India’s largest carmaker Maruti Suzuki has increased its capital expenditure (capex) by 40% to fund the construction of its new plant in Haryana and to prepare for production of new models that will hit the market next year.
The Delhi-based company will be spending more than Rs 7,000 crore during FY23, which is significantly up from the Rs 5,000-crore capex guidance given by it in April this year. The company has promised to showcase sports utility vehicles (SUV) at the upcoming India Auto Expo to be held in mid-January. These SUVs will go into production in FY24.
Ajay Seth, chief financial officer, Maruti Suzuki, said, “We will be spending upwards of Rs 7,000 crore this year and this includes the Kharkhoda facility (in Haryana) where we have started construction work and orders have to be placed to various vendors. That will be a major portion of capex. Besides, we need to make investments on tooling, etc, for all the new model launches we are doing. That will be the other large piece of capex. Then there is the routine capex for R&D and maintenance.”
With the exception of the Covid-impacted year of FY21, Maruti Suzuki’s capex has been on a constant rise, led by continued need to expand production and the requirement to offer new products. From a 12-year average of around Rs 3,000 crore, the company’s annual capex now stands more than double as of this fiscal. During FY22 the company had earmarked a capex of Rs 4,500 crore.
In May this year, the car market leader said it would invest Rs 18,000 crore for erecting factories at a new 800-acre site, which would be its third location overall. Starting with 250,000 units per annum, this new plant at Kharkhoda will eventually churn out 1 million units per annum.
With the resumption of semiconductor supplies to near normal levels, Maruti Suzuki ramped up production just in time to meet the festive demand this year where it claims to have clocked deliveries of more than 190,000 units in 32 days.
During the first half of the year (April-September), the company sold nearly 1 million units (985,326), reporting a growth of 34% compared to 733,155 units sold in the same period last year.
Pending customer orders for the company stood at about 412,000 vehicles at the end of the September quarter, of which 130,000 units were for the newly launched models such as Brezza and Vitara.
“Maruti Suzuki India would enjoy the benefit of higher market shares in CNG variants, as preference for CNG vehicles has been rising. In view of expected healthy PV sales over the next two years owing to low penetration and rising affordability, strong products portfolio across markets, strong return ratio and healthy balance sheet, at present we have ‘buy’ on MSIL,” stated a Reliance Securities report.