Maruti To Start Paying Royalty To Parent Company In Rupee

BANGALORE: Car market leader Maruti Suzuki India will now pay royalty to parent Suzuki Motor Corp in Indian rupees instead of Japanese yen.

Addressing shareholders at its annual general meeting, Maruti Suzuki India (MSI) Chairman R C Bhargava said the move would insulate the company from foreign exchange fluctuations. "Royalty to Suzuki will now be paid in Indian rupee price and not yen, so that we won't be affected by foreign exchange fluctuations," Bhargava said.

He said with the company enhancing its research and development capabilities and playing greater role in joint product development with Suzuki, the royalty payout will also decrease.

"More and more R&D work will be done in India and royalty calculation will be based on work done here and our expenditures on R&D will be rewarded in the form of reduced royalty," he added.

In the first quarter ended June 30, 2014, MSI had paid royalty of 689 crore, which was 6.2 per cent of net sales. MSI expects the royalty paid to parent Suzuki Motor Corp to come down starting with its upcoming compact SUV as its engineers enhance their role in the joint development of future products.