 "Maruti says royalty to Suzuki to be less than 5 pct in 4-5 years")
The lower royalties will boost margins and go some way to appeasing minority shareholders, several of whom have voiced discontent over high payouts to Suzuki, say analysts.
Maruti, whose market value surpassed that of Suzuki in July, contributes about a third of its parent's revenue. Maruti is India's leading carmaker, selling 1.2 million vehicles in the year to end-March.
"The capacity of Japan to develop and maintain models is limited. It has never dealt with a market that has 15 to 17 models ... so that (development) has to be in India," Chairman R C Bhargava said.
"To the extent work is done in India, the royalty will be reduced ... If you look four to five years in the future, definitely it would be (below 5 percent)," he said after the company reported a 42 percent increase in quarterly profit.
Net profit for July through September rose to Rs 1,226 crore from Rs 863 crore in the same period a year earlier.
Net sales rose about 13 percent to Rs 13,600 crore, the company said, as India's car trade continues to grow. India is expected to become the world's third-largest car market by 2020, moving up three places.
Maruti, majority-owned by Suzuki, currently pays royalties for use of technical know-how and its brand name. It paid Rs 2,660 crore ($409 million) for the year to March, according to its annual report.
Lower royalties are expected to lead to cost savings of up to 100 basis points, some of which will translate to higher margins, according to Phillip Capital auto analyst Nitesh Sharma.
