Maruti valuation declines 40% from December high

MUMBAI: For India’s largest carmaker that hit a record valuation of ₹3 lakh crore in December, all it took to surrender 40% of that value was a mere 10 months.

At $28 billion, a three-yearlow, Maruti’s valuation is now close to that of its Japanese parent Suzuki Motor Corp. Against its peak share price of ₹10,000 on December 20 and a market cap of $46 billion, Maruti shares on Monday closed at ₹6,904.

Investors who have been exiting Maruti shares in this period continued to sell after the company reported subdued sales in the quarter ended September 30. The company has cited the falling rupee and a sharp rise in oil prices as reasons for the toll on its stock price.

To be sure, Maruti continues to be India’s undisputed car market leader with a share of nearly 51%.

Domestic passenger vehicle sales of Maruti grew 13.19% in the July-September quarter. Between 2011-12 and 2017-18, its domestic passenger vehicles (PV) sales grew from 1.01 million to 1.65 million, while overall PV sales in India grew from 2.02 million to 3.29 million.

“Maruti was earlier given premium valuations due to its near monopolistic position in PV and its cost efficiencies. This is getting back to normalcy fearing a bump in its growth trajectory. The Pay Commission, especially of states, was a big stimulus for auto sales over the past two years. Now this tailwind is getting exhausted. Sentimentally, auto stocks are in a mild downtrend and may not revive in a hurry,” said Deepak Jasani, head of retail research at HDFC Securities Ltd.

Ajay Seth, chief financial officer at Maruti Suzuki, said the company is concerned about the weakness in the rupee, which closed at 74.07 against the dollar on Monday.

“Dollar-yen is pretty stable... dollar rupee is a concern... it is a steep depreciation. It reflects in the stock price but there, oil price is also a factor,” Seth said, highlighting a sharp increase in the prices of petrol and diesel in the last six months. Any increase in fuel price prompts price-sensitive India buyers to defer their purchase decisions. A weaker rupee hurts both automobile and component makers in India as they are importers of primary raw materials such as steel, aluminium and crude oil, which have dollar-denominated prices.