Salient Features of the Annual Report of Maruti Suzuki India Limited a) Message of the Chairman - In fact, the car

industry grew at about 29 per cent. A very pleasant surprise but it posed huge challenges to your Company and its vendors, in terms of production capacity. The Gurgaon plant of the Company was already working to full capacity. It is to the credit of our production team that they could bring in many innovations on the production system, which resulted in total sales increasing in 2010-11 to 1.27 million cars from 1.02 million in the previous year- an increase of 25 per cent. Performance of the Company

b) Achievements of the Company during the year Brand Equity a. Rolled out 10 Millionth vehicle b. 4 out of the 5 top selling cars of India are from the Company c. Market Share increased from 44.6% to 44.9% (YoY) d. No.1 in Customer Satisfaction - for 11 consecutive years in JD Power CSI Survey (at the service level) e. Highest ever sales 1,271,005 vehicles with a growth of 24.8% f. Highest ever total income: Rs. 375,224 million with a growth of 24.6% g. Net Profit - Rs. 22,886 million, declined by 8.4% c) Features from the Directors Report a. The various awards and recognitions received by the Company have been discussed specifying the growing presence of the Company over the world in terms of the awards and recognitions received. b. The Corporate responsibility in terms of the energy conservation c. Research and development initiatives undertaken by the Company d) Statements on the Corporate Governance in accordance of Clause 49 of the Listing agreement of Securities Exchange Board of India (SEBI) have been included. The following were the salient features:a. Composition of the Board of Directors b. Number of the Board Meetings and AGM c. Remuneration of the Directors d. Composition of the other committees of the Company viz. Audit Committee, Remuneration Committee, Investor Grievance Committee. e. Shareholding pattern of the Company as on March 31, 2011 f. Auditors Certificate of the Corporate Governance Report

Financial Results 2010-11 a) Auditors Report The report is a clean chit report without any qualifications and says that the accounts stage a true and fair view of the financial state of the Company. b) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement along with the Notes to Accounts have been signed by 4 directors (Incl MD and CEO) and the auditors. c) Fixed Assets Note to the Schedule - Freehold land costing ` 5,304 million (Previous year ` 5,255 million) is not yet registered in the name of the Company. A part of this land has been / would be made available to group companies. d) Capital Commitment - Estimated value of contracts on capital account, excluding capital advances, remaining to be executed and not provided for, amount to Rs 25,943 million (Previous year Rs 17,408 million). e) Significant Accounting Policies :a. The financial statements have been made in accordance with the accounting standards as notified by the Companies Act, 1956. The Company has also incorporated AS 30 to the extent it does not contradict with the other accounting standards as notified above. b. Fixed Assets i. Fixed assets (except freehold land which is carried at cost) are carried at cost of acquisition or construction or at manufacturing cost (in case of own manufactured assets) in the year of capitalisation less accumulated depreciation. ii. Assets acquired under finance lease are capitalized at the lower of their fair value and the present value of minimum lease payments. c. Depreciation i. Depreciation is charged on Straight Line Basis at rates specified in Schedule XIV to the Companies Act, 1956, except for the following:1. Plant and Machinery 8 11 Years 2. Dies and Jigs 4 Years 3. Electronic Data Processing Equipments 3 Years ii. Lump sum royalty is amortized on a straight line basis over 4 years from the start of production of the related model. d. Inventories valued at minimum of cost or Net Realisable value e. Foreign Exchange transactions - Derivative contracts (except for forward foreign exchange contracts where underlying assets or liabilities exist) are fair valued at each reporting date. f) Notes to Accounts a. Contingent Liabilities there are several cases in the form of excise duty, service tax, income tax, custom duty and sales tax as claims filed against the Company which have not been acknowledged as debts, the total amount involved being Rs 7,282 Mn. Against these the Company has deposited Rs 4,211 Mn under protest to the authorities. b. Investments Details of the investments of the Company wherein the Company has invested Rs 7,000 Million in Long term investments and has sold Rs 46,002 Million worth of current investments in mutual funds.

Strengths of Maruti Suzuki India Limited Strong profit generating Company The automobile sector along with the complete corporate sector was under a great depression in the FY 2008-09 due to the Global Financial Crisis. The Company has come up from the depression impact in the subsequent years, the reserves of the Company have grown in leaps and bounce from Rs 82,709 Mn in 2008-09 to Rs 137,230 Mn in 2010-11, leading to the following factors:a) Increase in sales to the tune of 80%:- Even though the automobile sector was facing the grim global financial crisis, the Company has been able to maintain a strong increase in its sales which has increased from a meagre Rs 203,583 Million in 2008-09 to Rs 361,282 Million in 2010-11, this increase can be attributed to the following factors:a. Quantity Increase:- There has been an incredible increase in the volume of cars sold by the Company from 792,167 units to 1,271,005 units leading to an increase of 55% in the sales during the same period. This increase in sales shows the strength of the Companys products and the equity of the Company in the market. b. Price Increase:- Increase in the average per unit price of the vehicles sold from Rs 256,995 to Rs 318,008, over the same period, leading to an increase of 24% in the Gross Selling price of the cars. Showing the strength of the product portfolio of the Company. b) Improvement in the liquidity position of the Company:- The Quick ratio of the Company has increased from 0.81 in 2009-10 to 1.41 in 2010-11. This has been attained by the Company due to the sale of investments of the Company in the form of Mutual funds to Fixed Deposits. c) Improvement in Inventory velocity :- The inventory velocity has increased from 20.41 days in 2009-10 to 15.41 days in 2010-11 due to efficient inventory management techniques followed by the Company. d) New Plant:- The Company has invested in building a new plant in Manesar leading to the increase in the CWIP balance from Rs 3,876 Million (2009-10) to Rs 14,286 Million (2010-11). The increased capacity will lead to better economies of scale to the Company and decreased cost of production. e) Effective debtors management:- Improvement in the Debtors velocity from 10.21 in 200910 to 9.02 in 2010-11, leading to better receivables management. This is prevalent even though the sales of the Company have increased considerably in the last year. Also the ratio of the debtors more than 6 months old to the total debtors has been reduced from 6.72% to 5.96%. f) Proprietary Ratio:- Improvement in the Proprietary ratio from 0.41:1 in 2009-10 to 0.49:1 leading to the increased presence of fixed assets in the total capital employed. g) Improvement in the Fixed Assets Turnover Ratio:- The Companys fixed assets turnover ratio has increased from 5.76 times to 6.53 times which signifies that the Company has been able to utilise its fixed assets to its benefit in the form of higher sales.

Weakness as per the Financials of Maruti Suzuki India Limited a) Fall in Profitability Ratios:- There has been a decrease in the profitability ratios of the Company due to the following:a. Increase in Raw Material Consumption as a percentage of sales from 77.4% (200910) to 79.7% (2010-11). This has been due to the operation of the factory at a level higher than the installed capacity, which leads the Company to be suffering from diseconomies of scale. b. Increase in the percentage of royalty paid to Suzuki Motors, Japan on the gross sales from 3% during the year 2009-10 to 5% in the year 2010-11. The decrease in the various profitability ratios, over the same period, has been as follows:i) Gross Profit Ratio 18.99% to 14.41% ii) Net Profit Ratio 8.62% to 6.33% iii) Return on Net Worth 21.15% to 16.53% iv) Return on Equity 21.10% to 16.50% b) Low Debt Equity Ratio of 0.02:1:- The Company has kept very low debt equity of 0.02:1 which shows that the Company is not financed from debt and they are not able to reap the benefits of Trading on Equity, which leads to lower return for the equity shareholders. c) Ineffective investment of surplus funds:- The Company has followed a risk averse strategy for the investment of the surplus funds generated from the business. Over the years the Company has invested funds in the Debt based Mutual Funds, Corporate Bonds and Bank Deposits. These investments have generated only 5% income in the last year on the investments. d) Net Negative Working Capital Turnover Ratio:- The net working capital turnover of the Company has been negative, at 12.43 days, with the debtors turnover ratio of 9.02 days, inventory turnover ratio of 15.49 days and the creditors turnover ratio of 36.94 days. This shows that the Company has been very harsh in the payment of the creditors leading to loss of goodwill. Moreover, the Company is not allowing any credit period to the debtors leading to an opportunity loss on account of loss of sales from parties demanding longer credit period e) Huge Loans and Advances given to subsidiary and associate Companies:- The Company has provided a lot of Unsecured loans and advances to its subsidiaries and advances amounting to Rs 2,157 Mn which can turn doubtful or bad leading to loss to the Company. f) Land and buildings provided to group Companies:- the Company has provided a part of land of 600 acres, received from HSIDC, to group companies. There has not been any income that has been accrued on such part of the land provided. g) Decrease in the export sales:- There has been a fall in the percentage of export sales as a percentage of the total sales. The percentage has fallen from 14.80% to 9.20% showing the dependence of the Company on the domestic market which can lead to stagnation of the market and the Company is not able to reap the benefits of the growing markets outside India. h) Sales Tax Benefit utilisation:- The Company was granted sales tax benefit in accordance with the provisions of Rule 28C of Haryana General Sales Tax Rules, 1975 for the period from 1st August, 2001 to 31st July, 2015. The ceiling amount of concession to be availed of during

entitlement period is Rs 5,644 million. Till 31st March 2011, the Company has availed of / claimed sales tax benefit amounting to Rs 2,118 million (Previous year Rs 1,893 million). Recommendations for Maruti Suzuki India Limited Improving the profitability ratios:a) Commissioning of the new plant at Manesar:- As seen above the Company has been operating at a level more than the installed capacity of the plant in Gurgaon, which has led to the high operating costs in the form of high raw material consumptions. The commissioning of the new plant will lead to the cure of the problem of operating at more than installed capacity. b) Negotiating the royalty percentages with Suzuki Motor Corporation, Japan:- The Company should ensure that it should renegotiate the royalty percentage with the holding company to ensure that the profitability is improved. Other Recommendations a) Emphasize on the export sales:- The Company should emphasize on the export sales to the territories outside India, to cap the growing demands of the other growing economies outside the country. This is required to increase the quantity of goods sold. b) Effective investment of surplus funds:- The Company has till now followed a risk averse strategy of investing of the surplus funds generated from the business in the fixed deposits and debt based mutual funds. This should be changed to a neutral risk category and the Company should start investing the funds in a mixed portfolio which will increase the incomes generated from these funds. c) Increase loan funds:- The Company has been working with all the equity funds till now and has not reaped the benefits of trading on equity which will increase the return for the shareholders of the Company. This will even lead to the increase in the EPS and Market Price of the share. d) Increase the Proprietary ratio:- The Company has increased the proprietary ratio from 0.40 to 0.49 but the same still looks to be low since the Company in the manufacturing sector has more of its funds invested in the current assets and investments than fixed assets. An enhanced investment in the fixed assets by the Company will lead to increase in the operating revenues of the Company, which as established above generates a return of 15%. e) Relaxation of the Debtors credit period:- The Company has a net working capital turnover of negative 12.43 days wherein the debtors turnover ratio is of 9.02 days. The Company should increase the credit period allowed for the collection post sales, this can lead to increase in the sales of the Company since, the current policy of strict collection periods leads to an opportunity loss on account of loss of sales from parties demanding longer credit period.