Maruti Suzuki shares rebound, selloff seen quite overdone

Reuters Posted online: Wednesday, Jan 29, 2014 at 0000 hrs
Mumbai : Maruti Suzuki India shares gain as much as 8 per cent, recovering almost fully from an 8.2 per cent drop on Tuesday due to concerns about Suzuki Motor's plans to invest $488 million to build a car plant in India's Gujarat state.

Investors worried as the plant would be wholly owned by Suzuki and would sell cars to Maruti Suzuki at a price that will include production costs plus enough cash to cover further capital expenditure requirements.

Brokerage Jefferies kept its "hold" rating on the stock, calling details of the arrangement unclear but noting that the downside was limited.

"We are unable to reconcile our calculation with management's contention that there will be no hit to Maruti's margins," Jefferies said in the report.

Macquarie upgraded the stock to "outperform" from "neutral", citing December-quarter earnings beating estimates and an exaggerated fall in the share price on Tuesday.