Stock Review: Maruti Suzuki

TOYOTA has finally driven into the small car segment with its Liva. In India, compact cars account for 75 per cent of total passenger car volumes. Therefore, Liva's disruptive pricing may impact the volumes of the market leader Maruti Suzuki. In recent times, several automakers have launched small cars, but not many have managed to seriously dent Maruti's volumes. Of the recent launches, Ford's Figo has been fairly successful, which has garnered a market share of 5 per cent in the segment. The Beat, after tasting initial success, couldn't do much in terms of marketshare. While Polo's ramp up has been slow due to capacity constraints, the monthly run rate has stabilised near the 3,000 mark, exceeding 200 basis points marketshare.

However, Liva is directly pitched against Maruti Suzuki's Swift and Ritz and Hyundai's i10. Apart from pricing, the product styling appears to be better than its sedan sibling Etios. Analysts believe the initial impact of Liva would be shared by both Maruti and Hyundai alike. Toyota plans to sell one lakh units in FY12, however, analysts say this is not enough to dent Maruti's marketshare immediately.

The road ahead is not likely to be as smooth existing data suggests. During FY09-11, Maruti's compact segment volumes grew at 25.7 per cent compounded annual growth rate (CAGR) against the segment's CAGR of 27.9 per cent, implying a market share loss of 200 basis points. In the same period Hyundai lost 160 basis points, while Tata Motor's loss is at a whopping 580 basis points. Analysts expect Liva's launch to have a maximum impact on Tata Motor's Indica petrol and General Motors' Beat and UVA. Maruti is expected to respond to competition by launching the new Swift in the second half of this year.

Going by the competitive intensity in the segment, Sharekhan has downgraded earnings per share estimates for Maruti for FY12 and FY13 to `85 and `98.3, respectively, on account of lower than expected volume growth. Its volume growth assumption now stand at 8 per cent and 13 per cent for FY12 and FY13, respectively.