Auto News

Maruti mulls options to counter yen impact on margins

By Motortrend India Staff   |   22 March,2011

The country’s largest car maker Maruti Suzuki India on Tuesday said it will consider taking different measures after April to protect its margins due to fluctuation of Japanese Yen, post the devastating earthquake and tsunami.

“For this month, we are completely protected. In fact, we are covered till April. Beyond that if Yen continues to appreciate, then we will have to take a call to counter it,” Maruti Suzuki India (MSI) Chief Financial Officer Ajay Seth told PTI.

He said the company’s margins are affected whenever the yen appreciates, while it is beneficial if it depreciates. After the natural disaster that struck the island nation on March 11, the Japanese currency is quoted at about 81 yen against a US dollar compared to that of about 83 yen earlier, Seth added.

While Seth did not elaborate on how MSI would counter the Yen fluctuation, market analysts pointed out that currency hedging is a strong possibility. On the component sourcing from Japan, Seth said, “Of our total raw material procurement, about 25 per cent are imported. Out of those imported parts, about 80 per cent are purchased in yen”.

During the October-December period last year, MSI spent Rs 6,959.03 crore in consumption of raw materials and components. It also paid Rs 460 crore as royalty in the quarter to its parent company Suzuki, which is about 5.5 per cent of MSI’s total sales.

When asked about the impact of Japan's natural disaster on MSI’s production, Seth said it will be unaffected for some time till next month as the company has enough inventory of components.

Related Content