India's largest car-maker Maruti Suzuki has come out with a fresh update that shall not just benefit the company but also please the minority shares and mutual fund holders. Maruti Suzuki India has made an announcement at a recently held annual general meeting that it would pay royalty for all new model in rupees instead of Yen. This move shall also reduce the risk of foreign exchange currency to the parent company.
A while ago many of company's stake holders had raised questions over the royalty payment policy being payed to the parent company. As per them, the Royalty amount paid to parent company Suzuki Motors increased from 2.7 noted in 2007-08 to about 6% in financial year 2013-14. reportedly the Royalty amount paid in financial year 2013-14 was even more that Suzuki's standalone profit. For now Maruti Suzuki may not have immediate gains as the policy would only stand effective when the company signs a new product agreement which may happen possibly from the financial year 2019. As for now, since the company has already ventured into an agreement with the parent company Suzuki it shall pay the existing royalty amount.
Speaking more on the occasion R C Bhargava, Maruti Chairman, said, “On all future models, the royalty will be expressed in rupees, and not in yen, so that we are not exposed to exchange-rate variations. Also, it will bring in stability about royalty payments. Which direction the yen will go is uncertain. So it could work both ways.”
