Maruti Suzuki tumbles after downgrade by a foreign investment bank

Maruti Suzuki India tumbled 3.6% to Rs 4,415 at 15:18 IST on BSE on media reports that a foreign investment bank downgraded the stock to underperform from buy.

Meanwhile, the S&P BSE Sensex was up 555.55 points or 2.12% at 26,776.50.

On BSE, so far 1.10 lakh shares were traded in the counter as against average daily volume of 50,596 shares in the past one quarter.

The stock hit high of Rs 4,572 and low of Rs 4,389 so far during the day. The stock had hit a 52-week low of Rs 2,903.25 on 17 October 2014. The stock had hit a record high of Rs 4,762.90 on 30 September 2015.

The stock had outperformed the market over the past one month till 1 October 2015, gaining 12.86% compared with Sensex's 2.04% rise. The scrip had also outperformed the market in past one quarter, surging 13.53% as against Sensex's 6.42% fall.

The large-cap car manufacturing company has equity capital of Rs 151.04 crore. Face value per share is Rs 5.

The foreign investment bank reportedly said that Maruti Suzuki India (MSIL), has built its extremely profitable business through efficient manufacturing and a consistently well run distribution network. However, over the next few years, MSIL is set to change capital allocation in ways that make profitability unpredictable and open to risk, the foreign investment bank reportedly said. MSIL is well positioned in small cars but lacks strength in the larger car segment, the foreign investment bank reportedly said. Given that the average size of cars has been increasing for several years now, MSIL suffers from lack of brand associated with larger cars and will need to invest in pricing or otherwise, the investment bank reportedly said. The attempt to set up a parallel distribution network is an effort to address this issue but has its own costs associated, the foreign investment bank added.

Maruti Suzuki India's net profit rose 56.5% to Rs 1192.92 crore on 18.1% growth in net sales to Rs 13078.32 crore in Q1 June 2015 over Q1 June 2014.

Japanese parent Suzuki Motor Corporation holds 56.21% stake in Maruti Suzuki India (as per the shareholding pattern as on 30 June 2015).

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