Company managements need to "curtail the kind of expenditures on themselves personally" with the COVID-19 pandemic highlighting the need to build internal resources with a frugal style of functioning, Maruti Suzuki India Chairman R C Bhargava said on Tuesday. Addressing shareholders in the company's annual general meeting held virtually, he also termed as "a good development for the whole of industry" recent shareholder actions that did not approve expenditures by management on themselves, without specifying details.
In the wake of the pandemic, building internal resources has to become a priority of industry and companies. It requires companies to have a more frugal style of management, he said. "Management themselves need, I think, to curtail the kind of expenditures on themselves personally. Recent shareholder action seems to suggest why a section of shareholders share this view and are voting on these lines and I think that's a good development for the whole of industry," Bhargava said without elaborating.
ALSO READ: CCI imposes Rs 200 crore fine on Maruti Suzuki India over dealer discount policy
Earlier this month Eicher Motors Ltd had failed to get approval of shareholders on a special resolution to re-appoint Siddhartha Lal as Managing Director with increased remuneration, with 73 per cent of them voting in favour and around 27 per cent against. As it was a special resolution, it needed support from 75 per cent of the votes cast to pass the proposal.
On Monday the company's board decided to go back to the shareholders for approval of Lal's re-appointment as Managing Director with effect from May 1, 2021, with changes in his remuneration package. Commenting on the learnings from the pandemic, Bhargava said companies which had strong financial reserves, which were generating internal resources and kept reserves were the ones best able to tide over the difficulties created by COVID-19.
"They were able to look after their manpower and employees and to come back to the production required as quickly as possible," he said, adding companies have to have the resilience to face the kind of crisis which the pandemic brought. Bhargava, who had in the past stated that the high tax regime is slowing down car demand, reiterated the need to address the issue.
"I am quite clear that if a strong industrial base has to be built in India, the auto industry and the car industry has to reach double digit growths and at present the conditions do not permit that we have it," he said. The auto industry veteran cited examples of state governments replacing the annual taxation by one time taxation on automobiles "in order to meet the immediate requirements of money", which made the cost of acquisition for customers very high.
"It restricts the ability of people to buy cars and therefore, it restricts the industry," Bhargava said. However, he added, "I am particularly grateful to the Revenue Secretary Union government (Tarun Bajaj) , who has recognised that there is a problem for the car industry. Once that recognition is there at that level of government, I'm sure appropriate solutions will be worked out."
Calling on the industry to partake in nation building, he said, "The management of industries must all understand and work not only for building companies and meet their limited objectives but think what they need to do to ensure that the industry plays a role in the growth and strengthening of the economy of the country." Industry has to understand that the purpose of an industry is not only to make the industry work in the interests of the promoter and the shareholders, but at the same time, they have a role to play in building a strong nation, he added.
Bhargava further said recent events in the world and in the neighbourhood as well as COVID-19 have highlighted the need of an Indian economy to be much much stronger. "A strong economy is one of the essentials of safeguarding, independence and our values getting respect in the world. A strong economy also provides the means to build infrastructure in all areas," he said, adding over the last 70 years India has not been able to build "an economy as strong as many of our neighbours".
Bhargava further said, "We found during the Covid epidemic that the health infrastructure was inadequate to meet much, much larger unexpected demands that were placed on it."
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
