The Maruti Suzuki India scrip rebounded smartly from Tuesday?s loss on value-buying in the wake of the company?s strategic manoeuvre. We take a look at the stance of leading brokerages on the stock
Brokerage: Macquarie
Recommendation
Old: Neutral
New: Outperform
Price
Old: 1,560
New:1,800
Rationale: Stock correction exaggerated. Gujarat announcement overshadowed strong Q3 numbers. Maruti gets access to new plant without investment
Brokerage: Barclays
Recommendation
Old: Overweight
New: Equalweight
Price
Old: 2,119
New: 1,563
Rationale: Significant strategic mis-step. Maruti?s lack of control over production cost is worry. Risk of earnings deterioration and cash drain by Suzuki likely to remain overhang in near term
Brokerage: Deutsche
Recommendation
Old: Buy
New: Buy
Price
Old: 3,075
New: 3,150
Rationale: New factory announcement is a twist. Capital structure a surprise as Suzuki will own 100%. Maruti shares fell sharply as expectations of stake increase by Suzuki did not materialise
Brokerage: ICICI Securities
Recommendation
Old: Add
New: Reduce
Price
Old: 1,626
New: 1,634
Rationale: Good result, but there is trust deficit. Result completely overshadowed by Gujarat announcement. We fear devil may lie in detail. Last year, Maruti Suzuki merged another company (SPIL) with itself, citing better control, synergies. Now it has done exactly the opposite. This raises questions on how future strategies will be played out
Brokerage: Ambit
Recommendation
Old: Buy
New: Underreview
Price
Old: 1,850
New: Underreview
Rationale: Suzuki proposal appears positive for Maruti in near term. However, capex for future phases will be indirectly funded by Maruti. Hence, Maruti shareholders will end up funding capacity, which will be owned by Suzuki
PROXY ADVISORY FIRMS
IIAS: The announcement regarding the Gujarat plant adds to the complexity and the ambiguity of the operating and ownership structure. Existing shareholders have been left with several unanswered questions, and no ability or opportunity to ask them
InGovern: Pliable board of Maruti Suzuki has done grave injustice to minority shareholders of MSIL. There is no compelling business logic for such an arrangement when Maruti has necessary capital raising ability to make investments. Minority shareholders should oppose this move, and register a complaint with Sebi