A project report on does maruti finance helps mul increase its sales

Does Maruti Finance Helps MUL increase its salesMaruti Finance

INTRODCTION TO Indian Auto Industry

The automobile industry in India offers significant employment opportunities. The

automobile industry including component industry employs 0.45 million people directly and

around 10 million people indirectly.

The auto industry recorded a turnover of US$ 10 billion while the auto-component industry

recorded a turnover of US$ 2.7 billion in 1999-2000.

Many international auto majors entered the country post liberalisation in 1991.

India’s largest car-maker Maruti Udyog Ltd (MUL) was recently privatised with Suzuki Motor

Corporation moving into the driving seat after acquiring a majority stake and management

control in the Maruti Suzuki joint venture in early 2002.

Policy Initiatives

Auto policy announced by the government in 2002 has opened the automobile sector to 100

per cent foreign direct investment and removed the minimum capital investment norm for

fresh entrants. This will benefit manufacturers who are planning to enter the Indian market,

particularly in the burgeoning motorcycle market.

The new policy has taken into account the need to address emerging problems and make the

auto sector WTO compatible.

The policy is also in favour of providing excise duty concessions to small cars, multi-utility

vehicles and low emission vehicles. It envisages India becoming a major hub for the

manufacture of small cars and a global supplier of components. The policy also includes

incentives to facilitate R&D.

Import tariffs are to be fixed in a manner so as to promote manufacturing in India, as opposed

to mere assembly, without giving undue protection to domestic industry. While ensuring a

balanced transition towards open trade, the automotive tariff structure will be reviewed

periodically to prevent India from becoming a ‘dumping ground’ for international rejects.

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Opportunities

India enjoys a distinct cost advantage with respect to auto-ancillary manufacturing

capabilities. While developed nations’ labour cost component is 30-35 per cent of sales, Indian

labour cost is only around 8-9 per cent of sales.

The number of vehicles manufactured in India has risen from 3 million units annually in 1999

to 5 million units in 2002. This has also led to an increase in domestic demand for automotive

components.

Other global players in component manufacturing

Japanese and British component manufacturers are already operating JVs in India. American

companies, which have or are planning to set up plants in India, include Delphi (an

automotive components division of General Motors, USA), Delco Electronics, Textron and

Magna International of Canada.

Auto majors such as DaimlerChrysler, Volvo, Renault, Toyota and Honda are planning to

outsource their requirements from India.

Automotive components manufactured in India are of top quality and used as original

components for vehicles made by top international companies such as General Motors,

Mercedes and IVECO among others

The industry encompasses commercial vehicles, multi-utility vehicles, passenger cars, two

wheelers, three wheelers, tractors and auto components. There are in place 15 manufacturers

of cars and multi utility vehicles, 9 of commercial vehicles, 14 of Two/Three Wheelers and

10 of Tractors besides 5 of engines. With an investment of Rs.50,000 crores, the turnover was

Rs. 59,500 crores in Automotive Sector during 1999-2000. It employs 4,50,000 people

directly and 100,00,000 people indirectly and is now inhabited by global majors in keen

contention.

India manufactures about 38,00,000 2-wheelers, 5,70,000-passenger cars, 1,25,000 Multi

Utility Vehicles, 1,70,000 Commercial Vehicles and 2,60,000 tractors annually. India ranks

second in the production of two wheelers and fifth in commercial vehicles.



India’s automotive component industry manufactures the entire range of parts required by the

domestic automobile industry and currently employs about 250,000 persons. Auto component

manufacturers supply to two kinds of buyers – original equipment manufacturers (OEM) and

the replacement market. The replacement market is characterised by the presence of several

small-scale suppliers who score over the organised players in terms of excise duty exemptions

and lower overheads. The demand from the OEM market, on the other hand, is dependent on

the demand for new vehicles.

There has been a slowdown in the automobile sector in the past two years. However, the

component industry maintained a low but positive growth rate mainly due to its export

performance. Over the years, the component industry has maintained a 10% - 12% share of

exports in the total production.

Roads occupy an eminent position in transportation as they, as per the present estimate, carry

nearly 65% of freight and 87% of passenger traffic. Although, India has 3.3 million

kilometers of road network, which is the second largest in the world, the Indian highways are

getting overpopulated. Traffic management and road sense also need attention.

Improving Road Infrastructure

Traffic on roads is growing at a rate of 7 to 10% per annum while the vehicle population

growth for the past few years is of the order of 12% per annum. Poor road infrastructure and

traffic congestion can be a bottleneck in the growth of vehicle industry. A balanced and

coordinated approach will be undertaken for proper maintenance, upgradation and

development of roads by encouraging private sector participation besides public investment

and incorporating latest technologies and management practices to take care of increase in

vehicular traffic.

For the convenience of traveling public the Government shall also promote multi-modal

transportation and the implementation of mass rapid transport systems.

Incentive for Research and Development



The Government shall promote Research & Development in automotive industry by

strengthening the efforts of industry in this direction by providing suitable fiscal and financial

incentives.

The current policy allows Weighted Tax Deduction under I.T. Act, 1961 for sponsored

research and in-house R&D expenditure. This will be improved further for research and

development activities of vehicle and component manufacturers from the current level of

125%.

In addition, Vehicle manufacturers will also be considered for a rebate on the applicable

excise duty for every 1% of the gross turnover of the company expended during the year on

Research and Development carried either in-house under a distinct dedicated entity, faculty or

division within the company assessed as competent and qualified for the purpose or in any

other R&D institution in the country. This would include R & D leading to adoption of low

emission technologies and energy saving devices.

Government will encourage setting up of independent auto design firms by providing them

tax breaks, concessional duty on plant/equipment imports and granting automatic approval.

Allocations to automotive cess fund created for R&D of automotive industry shall be

increased and the scope of activities covered under it enlarged



FINANCE COMPANIES – THE PRESENT SCENARIO

Rapidly falling interest rates have made loans affordable to more people, which means there's

still plenty of room left for growth. Disbursements are expected to increase at an annualized

34% over FY2003-FY2007,taking outstanding retail loans to $130bn by FY2007. This

translates to a growth in outstanding loans from the current $36bn to $130bn, which would

represent 33% of bank credit and 18% of GDP in FY2007. The market penetration at this

level would still leave ample room for growth. The boom in financing would spuran increase

in spends on consumer durables such as two-wheelers and cars. Sales growth in two-wheelers

would accelerate from an annualized 10-11% over the past ten years, to 15.6% over

FY2003-2007; Car sales, which have grown at an annualized 11% over the past three years,

would rise at an even faster 20%.

Retail loans would form a third of banks' asset books in FY2007, and add Rs130bn to their

earnings over the next three years.

Fuelled by the free fall in interest rates and intense competition, especially from state-owned

banks, the availability of finance has expanded rapidly, and EMIs have fallen more steeply,

than was expected.

Consequently, the target population for financing has expanded by 18-20% for assets like

cars, twowheelers and mortgages. The following exhibit shows growth of consumer finance

over the years. The growth has been on a very high base, fuelled by the rapid fall in interest

rates and the aggressive entry of many banks. The market would remain under penetrated

even at high projected growth in future.



Falling Interest Rates

Falling interest rates, coupled with increasing loan durations, have substantially

reduced the EMIs on retail loans, thereby making them affordable to more people than

ever before. The table below shows the fall in Interest Rates.

Year to 31 March 1999 1999 2002 Current

rates

Cars

Basic IRR (%) 18 13.5 9.5

Less manufacturer subventions (%) 1-1.5 1-1.5 1.5

Dealer (%) 1.5 1.5

DSA (%) 1 1

Net rate to customer (%) 16.5-17 9.5-10 5.5

Impact of Consumer Finance Growth on

Passenger Cars and Two-Wheelers

Sales of passenger cars increased by 26.5% yoy in the first half of this fiscal, owing to the

lowering of excise duties in the general budget. The two-wheeler industry grew by 8.9%

during this period, much slower than the heady high-teens growth over the past two years, as

the agricultural slowdown last year hit rural incomes. Two-Wheeler sales are expected to

increase at a compounded 15.6% over FY2003-FY2007 Car sales would rise at an even faster

20% over the same period.

Consumer Preferences

Indian consumers identify ease and speed of the loan application and approval process, as well as

flexibility of evaluation procedures, as the key drivers of financing satisfaction.

Consumer Financing Satisfaction Performance is measured by four factors:

• Application process (44 percent);

• Approval and documentation (22 percent);

• Finance advisor (18 percent); and

• Loan value (16 percent).

Customers who obtained their loans from a nationalized bank are relatively more satisfied than

those choosing a non-banking finance company (NBFC) or a foreign bank.



Low interest rates and the reputation of the finance company are among the key reasons for

customers who opted either for an NBFC or a foreign bank. In comparison, past experience and

personalized service are the main reasons indicated by those opting for a nationalized bank.

Furthermore, more than 50 percent of NBFC and foreign bank customers obtained their

financing at an automobile dealer or through a direct selling agent of the finance provider. In

contrast, more than 90 percent of nationalized bank customers obtained their financing directly

through the bank.

The car finance market has reached a new level of maturity, so much so that the car-maker, the

automobile dealer and the financier now work together to provide better features and funding

options for the buyer. Depending on the manufacturer, tenure of the loan and credit history of the

car buyer, interest rates, on a reducing balance basis, now hover in the 10-13.5 per cent range for

new cars compared to 13-16.5 per cent till early last year. There is an increased preference for

financing car purchases through loans.



Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to

meet the growing demand of a personal mode of transport caused by the lack of an efficient

public transport system.

Suzuki Motor Company was chosen from seven prospective partners worldwide. This was

due not only to their undisputed leadership in small cars but also to their commitment to

actively bring to MUL contemporary technology and Japanese management practices (which

had catapulted Japan over USA to the status of the top auto manufacturing country in the

world).

A licence and a Joint Venture agreement was signed between Govt of India and Suzuki Motor

Company (now Suzuki Motor Corporation of Japan) in Oct 1982.

The objectives of MUL then were:

Modernization of the Indian Automobile Industry.

Production of fuel-efficient vehicles to conserve scarce resources.

Production of large number of motor vehicles which was necessary for economic growth

Vision—“The Leader in The Automobile Industry, Creating Customer Delight and

Shareholders Wealth; A pride of India.”

Core values

CustomerObsession

Fast,Flexible and First Mover

Inovation and Creativity

Networking and Partnership

Openness and Learning

COMPANY BACKGROUND



Maruti collaborated with Suzuki of Japan to produce cars in 1983. At this time, the Indian car

market had stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983. With

MUL’s entry, the passenger car market saw a spurt in demand.

The sector registered 18.6% CAGR growth in sales during 1981-90.The company reached a

total production of one million vehicles in March 1994, becoming the first Indian Company to

cross this milestone. It crossed the two million mark in 1997. In 2001, it launched new

businesses – ‘True value’, ‘Maruti finance’,

‘Maruti Insurance’ and ‘N2N’. In 2003, the company listed on BSE & NSE after its public

issue.

Business profile

MUL is the leading automobile company in the passenger car segment with over 50% market

share in FY04. It has a presence across many segments in automobiles. It is the leader in the

mini and the compact segment with its brands like ‘800’, ‘Zen’,‘Alto’, ‘Wagon R’. It also has

a presence in the mid-size segment with its ‘Esteem’and ‘Baleno’ brands and the ‘Omni’,

‘Vitara’, ‘Versa’ models.

Industry scenario

The passenger vehicles industry comprises passenger cars, utility vehicles (UV) and multi-

purpose vehicles (MPV’s). The fortunes of the auto sector are strongly correlated to macro-

economic parameters and the performance of the industrial sector. In India, around 80% of all

new cars are financed. The increased availability of finance at low rates and strong GDP

growth translated in a healthy growth for the industry.



Passenger car sales account for over 77% of total passenger vehicle market and

UV’s account for the balance. Infact, UV’s have a higher share than what they did in the

earlier years. It is still lower compared to some of the developed countries. In USA for

instance, UV’s account for 50% of the total Passenger vehicles market and in Indonesia they

account for 80% of the market.

Length based classification (introduced by SIAM in April 2002):

Passenger cars

Segment A1 (mini) – cars having a length of up to 3,400mm

Segment A2 (compact) – cars having a length of 3,401-4,000mm

Segment A3 (mid-size) – cars having a length of 4,001-4,500mm

Segment A4 (executive) – cars having a length of 4,501-4,700mm

Segment A5 (premium) – cars having a length of 4,701-5,000mm

Segment A6 (Luxury) – cars having a length of more than 5,000mm

SWIFT A2 Mid-size B





In FY04, vehicle sales contributed for 94.6% of the gross sales and the balance 5.4% was

contributed by sales of spare parts, dies and moulds and components. The company registered

sales volumes of 472,122 units including exports in FY04. Net sales increased by 31.3% to

Rs93.7bn in FY04 from Rs71.4bn in FY03. Income from services stood at Rs278mn in FY04

from Rs136mn in FY03, a rise of 104%. Other income primarily included returns on treasury

operations, scrap sales, sales tax benefits and provision write back. It increased by 36.6% to

Rs3.8bn in FY04.

EXPORTS

MUL exported 51,175 units in FY04, a growth of 59% yoy. Its FOB value is Rs9.4bn in

FY04 compared to Rs6.2bn in FY03, registering a 51.7% rise yoy. This growth as mainly due

to ‘Maruti 800’ which grew 56.8%. The A2 category registered a 60.5% growth. The Alto and

the Zen have done well for the company. The company registered good growth in Algeria,

Belgium, Bhutan, Chile, Denmark, Germany, Hungary, Nepal, Sri Lanka and UK.

Raw material costs

Steel sheets, castings, forgings, alloy steels, steel tubes, saw steep rises in prices, which added

to the raw material costs of the company in FY04. Consolidated buying of steel and long term

contracts helped counter this problem to some extent.

Even under such a scenario where raw material prices were rising, the company saw its cost

of raw material go down by 4.8 percentage points to 74.5% of net sales in FY04 due to its

operating efficiencies. The company enjoyed a royalty waiver on some of its models from

Suzuki, and paid 10% less on components sourced from Suzuki, which helped reduce raw

material costs further. Operating profit margins (OPM) for the company improved to 10% in

FY04 from 5.3% in FY03.



Voluntary Retirement Scheme (VRS)The company has 3,334 employees as on March 31, 2004. It offered VRS to its employees in

FY04 and 1,251 employees accepted the same. Rs1.2bn were accounted in the income

statement to VRS in FY04. This was additional to the VRS offer in FY02, which was

accepted by 1,050 employees.

Initiatives takenVendor rationalization was done and number of vendors was reduced to 220 in FY04 from

over 350 two years prior to FY04. This helped enhance the supply chain efficiencies.

MUL’s tie-up with SBI and its associate banks enabled it to reach smaller towns and cities

where financing for purchase of vehicles was provided. Largely driven by this initiative, the

company witnessed a 17% growth in its ‘800’ sales. The ‘Alto’ too, with its reduced prices

saw a 130% growth, the highest by any car in the year. MUL has 142 outlets covering over

100 cities.

The company, realizing that presence across segments is a key factor, launched the ‘Grand

Vitara’ a top-end SUV for the Indian market.

It extended its ‘true value’ scheme and now accepts old cars of any manufacturer for a new

MUL car.

R&DThe objective of R&D by MUL was two-fold. One was to reduce product costs and the

second is to become the regional R&D hub for Suzuki operations. The R&D spend for FY04

stood at Rs390mn which is 0.35% of total turnover.

R&D operations include, face lifts and body changes – styling, clay modeling, computer

aided design, proto-type making, dies designing and so on. In FY04, the company introduced

new Zen due to its R&D efforts.

No capacity constraintMUL has three fully integrated facilities with a combined production capacity of 500,000

units pa. However, the company produced around 1.4lac cars in Q4 FY04 without a third

shift. Annualizing this figure makes it 5.6lac cars annually, which is higher than the 4.7lac

cars produced by MUL in FY04. Therefore, MUL will not be constrained by capacity in the

near future.



MUL also reduced the number of hours required to produce a vehicle. From a high of 100

hours in FY01 to 46.1 hours in FY04, it has come a long way in improving its productivity

and efficiency.

DepreciationMUL revised the estimated life of dies and jigs from a uniform eight years to periods ranging

from 29 months to five years depending on the model. This was done wef April 1, 2003 based

on technical evaluation. This resulted in higher depreciation to Rs4,949mn in FY04 from

Rs3,221mn in FY03.

Investments worth Rs15.7bn were made during FY04. The major chunk of the investments

are in debt mutual funds that account for 88.4% of the investment portfolio in FY04

compared to bank fixed deposits which accounted for 98% of the total investments in FY03.

Investment in bank fixed deposits is included under cash &

bank balances in the annual report.

Working capital managementThe company follows just-in-time (JIT) inventory principles. The net working capital of the

company fell 62.7% yoy in FY04 to Rs4.9bn. This was mainly due to a fall in the debtor days

to 26.8 days from 34.3 days in the previous year. Inventory holding days declined to 17.1

days in FY04 from 24.9 days in FY03.

Approximately 70% of MUL’s components are outsourced. The creditor days reduced too to

47.3 days from 58.1 days in the previous years. The company states that it does not desire to

delay payments to component manufacturers and therefore has not stressed on increasing

average payable period.



Due to high sales growth and improved efficiency in operations caused the EPS to more than

triple to Rs18.8 in FY04 from Rs5.1 in FY03. The debt to equity ratio declined to 0.09 in

FY04 from 0.15 in FY03. This shows that RONW increased with lower level of risks. Cash

flow from operating activities increased by 32% yoy to Rs10.5bn in FY04.



Outlook and future strategiesRobust economic growth, favourable regulatory framework, affordable finance and

improvements in infrastructure favor growth of the passenger vehicles segment. The low

penetration levels at 7 per thousand and rising income levels will augur well for the auto

industry. However, rising oil prices and input raw material costs remains a concern.

MUL expects the compact cars, which currently constitute around 80% of the market, to be

the engine of growth in the future.

About 18% of cars sold in India run on diesel. MUL does not have a presence in this segment.

It is therefore, setting up a capacity to offer diesel cars. It will be investing Rs3,500mn on this

plant that will be operational by 2006.

CHALLENGES

Wafer thin margins for financiers.

Intense competition for the market share.

Financiers exiting from the car loan sector

Standard Chartered , ABN Amro exited from Maruti Finance.

ICICI and HDFC reached to share of 80% in Maruti Finance



We have introduced the superior 16 * 4 Hypertech engines across the entire Maruti Suzuki

range. This new technology harnesses the power of a brainy 16-bit computer to a fuel-

efficient 4-valve engine to create optimum engine delivery. This means every Maruti Suzuki

owner gets the ideal combination of power and performance from his car.

Our other innovation has been the introduction of Electronic Power Steering (EPS) in select

models. This results in better and greater maneuverability. In other words, our cars have

become even more pleasurable to drive.]

Spread over a sprawling 297 acres with 3 fully-integrated production facilities, the Maruti

Udyog Plant has already rolled out over 4.3 million vehicles. In fact, on an average, two

vehicles roll out of the factory every minute. And it takes on an average, just 14 hours to

make a car. More importantly, with an incredible range of 11 models available in 50 variants,

there's a Maruti Suzuki made here to fit every car-buyer's budget. And dream.

MILESTONES

2005

Launch of Swift

The fiftieth lakh car rolls out in April, 2005

Growth in overall sales by 15.8%

2004

New (non A/C) variant of Alto

Alto becomes India's new best selling car

LPG variant of 'Omni Cargo'

Versa 5-seater, a t

Baleno LXi, a new variant

Maruti closed the financial year 2003-04 with an annual sale of 472122 units, the highest

ever since the company began operations 20 years ago



2003

New Suzuki Grand Vitara XL-7

Redesigned and all-new Zen

New upgraded WagonR

Enters into partnership with State Bank of India

Production of 4 millionth vehicle. Listed on BSE and NSE after a public issue

oversubscribed 10 times

2002

WagonR Pride

Esteem Diesel. All other variants upgraded

Maruti Insurance. Two new subsidiaries started: Maruti Insurance Distributor Services

and Maruti Insurance Brokers Limited

Alto Spin LXi, with electronic power steering

Special edition of Maruti 800, India’s first colour-coordinated car

Maruti True value in Mumbai

Maruti Finance in Mumbai with 10 finance companies

Suzuki Motor Corporation (SMC) increases its stake in Maruti to 54.2 percent

2001

Zen LXi

Maruti True Value launched in Bangalore and Delhi

Maruti Versa, India’s first luxury MPV

Alto Spin LXi, with electronic power steering

Alto Vxi

Customer information centers launched in Hyderabad, Bangalore and Chennai

Launch of versa

2000

First car company in India to launch a Call Center

New Alto

Altura, a luxury estate car

IDTR (Institute of Driving Training and Research) launched jointly with the Delhi

government to promote safe driving habit



1999

Maruti 800 EX ( 796cc, hatchback car)

Zen LX (993cc, hatchback car)

Zen VXi (993cc, hatchback car with power steering

Omni XL ( 796cc, MUV, high roof)

Baleno (1600cc, 3 Box Car)

Wagon R

1998

Maruti launches website as part of CRM initiatives

Zen D (1527 cc diesel, hatchback car)

Zen VX & Zen VX Automatic

New (Omni & Omni E) (796cc, MUV)

Launch of website as part of CRM initiatives

1997

Esteem (1299cc, 3 box car) LX, VX and AX

New Maruti 800 (796cc,hatchback Car) Standard and Deluxe

Produced the 2 millionth vehicle since the commencement of production

1996

Gypsy (E) (970cc, 4WD 8 seater)

Omni (E) (796cc, MUV, 8 seater)

Gypsy King (1298cc, 4WD, off road vehicle)

Zen Automatic (993cc, hatchback car)

Esteem 1.3L (1298 cc, 3 box Car)AX

Launch of 24-hour emergency on-road vehicle service

1995

Esteem 1.3L (1298 cc, 3 box car)VX

With the launch of second plant, installed capacity reached 200,000 units

1994

Esteem1.3L (1298cc, 3 box car)LX

Produced the 1 millionth vehicle since the commencement of production



1993

Zen(993cc, hatchback Car), which was later exported in Europe and elsewhere as the Alto

1992

SMC increases its stake in Maruti to 50 percent

1991

Reaches cumulative indigenisation of 65 percent for all vehicles produced

1990

Maruti 1000(970cc, 3 box), India’s first contemporary sedan

1988

Installed capacity increased to 100,000 units

1987

Exported first lot of 500 cars to Hungar

1986

Maruti 800 ( New Model-796cc, hatchback Car)

Produced 100,000 vehicles (cumulative production

1985

Launch of Maruti Gypsy (970cc, 4WD off-road vehicle

1984

Omni, a 796cc MUV

Installed capacity reached 40,000 units

1983

Maruti 800, a 796 cc hatchback, India’s first affordable car.

Production was started under JVA



1982

License and JV agreement signed between Maruti Udyog Ltd. and SMC of Japan

1981

Maruti Udyog Ltd was incorporated under the provisions of the Indian Companies Act,

1956

AWARDS

2005

Maruti Suzuki was No. 1 in Customer atisfaction, No. 1 in Sales Satisfaction No.1 in

Product Quality (Esteem and Alto) and No. 1 in Product Appeal (Esteem and Wagon R)

by JD Power

2004

No. 1 in Total Customer Satisfaction (Maruti 800, Zen and Alto)

Business World ranked us among the country's five most respected companies

Business World ranked us the country's most respected automobile company

Voted Manufacturer of the year by CNBC

Voted one of India's Greenest Companies by Business Today-AC Nielson ORG-MARG

2003

Maruti 800, Maruti Zen and Maruti Esteem make it to the top 10 automotive brands in

"Most Trusted Brand survey 2003"

J D Power ranked 3 models of Maruti on top: Wagonr, Zen and Esteem

Maruti 800 and Wagonr top in NFO Total Customer Satisfaction Study 2003

2001

MUL tops in J D Power CSI (2001) for 2nd time in a row: another international first ow

2000

Maruti bags JD Power CSI - 1st rank; unique achievement by market leader anywhere in

the world

1999

MSM launched as model workshop in India; achieves highest CSI rating.

Central Board of Excise & Customs awards Maruti with "Samman Patra", for

contribution to exchequer and being an ideal tax assessee



1998

CII's Business Excellence Award

1996

Maruti wins INSSAN award for "Excellence in Suggestion Scheme"

Awarded the Star Trading House status by Ministry of Commerce

1994-95

Engineering Exports Promotion Council's award for export performance

1994

Best Canteen award among Haryana Industries as part of employee welfare

1992-93


1991-92


The Quality Advantage

Maruti Suzuki owners experience fewer problems with their vehicles than any other car

manufacturer in India (J.D. Power IQS Study 2005). The Alto was chosen No.1 in the

premium compact car segment and the Esteem in the entry level mid - size car segment across

9 parameters.

The J.D. Power APEAL Study 2005 proclaimed the Wagon R no. 1 in the premium compact

car segment and the Esteem No.1 in the entry level mid - size car segment. This study

measures owner in terms of design, content, layout and performance of vehicles across 8

parameters.

A Buying Experience Like No Other

Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a

workforce of over 6000 trained sales personnel to guide our customers in finding the right car.

Our high sales and customer care standards led us to achieve the No.1 nameplate in the J.D.

Power SSI Study 2005.



Quality Service Across 1036 Cities

In the J.D. Power CSI Study 2005, Maruti Suzuki scored the highest across all 7 parameters:

least problems experienced with vehicle serviced, highest service quality, best in-service

experience, best service delivery, best service advisor experience, most user-friendly service

and best service initiation experience.

92% of Maruti Suzuki owners feel that work gets done right the first time during service. The

J.D. Power CSI study 2005 also reveals that 97% of Maruti Suzuki owners would probably

recommend the same make of vehicle, while 90% owners would probably repurchase the

same make of vehicle.

One Stop Shop

At Maruti Suzuki, you will find all your car related needs met under one roof. Whether it is

easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to provide

a single-window solution for all your car related needs.

The Low Cost Maintenance Advantage

The acquisition cost is unfortunately not the only cost you face when buying a car. Although a

car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its

regularly used spare parts may be priced quite steeply. Not so in the case of a Maruit Suzuki.

It is in the economy segment that the affordability of spares is most competitive, and it is here

where Maruti Suzuki shines.

Lowest Cost of Ownership

The highest satisfaction ratings with regard to cost of ownership among all models are all

Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni.

We are proud to have the lowest cost of operation/km (among petrol vehicles) - the top 5

models are all Maruti Suzuki models : Maruti 800, Alto, Zen, Omni and Wagon R.

Quality System

At Maruti, our approach to quality is in keeping with the Japanese practice--"build it into the

product". Technicians themselves inspect the quality of work. Supervisors educate and

instruct technicians to continually improve productivity and quality. The movement of quality

indicators is reviewed in weekly meetings by the top management.



In 2001, Maruti Udyog Ltd became one of the first automobile companies anywhere in the

world to get an ISO 9000:2000 certification. AV Belgium, global auditors for International

Organization for Standardisation(ISO), certified Maruti after a four day long audit, covering

varied parameters like Customer Focussed organization, Leadership, Involvement of people,

Process approach, System approach to Management, Continual improvement, etc.

In May 1995, Maruti got ISO 9002 certification. The audit for this covered quality assurance

in production, installation, marketing and sales as well as after sales services. We were also

one of the first companies in the world to pioneer ISO 9000 certification for our dealers.

In October 1993, MUL passed the Conformity Of Production (COP) Audit, which is based on

a European Union Directive. This authenticated our quality systems and testing facilities for

export to Europe.

Our emphasis on total quality has meant that today we are in a position to guide vendors and

dealers in establishing and consolidating their individual quality systems. This commitment to

quality has ensured a consistently satisfying product and world-class sales and after-sales

services.

A new feather was added recently in Maruti’s cap in the field of quality when the Quality

Management System of its Press Shop & associated functions (collectively termed as Press

Function) got certification for conformance to the requirements of TS16949:2002 standard.

The need for TS certification of Press Function had its genesis in the prestigious project that

Maruti earned for the supply of stamped panels to General Motors India for one of its

forthcoming models.

As a part of Quality system requirements, GM requires all its suppliers to be certified to either

ISO TS 16949 or QS 9000.

These standards address Quality System requirements, which are particularly specific to the

automotive industry and requires an organization to be in compliance with ISO 9000 systems

as a basic requirement. However, whereas QS 9000 would become defunct and cease to exist

after Dec 2006, TS 16949 is going to be the standard of the future.

The TS 16949 standard, brought out by ISO in the year 1999, is an extension of the ISO



9001:2000 standard that prescribes Quality management system requirements that are

specifically applicable to the automotive industry.

TS 16949 has gained high popularity and almost all major automobile players across the

globe including GM, Ford, Daimler Chrysler, Nissan, Honda are embracing & promoting it

It incorporates a series of continuous small and simple improvements, which aim at involving

employees at all levels.

The Suggestion Scheme is based on the same principle. Under this scheme, employees are

encouraged to make suggestions for improvement in any area of our operation. Over 50,000

suggestions are received from employees every year.

Maruti has won the First place in "Excellence in Suggestion Scheme Contest 2003", which is

the 6th consecutive award won in as many years. This contest is organized by Indian National

Suggestion Schemes Association (INSSAN). Since 1998 Maruti has won this award 10 times.

"Quality Circles" are groups of five to eight members from a particular work area who work

as a team to identify priorities and solve work related problems in the area.

We believe that it is this unwavering commitment to quality that will lead to the further

growth of the organization as competition increases.

Kaizen is based on the concept of making incremental improvements in our products

About N2N Fleet Management

Car maintenance is a time-consuming process, especially if you own a fleet. Maruti’s new

N2N Fleet Management Solutions for companies, takes care of the A-Z of your automobile

problems. These services include end-to-end backups/solutions across the vehicle’s life:

Leasing, Maintenance, Convenience services and Remarketing.

When companies lease a fleet from us, they get vehicles in prime running condition plus an

attractive lease EMI. They also take responsibility for the reliability and performance of your

entire fleet throughout the lease period. There state-of-the art maintenance services ensure

that our vehicles are in excellent shape and give a great ride each time you are on the go

Besides Fleet Solutions for company owned cars, Maruti also offers this service for

employee-owned cars. With N2N on board, car problems are things that happen to other

people. So just sit back, relax and race ahead with the times. With Maruti, your car is in good



hands.

Corporate buyers now enjoy the following benefits

Single window processing for delivery at multiple locations

Since vehicle prices differ from place to place we will coordinate the delivery of

these vehicles at different locations for you

Total customer solutions

You can avail of

A wide variety of financial options through our joint-venture finance companies

Extended Warranty

Annual Maintenance Contract at select dealerships

Comprehensive lease packages

CNG fitment in cities where CNG is available

Bulk incentive schemes

You are also entitled to incentives on bulk sales, which may differ from time to

time and from one model to another

Maruti at a considerably lesser price is an opportunity you wouldn't want to miss. Now you

can book your Maruti at any CSD Area Depot, anywhere in the Country, and buy a Maruti at

considerably less the market price. One more reason to be the proud owner of India's most

sought after car!

Who can book?

All commissioned officers -- either retired or currently serving in the Indian Army, Navy or

Air Force -- can avail of a sales tax exemption on the purchase of a Maruti Gypsy or indeed

any Maruti vehicle. All you have to do is, select your preferred model from the entire range of

Maruti Cars and book right away!

Sales tax relief for the Armed Forces

You can avail of a sales tax exemption in various states across the country. In a few states, the

sales tax is considerably lower than the rest of India. Which means, if you book your Maruti



through the CSD Depot in Punjab, Bihar, Gujarat, Maharashtra, Goa, Andhra Pradesh, Kerala,

Tamil Nadu, Nagaland, etc, you will get a considerable tax relief.

The sales tax exemption pertains to Maruti vehicles purchased through the Canteen Stores

Department (CSD).

Your reliable Maruti…delivered promptly. Before you know it, you will be driving away with

your Maruti in no time. Now you can look forward to many pleasurable moments on the road!



Introduction

One company that redefined the way people looked at cars, Maruti Suzuki. In the past 23

years Maruti Suzuki has emerged as the undisputed leader in the automobile industry,

bringing more cars, more technology and more satisfaction. Today, Maruti Suzuki gives

another reason to smile. Maruti Finance, empowers to buy the car we want, on our terms.

Maruti has partnered with leading Finance companies in India to provide highly attractive

finance deals to its customers through its authorized dealers. Maruti finance is the program

under which these deals are being offered exclusively to customers of Maruti vehicles.

Features:

Best Interest Rates

Maruti Finance offers the best rates of interest. The installment schemes are designed to suit

customers convenience and other requirements. The interest rate offered for car financing

depends on the credit evaluation of the customer by the Finance company. However, the rates

offered by Maruti Finance are 0.25% to 0.5% lower than those available in the market across

all credit profiles

Value Added Services

Extended warranty:

Maruti Finance gives us the privilege of extended warranty that goes up to four years! This

means four years of hassle-free maintenance. we can get up to 30% discount on extended

warranty under Maruti Finance.

Customized loan schemes

They have a number of customized loan schemes. Their finance advisor will help in choosing

the one that best suits the needs of customers. So the customer can either have a initial down

payment or low EMIs.

Loans for Insurance and Accessories



Loans for insurance and accessories are built into the EMI's, keeping the whole deal simple

and hassle free.

Transparent transactions

Maruti Finance is reliable, transparent and convenient. We simply need to walk into an

authorized Maruti Suzuki dealership, for the best cars and the best finance options!

After all it is a better way to buy a car!

One Stop Shop

From Finance to Insurance. From used cars to genuine accessories. When it comes to car

elated needs all we have to do is to contact nearest Maruti Suzuki Dealer.

MARUTI FINANCE PARTNERS

Earlier, Maruti has tied up with 8 finance companies to form a consortium. This consortium

comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra,

Sundaram Finance, ABN Amro Bank, & Standard Chartered Bank.

But now in current year 2005-06 Maruti Finance has 6 finance companies excluding ABN

Amro & Standard Chartered bank.



Structure of Maruti Finance Partners

BRIEF INTRODUCTION TO MARUTI FINANCE PARTNERS

ICICI Bank is India's second-largest bank with total assets of about Rs.1,67,659 crore at

March 31, 2005 and profit after tax of Rs. 2,005 crore for the year ended March 31, 2005 (Rs.

1,637 crore in fiscal 2004). ICICI Bank has a network of about 560 branches and extension

counters and over 1,900 ATMs. ICICI Bank offers a wide range of banking products and

financial services to corporate and retail customers through a variety of delivery channels and

through its specialised subsidiaries and affiliates in the areas of investment banking, life and

non-life insurance, venture capital and asset management.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to

receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in


MARUTI COUNTRYWIDE AUTO

FINANCE LTD

HDFC BANK

SUNDARAM

FINANCE LTD

ICICI BANK

CITI CORP

MARUTI FINANCE

LTD

MARUTI FINANCE

KOTAK MAHIND

RA PRIMUS

LTD.


the private sector, as part of the RBI’s liberalisation of the Indian Banking Industry in 1994.

The bank was incorporated in August 1994 in the name of ‘HDFC Bank Limited’, with its

registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled

Commercial Bank in January 1995

Maruti Countrywide was set-up when GE Capital and Maruti Udyog Limited formed a

captive finance company in 1995

A professionally managed company, they share the ideals and work culture of the parent

companies. Their prime objective is to cater to the needs of Maruti car buyers by offering

innovative finance schemes for the purchase of Maruti cars.

GE Countrywide. Help Indian consumers fulfil their aspirations with quick and easy loans.

Set up in 1994 and currently operating out of 62 locations in the country, GE Countrywide

pioneered the Consumer loan revolution in India.


http://www.maruticountrywide.com/


Citicorp Maruti Finance Limited was formed when Maruti joined hands with Citibank in May

1998.

Located in 52 cities, CMFL is the first company that provides services to finance the purchase

of secondhand cars nationally. They also offer a wide range of flexible and customized

financing options at affordable rates to individuals buying a Maruti car.

Citibank understands that every car buyer's needs are different. This is the reason why they

offer car loan schemes that suit customer requirements.

Citibank Auto Loan makes paying back a car loan easy by offering you a loan that stretches

your payments upto 60 months.

Citibank Auto Loan gives you a benefit of making a down payment of only 10%.

They also offer you the most competitive interest rates.

With a Citibank Auto Loan customers can acquire a loan with minimum fuss and maximum

assistance. If you are salaried, all you require is a salary certificate from your company, copy

of your CPR & Passport and your bank account statement for the last three months.

If your are self employed all we require is a copy of your CR, a copy of your CPR, and bank

statements for the last three months

Citibank offers you a unique opportunity to Cash-in-your-car.

Arranging a loan can often prove difficult and inconvenient. At best, it can be a time-

consuming and lengthy process, unless the bank is Citibank.

Kotak Mahindra Primus Limited (KMPL) is a joint venture between Kotak Mahindra Bank

Ltd. (KMBL) and Ford Credit International Inc. (USA)(FCII) formed to finance all non-Ford

passenger vehicles. The Joint Venture is dedicated to financing and supporting automotive

and automotive related manufacturers, dealers and retail customers. The Company was



incorporated on 28th February 1996 and commenced it's operations on 1st November 1996.

After incorporation and subsequent commencement of the business by the joint venture, the

business of financing non-Ford passenger cars and it's related activities, previously carried out

by KMFL, is being undertaken by KMPL. The Company has immensely benefited from the

brand equity of "Kotak Mahindra" who were market leaders in the auto finance sector.

Kotak Mahindra is one of India's leading financial institutions, offering complete financial

solutions that encompass every sphere of life. From commercial banking, to stock broking, to

mutual funds, to life insurance, to investment banking, the group caters to the financial needs

of individuals and corporates

The group has a net worth of over Rs.1,800 crore and employs over 4,400 employees in its

various businesses. With a presence in 82 cities in India and offices in New York, London,

Dubai and Mauritius, it services a customer base of over 5,00,000.

Kotak Mahindra has international partnerships with Goldman Sachs (one of the world's

largest investment banks and brokerage firms) and Old Mutual (a large insurance, banking

and asset management conglomerate).

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance

Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &

Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and

that's when the company changed its name to Kotak Mahindra Finance Limited

Kotak Mahindra Primus Limited (KMPL) is a joint venture between Kotak Mahindra Bank

Ltd (KMBL) and Ford Credit International Inc. (USA) (FCII) formed to finance all non-Ford

passenger vehicles.

SUNDARAM FINANCE

Sundaram Finance has grown over the past decades on the foundations of dedicated customer

service, fair business practices, efficient, safe and trusted financial policies.



The Company was incorporated in 1954, with the object of financing the purchase of

commercial vehicles and passenger cars.

The company was started with a paid-up capital of Rs.2.00 Lakhs and later went public in

1972.

The Company's shares were listed in the Madras Stock Exchange in 1972 and in the National

Stock Exchange in January 1998

Subsequently, the equity shares of the Company have been delisted from Madras Stock

Exchange Limited (MSE) with effect from January 27, 2004, in accordance with SEBI

(Delisting of Securities) Guidelines, 2003, for voluntary delisting

Sundaram Finance Ltd registers Rs. 75.99 Cr. Net Profit for FY05

Disbursements rise to Rs. 2887 Cr.

Net NPA halves to 0.45%

Leading Financial Services company Sundaram Finance Limited (SFL) has announced that it

has registered a Net Profit of Rs. 75.99 Cr. for the year ended 31st March 2005. The company

had ended 31st March 2004 with a Net Profit of Rs.55.62 Cr.. However, the numbers (relating

to FY04 and FY05) are not strictly comparable on account of the merger of Lakshmi General

Finance (LGF) with SFL during the year.

Finance options for new car

Sundaram Finance Group provides car finance for all models of cars through 100 plus

locations that are spread all over the country. The documentation required is minimal and

there are no hidden costs. Our procedures are transparent and hassle free. Details of some of

the schemes that have been designed with you in mind are given below.

Finance options

The maximum finance period is for 36 months and this also depends on the model and the age

of the car being financed. The age of the car including the financing period is generally

maintained at a maximum of 5 years. The maximum amount of finance that is given would be

60% of the assessed value



PROFILE

Bimal Auto Agency (Bangalore) – A Maruti-Suzuki authorized dealer –is among the few ISO

9001 certified dealerships in the country. Spread over 125000 sq ft, the Bimal campus is one

of the biggest in India and is designed with customer convenience in mind. All facilities –

Sales, Service, Body Repairs and Spares are in the same premises. Moreover, there are

facilities for accessories, extended warranty, insurance, finance and pre-owned cars.

Bimal auto agency, the flagship company, was established in the year at Guwahati(Assam). It

started with Bajaj Tempo and Hindustan Motors spare-parts dealerships and in 1984

established the Maruti dealership.sodsequently, it went on to become dealers for Yamaha and

LML range of two-dealers. In the year 2002, Bimal started the Maruti-Suzuki dealership at

Bangalore. With combined sales of over 6000 cars, it is among the largest Maruti Dealership

groups in the country. It is fully owned and managed by the Sarawagi family members. Other

family business interests include Petroleum outlets, transport business and coffee plantations.

Bimal Auto Agency - located on Whitefield Road, Bangalore’s IT hotspot is the Maruti

dealership that has created waves in Bangalore. The success comes from our keen eye for

detail, quality and the standards & policies that is based on satisfying the customer’s every

need. We intend to make our dealership, a byword for quality and customer delight in

Bangalore.

Bimal has been honoured with the following at the All India Maruti Dealer onferences:



Sales Infrastructure – All India Best New Showroom 2003

Service Infrastructure – All India Best New Workshop 2002

Service Infrastructure – All India Best New Body Repairs Workshop 2003

Leadership – Young Entrepreneur Of The Year Award for Mr. Naveen Sarawgi, CEO

Innovation – All India Best Practices on Product Customization 2003



BEST PRACTISES IN BIMAL AUTO AGENCY WORK SHOP

Regular morning meetings and exercise.

Identifying the weaker areas and training in-house.

Training process to improve their efficiency.

Same Service Advisor for receiving and delivering vehicles.

Every customer complaint is taken for detailed study, the concerned are educated.

Analysis of final inspection report by Works Manager on weekly basis.

Weekly meeting with washing supervisor to improve washing quality.

Random check of vehicle before delivery.

Works manager does special customer’s service vehicle follow-up

Free pickup and drop for all customers on request.

Welcome drink to all customers’ refreshment at lunchtime for wait and take customers.

All managers from service is present while receiving and delivering vehicles.

Regular camps are conducted in corporate houses and housing complexes.

Marketing teams with photo album to authenticate the facility available.

Every employee of Bimal is a spokesman of dealer and trained to market the services

Discount and free wash coupons are distributed during the camps.

24hours MOS operations on free of cost basis for Break Down Repairs.

8 a.m to 8.p.m service and Sunday working for customer convenience.

Visiting customers, to build relationship.

Dedicated Mobile numbers for pickup and drop

Monthly Customer Interactive Meet for collecting the feedback.

Bonus on service is offered as a tool for retaining customer.

Hotlines for services, pick up & drop, insurance renewals & breakdown.

All service vehicles are polished.

All vehicle interiors are cleaned by vacuum cleaner

Special highly skilled team to resolve customer complaints identified through PSF,

Feedback Card etc.,

SERVICE MARKETING



Initially we started brand building through Marketing Executives by conducting camps at

Corporate Houses, Housing Colonies, Business Centres etc,.

Now we appointed a Business Development officer to improve our penetration in the area of

service and selling special products like Insurance, Extended Warranty etc,.

We have one exclusive person who does the SMR .

SMR has been a very important tool to improve our service load over a period of time.

Through SMR an average of 800 customers are contacted per month.

The enforcement ratio is approximately 85%.

The enforcement ratio through SMR is around 55%

PICK UP & DROP FACILITY

We had introduced the pick up & drop facility right from the beginning, which has provided

maximum convenience to our customers.

Hotline for picks up & drops.

An average of 35% vehicles are picked up for service & dropped back at customer’s place

which constitutes to 18 to 20 vehicles per day.

This facility has been one of the factor in building our service load.

One person is in charge of controlling the drivers who are utilised for pick up & drop.



SWOT Analysis

STRENGTHS

Infrastructure

Processes & Systems

Leadership

Industry Experience

Bimal Edition Vehicles (Customization of Cars)

WEAKNESSES

Location

Parking Space

OPPORTUNITIES

Field Sales

ITPL

THREATS

Competition Branche

Bimal DC



OBJECTIVE OF THE STUDY:

Primary Objectives:

1. To study the loan approval procedures of all finance companies, which come

under MARUTI FINANCE consortium.

2. To Study of Market Shares of Maruti Finance Partners & Bimal Auto Agency

Secondary

1. Study of Maruti Udyog Ltd in general and Maruti Finance in Particular.FL

2. Study of Indian Auto Industry in general and Auto financing in Indi

METHODOLOGY OF THE STUDY

Observing the actual working of various departments mainly finance department

and also marketing dept.

Analyze the functions performed by finance & marketing departments

Study the objectives, growth and achievements of each department in particular

and the organization as a whole.

Visiting the banks to study the approval procedure with the finance executive.

The research design is divided into two parts

PART 1 Loan Approval Procedural study of Maruti Finance Partners

PART 2 Study of Market Shares of Maruti Finance Partners & Bimal Auto Agency

Collection of data –

There are different methods by which data can be collected. The following methods

were adopted in collecting the information required for the project study –

Primary source – different documents of the company like official records, manuals

face-to-face interview with officials were done to collect information . In the face-to-

face interview officers where highly knowledgeable and experienced were met to get

extensive information about the concerned topic.



Secondary data – in this Method Company’s Brochure, Magazines, manuals and

Annual Reports were studied to collect data. The Official Records will give detail

information about the past, present and future plans of the company. Accurate vital

statistical information can also be collected from such records.

Limitations of the study –

The data collected was informal. The working executives inside the organization

did not reveal much information for the study.

The study is limited to Maruti cars buyers only

The study tells only about Maruti finance & its consortium.



PART 1

Loan Disbursement procedure at Maruti Finance

Step by Step approval procedure of Car loan

Step 1 Car Loan Products

Step 2 Deciding Customer Requirements

Step 3 Collection Of Pre Documents

Step 4 File Logins In Banks

Step 5 Field Verification & Tele Verification

Step 6 Loan Approval & Deviation On Approval

Step 7 Rate Approval & Deviation On Rate Approval

Step 8 Collection Of Post Documents

Step 9 Disbursements

Step 10 Issue Of Delivery Order To Dealership

Step 11 Delivery Of Cars To Customers



Step 1CAR LOAN PRODUCTS:

Each banks/finance companies are having different schemes /products. Following are

the some products

ICICI :

Loan On Phone (for existing icici customers)

8 yr Product for M800

100% loan scheme

90% loan scheme – A3 Segment (esteem, baleno, versa)

No Income Proof Scheme

HDFC:

On road 85% for 7 yrs on M800 & alto

100% loan scheme

90% loan scheme – A3 Segment (esteem, baleno, versa)

Step Up EMI Scheme up to 7 yrs

MCW:

Special Offer for GE Employees (Quick approval)

Step Up scheme up to 7 yrs (launched by MCW first time) )(here initially EMI

will be lesser & gradually rises till the tenure ends).

100% funding

CMFL :

90% funding

Suvidha Existing customers Scheme(Quick approval)



Special Scheme for gold Card holders & Dinus Club members

KMPL :

Margin money-- This is a regular scheme wherein you pay a minimum margin of 25%

on the cost of the car. The balance cost is financed and you repay with finance charges in

equated monthly instalments (EMI).

Advance EMI-- In addition to margin money, based on your cash flow, you can pay 2-3

instalments in advance. The advantage here is that the finance charges will be less than

the above margin money scheme

Security deposits-- Here you place a refundable security deposit (of about 10% to 25%

of the cost of the car) with us, which carries an interest at an agreed rate. The finance

charge is payable on the total cost of the car.

100 % finance-- Here we provide 100% finance on the cost of the car for varying

tenures. This is a facility provided under the lease option for medium and large corporates

No Income Proof Scheme

Bullet payment Scheme(in this scheme customer can repay as much as he can as there

is no fixed emi, but last installment must be lumpsum)

90% funding

5 yrs Tenure Scheme

SFL:

Flexible Scheme :You decide Your Emi Scheme (customer has to choose their

emi which suits their pocket, max 48 months, it should be step up , remaining

amount they have to pay at 48th installment lump sum. If they are not affordable to

pay on 48th installment, they can extend loan for further 2 yrs)

Asset Proof Scheme: (asset must)(applicable for low income individuals)

Guarantor Scheme ( outside guarantor also)

Note: The above funding products is not constant. It depends on customer profile &

criteria’s. As they match according to bank criteria his funding will rise otherwise it

declines.



Step 2

DECIDING CUSTOMER REQUIREMENTS:

Once customer approaches for Car Loan, Concerned Dealer Sales executives will give

various options and quotations to the customers. Sometimes customers ask for exact

loan amount and loan tenures according to their requirements. Otherwise Sales

executives have to give various options of finance facilities as below.

Lesser loan amount for lesser tenure. (75 to 80% loan for 1 to 4 yrs.)

Lesser loan amount for Maximum tenure.(75 to 80% loan for 5 to 7 yrs)

Maximum Loan amount for lesser tenure (90 to 100% loan for 1 to 4 yrs)

Maximum loan amount for maximum tenure. (90 to 100% for 5 to 7 yrs)

Now customers are required to select any one of the above options according to their

need. At present most of the customers are asking least down payment schemes, i.e.

Maximum Loan amount for maximum Tenure with least rate of Interest. Finalization

of loan amount and tenure is mainly based on customers profiles.

Since loan approval is the sole discretion of finance companies,

In practice, Credit is the sole discretion of finance companies; each finance company

will have different criteria. Some of the criteria are as follows.

Income tax returns

Residential Status

Job Continuity

Salary drawings

Repayment track of existing loan

Bank transactions copy

Customers have to give all supporting documents in connection with above criteria’s.

If any deviations are there in the above-mentioned criteria, the required loan amount

or the Tenure will be affected proportionately.



Step3

COLLECTION OF PRE DOCUMENTS

Once customers accept the finance quotation made by Dealer Sales Executive, he has to

provide same basic documents for taking loan approval. These documents are called Pre

approval Documents. Normally these documents remain to same in most of the financiers.

Sl.

No

Documents For Salaried For Self employed

For partners

hip Firms

For Private/Public Ltd companies

1 Application Form duly filled and signed by customer

YES YES YES YES

2 1 Photo YES YES YES YES

3 Residence Proof (Copy of Electricity bill or Telephone bill or laminated driving license or Voters identity card or Ration card or passport or Rental Agreement. (any one)

YES YES YES YES

4 Signature proof (Pan Card, Driving License, Passport, Bankers Verification.

YES YES YES YES

5 Identity proof & Age Proof(Passport, Pan card, Driving Licence , Voters Identity card, Photo Credit Card, Photo ration Card.)

YES YES YES YES

6 Proof of Latest Bank Statement for Last 3 to 6 months

YES YES YES YES

7 Latest Salary Slip YES NO No YES

8 Form No 16 for Last Year YES NO NO NO

9 Income Tax Returns for Last 2 yrs. NO YES YES YES

10 Computation Copy with Profit & loss account for Last 2 years.

NO YES YES YES

11 Partnership Deed NO NO YES NO

12 Memorandum & Article Of Association

NO NO NO YES

13 Board Resolution authorizing One Director to execute the agreement.

NO NO NO YES



Step4

FILE LOGINS IN BANKS

Once the collection of pre documents is over, Finance executives will LOGIN the file in

concerned banks for Approval. Since Different banks are having different procedures to

LOGIN, the detailed summary of each Financier furnished below.

ICICI BANK:

In ICICI Bank, there is one Outsourcing Unit called CPA (Credit Processing Authority)

which is owned & maintained by leading Chartered Accountants situated in the same

premises. After collection of Pre-documents, concerned finance executive has to prepare

customer File and they have to submit such files to CPA. It is the duty of CPA to check all the

collected documents and verify the accuracy of the documents like below.

Whether application s dully filled or not,

Whether all attached documents are self attested by customer or not,

Incomplete files not accepting in CPA

If any discrepancy found, CPA will communicate to customers through

concerned executives and ensure that discrepancy is overcome.

Allotment of file numbers,

Updating files in MIS

Updating of approval Status in MIS

Sending File Status (MIS) to dealer thrice in a day by email

HDFC BANK

HDFC also appointed a Chartered Accountant Firm as CPA and the office was not situated in

same premises. Like ICICI, here also systems & procedures are more or less same. Daily once

they are sending MIS to all channels.

MARUTI COUNTRYWIDE AUTO FINANCE LTD:-

The System is entirely different here. There is no CPA here in MCW. The Whole system is

centralized. The Regional office of MCW is situated at Chennai. Once the file login,

documents will get scanned in the branch & Sent it to Regional Office



Through online. Once the file is received, RO will allot file & if find any discrepancy they

will communicate to Branch Office where it is sourced. Here the Branch office does not have

authority to modify or change the documents. To view the file, Branch need to feed files

number in the online system.

CITICORP MARUTI FINANCE LTD :-

Citi Bank has outsourced file logins to different department called CPA.The activities

performed by CPA is same as in HDFC /ICICI.

KMPL & SUNDARAM FINANCE LTD:

In case of Kotak Mahindra & Sundaram Finance. There is no separate entity to handle file

logins. All the activities are centralized; logins & verifications are done by Bank itself.



MIS format as below

S.No App ID App

Rcd

date

Cust name Vehicle Dlr Name

DSA Name

Status Comments Loan amt

Tenure LTV(%) DSE Disb

date

68 507892

03

16/07

/05

Shiva

Shankar

Esteem

Lxi

Bimal Bimal To Ops 384000 60 83



Step 5

FIELD INVESTIGATION & TELE VERIFICATION

The main reason behind conducting FV & TV is to ensure whether the address given by the

customer is genuine or not,. In case of ICICI, HDFC, MCW, CMFL & Kotak, verification

has been done by separate agency which works for Bank. .Once the verification is initiated by

the Bank; Agency will personally visit to both office & Resident Address of applicant for

field verification and make report on that and communicate results to Bank. In case of Tele

Verification, the Agency will not meet personally but contact them over phone both office &

residents to get details. Questions are designed in such a way that they will cover following

factors:

Credit Entity’s identity

Stability of residents

Family Structures & Age

Sources of Income

Own house or rented house.

Vehicles or Assets Owned.

Standard of Living.

There are some entities, which are considered as negative profile, which will come to know at

the time of investigation. The usual negative profiles are;

Contractual Employees

Politicians

Policemen (Except IPS & IAS)

Video Parlor Operators

Bar Owners

Chit Funds

Real Estate Agency

Advocates (Except High Court & Supreme Court lawyers)

Film industry professionals

Builders, Contractors & Building Materials Suppliers



For the above-mentioned profiles, all banks/finance companies are taking precautions before

approving files. Precautions like low LTV (Loan To Value) like 50 to 60%, shorter tenure like

2 to 3 yrs, etc.

Moreover in Sundaram Finance Ltd., there is no separate Agency for field Investigation &

tele verification and this process get done through their own staff. Field officers are visiting

customer’s residence & office and submit the reports to the branch manager for approval.



Step 6

LOAN APPROVAL

After the field and tele verification has been done, the agency sends the report back to the

bank confirming the customer status. If the report is positive, then further loan procedure is

preceded or if the report shows negative the case is dropped at first instance itself. If the

negative status in the FI Report is for minor reasons, sales manager /credit manager are taking

deviations.

The documents collected from the customer are taken to bank. The person approving the loan

is known as Credit Manager or Credit Buyer. His duty is to see the customer profile and

approve the loan accordingly. The Bank / Finance Companies have their own criteria’s and

procedures for approval of loans and based on these, the Credit Manager will approve the

loan. However these criteria’s & procedures will differ from one Bank to another. The main

outlooks of these criteria’s & procedures stands below in respect to following companies.

ICICI BANK & HDFC BANK:

Linking of FI reports:

After the completion of tele verification & filed verification, the credit department (CPA) in

the bank will link the above report to concerned customer files.

Dedup Match:

In this procedure, Credit Processing Authority will cross verify the earlier banking habits of

the customer with ICICI or other banks. In case of existing customer they are cross checking

the savings/current account transactions, credit card transactions, housing/car loan repayment

records etc., to confirm the creditability of the customer. If the customer is not an existing

customer, then with the help of date of birth they can access the customer’s creditability with

other banks/ financial institutions. After assessing the above all, the profile stands negative

then the file get rejected immediately at this stage otherwise the files moves towards

preparation of CAM.



Credit Assess Memo:

Now the CPA people are authorized to prepare a CAM based on customer profile and they are

also authorized to recommend the percentage of LTV (Loan to Value). In this CAM they are

mentioning the income stability of the customer, banking stability of the customer, job

continuity of the customer, business continuity of the customer, business stability of the

customer, residence continuity of the customer, ownership resident/office of the customer and

about co-applicant also if required. Based on the above criteria they are fixing /

recommending LoanToValue (LTV) Grid as shown in the chart below.

LTV GRID

Income <60K & NIP 60K-100K >100K-150K >150K

Tenure 1-3 1-3 4-5 1-3 4-5 1-3 4-5

Category 1 70% 85% 85% 85% 85% 90% 85%

Category 2 70% 70% 70% 85% 80% 85% 80%

Category 3 60% 70% - 75% - 75% -

Category 4 - 50% - 50% - 50% -

Category 5 50% - - - - 60% -

In case of NIP (No Income Proof) or income is less than Rs.60,000 normally they are

approving only 60 to 70% LTV, for a tenure of maximum of three years. Like that based on

customer income as per Income Tax Returns the LTV and the Tenure will take a hike as

shown in the above chart.

The categories shown in the above table are based on the segment of cars like;

CAT 1 – Maruti 800 / Omni

CAT 2 – Alto / Zen / Wagon R / Swift

CAT 3 – Esteem / Baleno / Versa

CAT 4 – Vitara

After considering eligibility of the customer as per above gird they will mention the

percentage of LTV to be granted to the customer in the CAM

Approval by Credit Manager:



In this stage the full file with CAM will come over to Credit Manager’s desk to sign for final

approval. After the scrutiny of file along with the CAM, if he is satisfied he can approve the

proposal for an eligible amount or other wise he may reduce the percentage of LTV to the

extent of discomfort he founds in approval

E.g. If a customer’s applied LTV is 90% for 5 years and eligible LTV as per CAM is 75% for

5 years, he can approve for a maximum extent 75% for 5 years. If he feels discomfort with

file, the LTV/Tenure may come down like he can approve for 75% for 3 years or 70% for 5

years etc.,

Deviation on Approval:



Sometimes, if the applied LTV is more and same it is not under the Credit Manager’s

Discretion, he can ask for his superior’s consent or approval for such cases. The following

table shows the flow/chain of authority people for approvals.

CREDIT MANAGER

AREA CREDIT MANAGER

REGIONAL CREDIT MANAGER

ZONAL CREDIT MANAGER

NATIONAL CREDIT MANAGER

The above chart also reveals that a common customer’s file can go up to National Credit

Manager’s level to take approval for applied LTV. One more interesting fact is that the

process of these approvals takes place within a span of few minutes.

CITI CORP MARUTI FINANCE LTD :

The process of linking of FI reports, Dedup Match, preparation of CAM is more or less same

as in the ICICI/ HDFC Bank. The Credit Manager in the Bank authorized to do final approval

with the consent of Sales Manager. Since CMFL is not approving more than 90% of LTV, the

chances of deviations are very less. Comparing to ICICI/HDFC, here the maximum tenure

also restricted to five years. CMFL also giving special consideration on approval and tenures

for Citi Bank Suvidha account holders and Citi Bank card holders. But maximum LTV and

tenures are same for all.

MARUTI COUNTRYWIDE AUTO FINANCIAL SERVICES LTD:



As mention earlier the system of approval process also centralized at Regional office, (e.g.:

Chennai is the regional office for all logins of Karnataka). Once the file is “Soft approved”

( prima-facie approval ), the linking of FI reports, Dedup Match, preparation of CAM are

processed at regional office. At the end, the file goes to Credit manager at regional office for

“Hard approval”. After hard approval, they will update the status of the file in online. Within

a fraction of seconds after hard approval, Sales manager at local office can access the status of

a file and he can go ahead for further process.

KOTAK MAHINDRA PRIMUS LTD.

In Kotak Mahindra, the system of approval is flexible compared to all above banks. After

linking of FI reports, the Credit Manager approves the files as per credit norms. In case of

deviations, file moves to Location Head/Branch Head for final approval. If LTV is more than

95%, Area Manager or Head Office (Mumbai) approval is necessary.

SUNDARAM FINANCE LTD

Field Officers at Sundaram Finance Ltd., are doing both field verification and primary

approval also. Once the file is primary approved by field officers Branch Manager’s green

signal gives final approval on the file. Since the branch is entirely responsible for selling of

car loans and recovery of loans, they are personally evaluating the customers’ stability,

repayment capacity and guarantors profile rather than a mere verification of document/papers.

Noticeably, SFL is the only one finance company accepts a third party guarantor as a co-

applicant compared to other finance companies as they are accepting only family members

(blood relatives) as guarantors.

It is observed here that the percentage of recovery is more in SFL only due to this Third party

guarantor.

Step 7

COLLECTION OF POST DOCUMENTS



All banks / finance companies are having same system of collection of post documents. After

the approval, the executives has to visit customers place to collect post documents and they

will hand it over to the bank to attach with customer file.

The following is the list of post documents to be collected by the executives

Agreement Copy (Duly signed by applicant)

Money Margin Receipt.

Post-dated cheque’s or Security Cheques (According to the finance co & tenure) r

Electronic Clearing System (ECS) (For Salaried Class)

Own house proof (Optional)

Repayment Track (Optional)

Credit Card Statement (Optional)

Note: The ECS system is not applicable for KMPL & SFL companies, customers has to

submit post dated cheques only since the company does not have the facility of ECS.

Step 8

RATE APPROVAL & DEVIATION ON RATE APPROVAL:



The rate of interest is one of the most important factors to attract the customer towards car

loans. The six finance partners, who have tied up with Maruti Finance, are giving very

competitive rates to its customers. Before starting Maruti Finance some finance companies

are charging more than 15% per annum for car buyers. The entrance of Maruti Finance,

reduced the rate of interest by restricting it’s channel partners.

In all the banks Branch Head/Sales Managers are authorized to fix/approve rate of interest.

Normally, prevailing rate of interest to customer is 9% to 10% for Maruti 800/ Omni, 8.5% to

9.5% for Alto / Zen / Wagon R / Swift, 7.5% to 8.5% for Esteem / Baleno / Versa. These

rates are possible only after giving some subsidy / subvention from Maruti Udyog Limited or

Dealers.

Some banks like ICICI & HDFC, for the rate approvals only Branch Head is not authorized to

approve all rates. For deviation they are moving such files to higher officials like Area Sales

Manager, Regional Sales Manager, Zonal Sales Manager, National Sales Manager and finally

to Business Head.

Step 9

DISBURSEMENTS



After getting rate approval, the file moves to Operation Department cum Finance Department

for Final Disbursements where the approved loans are getting readied for payments to the

dealer.

Before preparing the payment, the Operation Department will scrutinize all the post

documents. The following documents will scrutinized

Checking all signature of customer in loan agreement

Verification of post dated Cheques (Date, amount & signature)

Verification of Margin Money Receipt

Verification of Insurance Cover Note

Verification of Pro-forma Invoice / Price List from Dealer

Verification of ECS form & Security Cheques



Step 10

ISSUE OF DELIVERY ORDER & FORM – 20 TO DEALERSHIP

After completion of disbursement process, the Operation Department will issue a delivery

order to the dealer. It contains the loan amount, EMI, the dealer discounts if any adjusted and

the disbursement amount. Along with the delivery order, they are also issuing a Form – 20

which is required for registration of vehicle at the Regional Transport Authority.

Step 11

DELIVERY OF CARS TO CUSTOMERS

On the basis of the financier’s Form – 20 & delivery order, the dealer will register vehicle

with the hypothecation of concerned financier. After registration customer will get the

delivery of vehicle.

Once the new car is purchased the following documents have to be submitted to the RTO for

registration purposes;

Copy of the invoice - (photocopy)

Copy of the insurance cover-note / policy

Residence proof.

PUC certificate issued by the manufacturer (form no. - 22)

Form -20 Imprint of Chassis No.

PAN / GIR No

4 Photos



Step 12

MAKING PAYMENT TO DEALERSHIP

More or less all Maruti Finance Partners arranged inventory funding/trade advance facilities

to the dealership. In such case banks / finance companies are not supposed to prepare

Cheques / drafts to release the payment. Since under inventory funding dealership is having

online account with the finance companies and within a few minutes the payment will get

credited to dealer inventory funding/trade advance account. Or otherwise, the dealer is not

availed such a inventory/trade advance facility from the bank / finance companies, then the

bank/finance company will pay the amount of disbursal through cheque /demand drafts.

STEP 13

COLLECTION OF RC BOOK, & INVOICE COPY FROM DEALER

After all payments are over the dealer issues RC Book & Invoice copy to customers.



MARUTI FINANCE PARTNERS SHARE 2003-04

In the year 2003-04, there were 8 partners in Maruti finance. There Market share is

shown below.

Fig 1

MARUTI FINANCE PARTNERS SHARE:2003-04

9% 8%10%

7%

36%

16%

5%9%

0%

5%

10%

15%

20%

25%

30%

35%

40%

MCW CMFL KMPL SFL ICICI HDFC ABN SCB

SALES

Key Findings

ICICI seems to be clear winner with Highest Market share of 36% ,

HDFC takes the second place with 16% Market Share

KMPL takes the third place with 10% Market Share

Rest other banks combined(MCW,CMPL,SFL,ABN,SCB) constitutes 38% of Market

share.



Fig 2

MARUTI FINANCE PARTNERS SHARE 2004-05

7% 6% 7%4%

48%

21%

3% 4%

0%

10%

20%

30%

40%

50%

60%

MCW CMFL KMPL SFL ICICI HDFC ABN SCB

SALES

Key Findings



KMPL & MCW takes the third place with 7% Market Share

Rest other banks combined (CMPL, SFL, ABN, SCB) constitutes 24% of Market share.



Fig 3

MARUTI FINANCE PARTNER SHARE 2005-06(Q1)

6% 3% 6% 5%

58%

22%

0%

10%

20%

30%

40%

50%

60%

70%

MCW CMFL KMPL SFL ICICI HDFC

SALES

Key Findings



KMPL & MCW takes the third place with 6% Market Share

Rest other banks combined (CMPL, SFL ) constitutes 14% of Market share.



Fig 4

Key Findings


MCW takes the second place with 17% Market Share

CMPL takes the third place with 15% Market Share

Rest other banks combined (HDFC, SCB, KMPL, ABN, SFL )constitutes 35% of Market

share.



Fig 5

Key Findings



CMPL takes the third place with 11% Market Share

Rest other banks combined (MCW, SCB, KMPL, ABN, SFL )constitutes 28% of Market

share.



Fig 6

Key Findings

Maruti Finance has seen decent growth of over 10% during the year 2004-05 compared to

2003-04.

Other Banks has seen downturn with 5% decrease in total car financed.

The Non Financed cars has seen downturn of 4%



Major Findings

On Maruti Finance consortium

From the study it has been clear that, ICICI & HDFC Banks are getting stronger and they

cover nearly 80% of Total Volumes which seems to be monopolistic situation .If same

situation continues, it is very difficult for other Maruti Finance Partners to continue

partnership with MFL. This was also the main reason for ABN Amro Bank and Standard

Charted bank discontinuing partnership with Maruti Finance.

On Bimal Auto Agency

Bimal has been maintained comparatively consistent over different Maruti Finance Partners.

It has been evidenced by All India Market Share & Bimal market share of Different

Financier. (See Fig 4-5)

Bimal as an authorized Maruti Dealer has been growing over a period of time. It has been

evidenced by Turnover achieved from last three years and still rising.

On Maruti Finance

Maruti Finance involves minimum paper documents.. They are providing good services to

customers in time with minimum loan formalities Documents which are given to book the

Maruti vehicle & to avail the Mauti Finance almost all same.

Before the introduction of maruti finance customers used to run to different financial

institutions for availing car loans, but now on introduction of Maruti Finance it has eased the

customer problems.

Usually, Customer doesn’t find any difficulty in taking delivery of the vehicle if he availed

Maruti Finance. Because generally all Maruti Dealers do have Inventory Funding Account

with Financier, which would not only help dealer to make bulk purchase from Maruti Udyog,

but also have payments of loan disbursed with minimum loss of time & formalities.



Since MUL has got National Level Tie up with leading Finance Companies They are giving

top priority to Maruti Finance customers in the way of;

Maximum funding on vehicles (up to 100%)

Giving loans for longer tenure, (up to 8 years)

Flexi schemes like step up emi scheme, Bullet payment scheme, etc.

Competitive rate of interest.

Even though the files are processed for approval through various desks, it will consume only

a few minutes to have its final touch from higher authority (National Level) also.

On Approvals

Loan Approvals are based on lot of criteria like income stability, residence continuity, job

stability, previous loan repayment record, credit card track record, banking habit etc

Since banks are looking for all criterias there are chances wherin approved loan amount may

be lesser than applied one



Suggestions

Faster Loan Procession

The documentation process followed by Maruti Finance seems to be a rather lengthy process.

This needs to further curtailed lengthy processes usually robs the interest of the customers.

Lower Bargains

It seems to be that there are different rates of interest for different customers. Maruti Finance

needs to adopt a more transparent interest rate charges. Different rate brings in more

complexity between both the parties i.e. Maruti Finance and the Customer

Be More Aggressive

Out of the total cars sold at Bimal only about 50 % are bean financed through Maruti Finance.

This shows that still there is high scope for tapping the market. Maruti Finance has to adopt

more aggressive strategies towards the same.

Vested Interests

There seams to be a dominance of only two major banks that is ICICI & HDFC as they cover

nearly 80%. This may sometimes result in vested interests or dictatorial terms by these two

major partners. If same situation continues, it is very difficult for other Maruti Finance

Partners.

Be an independent entity

The question here is why cant MUL with such a huge market share becomes a independent

financing company instead of getting tied up with other financial institutions. It shows the

dependency of Maruti Finance which may force lead the other sources to misuse the situation.

The companies like GE, Reliance, and TATA etc have their own financing companies. Thus

this can be a good strategy towards the future growth of, Maruti Finance as an independent

financial entity.



Extended working hours.

Bimal can extend its working hours from 7pm to 8.30pm. as the location of Bimal is located

near the ITPL, where most of the customers are working & get free in evening. This will help

the customer’s satisfaction.



Bibliography

Books Referred:

Tull & Hawkins

WebSites

www.marutiudyog.com

www.indianinfoonline.com

Www.bdomain.com


http://Www.bdomain.com/

http://www.indianinfoonline.com/

http://www.marutiudyog.com/

Date post:	11-Sep-2014
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