Have taken steps to de-risk co from yen strength: Maruti chair

Maruti, however, is not planning to export any other cars except the Balano to Japan -- something that would have served as a natural hedge in case of a yen appreciation -- because it would first like to see how Baleno performs, Bhargava said. "The first batch of cars have shipped out at the end of January or beginning of February, so there is no updates on any sales figures from there," he added.

Below is the verbatim transcript of RC Bhargava's interview with Surabhi Upadhyay and Sonia Shenoy on CNBC-TV18.

Surabhi: Obvious concerns with the way the yen is surging, you need to make royalty payments to Suzuki and also the imports that you might have. What is the mathematics? What is the equation with this kind of surge that we are seeing? What does it mean for your margins?

A: At the moment I cannot comment on margins. We never comment on margin but our effort has throughout being to reduce our dependence on imports particularly imports which are yen denominated and the programme of localising in a part imports by vendors has been carrying on for the last five-six years and that has paid off in terms of reduced imports and much greater local content. In addition to this we have started exporting Baleno to Japan and that will provide a kind of natural hedge to our import from Japan because they both are in yen. So that will bring down the dependence on the yen imports. So overall the impacts of fluctuation in the yen either way are not going to be as much now as they use to be in the past.

Sonia: A couple of years ago you had a high dependency on the yen. It was almost to the tune of 20 percent plus as a percentage of your sales were yen denominated. Can you tell us how much has it dwindled down to now. Is it 10-12 percent, any ballpark number just to understand how much the yen dependency has reduced for the company?

A: I will not be able to give an exact figure but the fact is that we have been taking on the royalty side. We have said this earlier that all the new models, Brezza onwards will have royalty denominated in rupees and therefore the impact of a rising yen which meant a much larger outflow of rupees will no longer be there as we go along, Brezza being the first car. The import which we do for components is partially getting set off by the exports to Japan. However, while I cannot give you the number as to what extent we will be dependent on yen, imports and the fluctuations which arise from that, all I can say that in qualitative terms the situation will be better. 

Sonia: You spoke about export of Baleno to Japan and that will provide a natural hedge to your company. Are you looking at exporting any other products to Japan, just to increase the natural hedges?

A: Not at the moment. We will see how Baleno performs, how it is accepted by the customers there and after that we will discuss and Suzuki will tell us what else we could try and put out for exports to Japan.

Sonia: What is the progress on the Baleno export so far?   

A: Still early to say. It takes time for this to have an impact. The first car will be shipped out from here by end of January or beginning of February and after it will be inspected, checked and sent to different dealerships. Therefore, I do not have an update on what is the state of sales of Baleno in Japan.

Sonia: Do you think that because of natural hedges on account of exports, also cost reductions and lowering of various costs like promotion expenses etc, the margins will at least be able to be held on at these levels of about 15-15.5 percent?

A: I cannot comment on the margins.