. The Whole system is
centralized. The Regional office of MCW is situated at Chennai. Once the file login,
documents will get scanned in the branch & Sent it to Regional Office

Through online. Once the file is received, RO will allot file & if find any discrepancy they
will communicate to Branch Office where it is sourced. Here the Branch office does not have
authority to modify or change the documents. To view the file, Branch need to feed files


Maruti Finance

number in the online system.

CITICORP MARUTI FINANCE LTD :-
Citi Bank has outsourced file logins to different department called CPA.The activities
performed by CPA is same as in HDFC /ICICI.

KMPL & SUNDARAM FINANCE LTD:
In case of Kotak Mahindra & Sundaram Finance. There is no separate entity to handle file
logins. All the activities are centralized; logins & verifications are done by Bank itself.


Maruti Finance

MIS format as below

S.No App ID App Cust name Vehicle Dlr DSA Status Comments Loan Tenure LTV(%) DSE Disb
Name Name amt
Rcd date
date
68 507892 16/07 Shiva Esteem Bimal Bimal To Ops 384000 60 83
03 /05 Shankar Lxi


Maruti Finance

Step 5

FIELD INVESTIGATION & TELE VERIFICATION

The main reason behind conducting FV & TV is to ensure whether the address given by the
customer is genuine or not,. In case of ICICI, HDFC, MCW, CMFL & Kotak, verification
has been done by separate agency which works for Bank. .Once the verification is initiated by
the Bank; Agency will personally visit to both office & Resident Address of applicant for
field verification and make report on that and communicate results to Bank. In case of Tele
Verification, the Agency will not meet personally but contact them over phone both office &
residents to get details. Questions are designed in such a way that they will cover following
factors:

♦ Credit Entity’s identity
♦ Stability of residents
♦ Family Structures & Age
♦ Sources of Income
♦ Own house or rented house.
♦ Vehicles or Assets Owned.
♦ Standard of Living.

There are some entities, which are considered as negative profile, which will come to know at
the time of investigation. The usual negative profiles are;

♦ Contractual Employees
♦ Politicians
♦ Policemen (Except IPS & IAS)
♦ Video Parlor Operators
♦ Bar Owners
♦ Chit Funds
♦ Real Estate Agency
♦ Advocates (Except High Court & Supreme Court lawyers)
♦ Film industry professionals
♦ Builders, Contractors & Building Materials Suppliers


Maruti Finance

For the above-mentioned profiles, all banks/finance companies are taking precautions before
approving files. Precautions like low LTV (Loan To Value) like 50 to 60%, shorter tenure like
2 to 3 yrs, etc.

Moreover in Sundaram Finance Ltd., there is no separate Agency for field Investigation &
tele verification and this process get done through their own staff. Field officers are visiting
customer’s residence & office and submit the reports to the branch manager for approval.


Maruti Finance

Step 6

LOAN APPROVAL

After the field and tele verification has been done, the agency sends the report back to the
bank confirming the customer status. If the report is positive, then further loan procedure is
preceded or if the report shows negative the case is dropped at first instance itself. If the
negative status in the FI Report is for minor reasons, sales manager /credit manager are taking
deviations.

The documents collected from the customer are taken to bank. The person approving the loan
is known as Credit Manager or Credit Buyer. His duty is to see the customer profile and
approve the loan accordingly. The Bank / Finance Companies have their own criteria’s and
procedures for approval of loans and based on these, the Credit Manager will approve the
loan. However these criteria’s & procedures will differ from one Bank to another. The main
outlooks of these criteria’s & procedures stands below in respect to following companies.

ICICI BANK & HDFC BANK:

Linking of FI reports:

After the completion of tele verification & filed verification, the credit department (CPA) in
the bank will link the above report to concerned customer files.

Dedup Match:

In this procedure, Credit Processing Authority will cross verify the earlier banking habits of
the customer with ICICI or other banks. In case of existing customer they are cross checking
the savings/current account transactions, credit card transactions, housing/car loan repayment
records etc., to confirm the creditability of the customer. If the customer is not an existing
customer, then with the help of date of birth they can access the customer’s creditability with
other banks/ financial institutions. After assessing the above all, the profile stands negative
then the file get rejected immediately at this stage otherwise the files moves towards
preparation of CAM.


Maruti Finance

Credit Assess Memo:

Now the CPA people are authorized to prepare a CAM based on customer profile and they are
also authorized to recommend the percentage of LTV (Loan to Value). In this CAM they are
mentioning the income stability of the customer, banking stability of the customer, job
continuity of the customer, business continuity of the customer, business stability of the
customer, residence continuity of the customer, ownership resident/office of the customer and
about co-applicant also if required. Based on the above criteria they are fixing /
recommending LoanToValue (LTV) Grid as shown in the chart below.

LTV GRID
Income <60K & NIP 60K-100K >100K-150K >150K
Tenure 1-3 1-3 4-5 1-3 4-5 1-3 4-5
Category 1 70% 85% 85% 85% 85% 90% 85%
Category 2 70% 70% 70% 85% 80% 85% 80%
Category 3 60% 70% - 75% - 75% -
Category 4 - 50% - 50% - 50% -
Category 5 50% - - - - 60% -

In case of NIP (No Income Proof) or income is less than Rs.60,000 normally they are
approving only 60 to 70% LTV, for a tenure of maximum of three years. Like that based on
customer income as per Income Tax Returns the LTV and the Tenure will take a hike as
shown in the above chart.
The categories shown in the above table are based on the segment of cars like;
CAT 1 – Maruti 800 / Omni
CAT 2 – Alto / Zen / Wagon R / Swift
CAT 3 – Esteem / Baleno / Versa
CAT 4 – Vitara

After considering eligibility of the customer as per above gird they will mention the
percentage of LTV to be granted to the customer in the CAM

Approval by Credit Manager:

In this stage the full file with CAM will come over to Credit Manager’s desk to sign for final
approval. After the scrutiny of file along with the CAM, if he is satisfied he can approve the


Maruti Finance

proposal for an eligible amount or other wise he may reduce the percentage of LTV to the
extent of discomfort he founds in approval

E.g. If a customer’s applied LTV is 90% for 5 years and eligible LTV as per CAM is 75% for
5 years, he can approve for a maximum extent 75% for 5 years. If he feels discomfort with
file, the LTV/Tenure may come down like he can approve for 75% for 3 years or 70% for 5
years etc.,

Deviation on Approval:

Sometimes, if the applied LTV is more and same it is not under the Credit Manager’s
Discretion, he can ask for his superior’s consent or approval for such cases. The following
table shows the flow/chain of authority people for approvals.


Maruti Finance

CREDIT MANAGER

AREA CREDIT MANAGER

REGIONAL CREDIT MANAGER

ZONAL CREDIT MANAGER

NATIONAL CREDIT MANAGER

The above chart also reveals that a common customer’s file can go up to National Credit
Manager’s level to take approval for applied LTV. One more interesting fact is that the
process of these approvals takes place within a span of few minutes.

CITI CORP MARUTI FINANCE LTD :

The process of linking of FI reports, Dedup Match, preparation of CAM is more or less same
as in the ICICI/ HDFC Bank. The Credit Manager in the Bank authorized to do final approval
with the consent of Sales Manager. Since CMFL is not approving more than 90% of LTV, the
chances of deviations are very less. Comparing to ICICI/HDFC, here the maximum tenure
also restricted to five years. CMFL also giving special consideration on approval and tenures
for Citi Bank Suvidha account holders and Citi Bank card holders. But maximum LTV and
tenures are same for all.

MARUTI COUNTRYWIDE AUTO FINANCIAL SERVICES LTD:

As mention earlier the system of approval process also centralized at Regional office, (e.g.:
Chennai is the regional office for all logins of Karnataka). Once the file is “Soft approved”
( prima-facie approval ), the linking of FI reports, Dedup Match, preparation of CAM are


Maruti Finance

processed at regional office. At the end, the file goes to Credit manager at regional office for
“Hard approval”. After hard approval, they will update the status of the file in online. Within
a fraction of seconds after hard approval, Sales manager at local office can access the status of
a file and he can go ahead for further process.

KOTAK MAHINDRA PRIMUS LTD.

In Kotak Mahindra, the system of approval is flexible compared to all above banks. After
linking of FI reports, the Credit Manager approves the files as per credit norms. In case of
deviations, file moves to Location Head/Branch Head for final approval. If LTV is more than
95%, Area Manager or Head Office (Mumbai) approval is necessary.

SUNDARAM FINANCE LTD

Field Officers at Sundaram Finance Ltd., are doing both field verification and primary
approval also. Once the file is primary approved by field officers Branch Manager’s green
signal gives final approval on the file. Since the branch is entirely responsible for selling of
car loans and recovery of loans, they are personally evaluating the customers’ stability,
repayment capacity and guarantors profile rather than a mere verification of document/papers.
Noticeably, SFL is the only one finance company accepts a third party guarantor as a co-
applicant compared to other finance companies as they are accepting only family members
(blood relatives) as guarantors.

It is observed here that the percentage of recovery is more in SFL only due to this Third party
guarantor.

Step 7
COLLECTION OF POST DOCUMENTS

All banks / finance companies are having same system of collection of post documents. After
the approval, the executives has to visit customers place to collect post documents and they
will hand it over to the bank to attach with customer file.


Maruti Finance

The following is the list of post documents to be collected by the executives

♦ Agreement Copy (Duly signed by applicant)
♦ Money Margin Receipt.
♦ Post-dated cheque’s or Security Cheques (According to the finance co & tenure) r
♦ Electronic Clearing System (ECS) (For Salaried Class)
♦ Own house proof (Optional)
♦ Repayment Track (Optional)
♦ Credit Card Statement (Optional)

Note: The ECS system is not applicable for KMPL & SFL companies, customers has to
submit post dated cheques only since the company does not have the facility of ECS.

Step 8

RATE APPROVAL & DEVIATION ON RATE APPROVAL:

The rate of interest is one of the most important factors to attract the customer towards car
loans. The six finance partners, who have tied up with Maruti Finance, are giving very


Maruti Finance

competitive rates to its customers. Before starting Maruti Finance some finance companies
are charging more than 15% per annum for car buyers. The entrance of Maruti Finance,
reduced the rate of interest by restricting it’s channel partners.

In all the banks Branch Head/Sales Managers are authorized to fix/approve rate of interest.
Normally, prevailing rate of interest to customer is 9% to 10% for Maruti 800/ Omni, 8.5% to
9.5% for Alto / Zen / Wagon R / Swift, 7.5% to 8.5% for Esteem / Baleno / Versa. These
rates are possible only after giving some subsidy / subvention from Maruti Udyog Limited or
Dealers.

Some banks like ICICI & HDFC, for the rate approvals only Branch Head is not authorized to
approve all rates. For deviation they are moving such files to higher officials like Area Sales
Manager, Regional Sales Manager, Zonal Sales Manager, National Sales Manager and finally
to Business Head.

Step 9

DISBURSEMENTS

After getting rate approval, the file moves to Operation Department cum Finance Department
for Final Disbursements where the approved loans are getting readied for payments to the
dealer.


Maruti Finance

Before preparing the payment, the Operation Department will scrutinize all the post
documents. The following documents will scrutinized

 Checking all signature of customer in loan agreement
 Verification of post dated Cheques (Date, amount & signature)
 Verification of Margin Money Receipt
 Verification of Insurance Cover Note
 Verification of Pro-forma Invoice / Price List from Dealer
 Verification of ECS form & Security Cheques


Maruti Finance

Step 10

ISSUE OF DELIVERY ORDER & FORM – 20 TO DEALERSHIP

After completion of disbursement process, the Operation Department will issue a delivery
order to the dealer. It contains the loan amount, EMI, the dealer discounts if any adjusted and
the disbursement amount. Along with the delivery order, they are also issuing a Form – 20
which is required for registration of vehicle at the Regional Transport Authority.

Step 11

DELIVERY OF CARS TO CUSTOMERS

On the basis of the financier’s Form – 20 & delivery order, the dealer will register vehicle
with the hypothecation of concerned financier. After registration customer will get the
delivery of vehicle.
Once the new car is purchased the following documents have to be submitted to the RTO for
registration purposes;
 Copy of the invoice - (photocopy)
 Copy of the insurance cover-note / policy
 Residence proof.
 PUC certificate issued by the manufacturer (form no. - 22)
 Form -20 Imprint of Chassis No.
 PAN / GIR No
 4 Photos


Maruti Finance

Step 12

MAKING PAYMENT TO DEALERSHIP

More or less all Maruti Finance Partners arranged inventory funding/trade advance facilities
to the dealership. In such case banks / finance companies are not supposed to prepare
Cheques / drafts to release the payment. Since under inventory funding dealership is having
online account with the finance companies and within a few minutes the payment will get
credited to dealer inventory funding/trade advance account. Or otherwise, the dealer is not
availed such a inventory/trade advance facility from the bank / finance companies, then the
bank/finance company will pay the amount of disbursal through cheque /demand drafts.

STEP 13

COLLECTION OF RC BOOK, & INVOICE COPY FROM DEALER
After all payments are over the dealer issues RC Book & Invoice copy to customers.


Maruti Finance

MARUTI FINANCE PARTNERS SHARE 2003-04

In the year 2003-04, there were 8 partners in Maruti finance. There Market share is
shown below.

Fig 1

MARUTI FINANCE PARTNERS SHARE:2003-04

40% 36%
35%
30%
25%
20% 16% SALES
15%
9% 10% 9%
10% 8% 7%
5%
5%
0%
MCW CMFL KMPL SFL ICICI HDFC ABN SCB

Key Findings
 ICICI seems to be clear winner with Highest Market share of 36% ,
 HDFC takes the second place with 16% Market Share
 KMPL takes the third place with 10% Market Share
 Rest other banks combined(MCW,CMPL,SFL,ABN,SCB) constitutes 38% of Market
share.


Maruti Finance

Fig 2

MARUTI FINANCE PARTNERS SHARE 2004-05

60%
48%
50%

40%

30% SALES
21%
20%

10% 7% 6% 7%
4% 3% 4%

0%
MCW CMFL KMPL SFL ICICI HDFC ABN SCB

Key Findings

 KMPL & MCW takes the third place with 7% Market Share
 Rest other banks combined (CMPL, SFL, ABN, SCB) constitutes 24% of Market share.


Maruti Finance

Fig 3

MARUTI FINANCE PARTNER SHARE 2005-06(Q1)

70%
58%
60%

50%

40%
SALES
30%
22%
20%

10% 6% 6% 5%
3%
0%
MCW CMFL KMPL SFL ICICI HDFC

Key Findings

 KMPL & MCW takes the third place with 6% Market Share
 Rest other banks combined (CMPL, SFL ) constitutes 14% of Market share.


Maruti Finance

Fig 4

BIMAL AUTO AGENCYMARKET SHARE 2003-04

33%
35%
30%
25%
20% 17% 15%
15% 13%
8% 7%
10%
4% 4%
5%
0%
MCW CMFL KMPL SFL ICICI HDFC SCB ABN

SALES

Key Findings

 MCW takes the second place with 17% Market Share
 CMPL takes the third place with 15% Market Share
 Rest other banks combined (HDFC, SCB, KMPL, ABN, SFL )constitutes 35% of Market
share.


Maruti Finance

Fig 5

BIMAL AUTO AGENCY MARKET SHARE 2004-05

40% 35%
35%
30% 26%
25%
20%
15% 11%
8% 9%
10% 7%
3%
5% 1%
0%
MCW CMFL KMPL SFL ICICI HDFC SCB ABN

2004-05

Key Findings
 CMPL takes the third place with 11% Market Share
 Rest other banks combined (MCW, SCB, KMPL, ABN, SFL )constitutes 28% of Market
share.


Maruti Finance


A project report on does maruti finance helps mul increase its sales

A project report on does maruti finance helps mul increase its sales

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