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Maruti to pay royalty to parent company Suzuki MotoCorp in INR

Snapshot: Country's largest automaker Maruti would now pay royalty to its parent company the Japanese Suzuki Motor Corp in Indian currency. The royalty was earlier paid in Japanese Yen instead of Indian Rupee...

Country's largest automaker Maruti would now pay royalty to its parent company the Japanese Suzuki Motor Corp in Indian currency. The royalty was earlier paid in Japanese Yen instead of Indian Rupee. Maruti Suzuki India (MSI) Chairman R C Bhargava, while speaking to stakeholders at company's annual general meeting, said that this move would keep the company away from fluctuations in the foreign exchange. 

"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. "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. Maruti Suzuki India paid a royalty of Rs. 689 crore, 6.2 per cent of its net sales, to the parent company in the first quarter that ended on June 30, 2014. However, the Indian unit of company is hopeful of lowering down this royalty sum with its upcoming compact SUV as its engineers enhance their role in the joint development of future products.

Maruti is also investing around Rs 2,000 crore on a research and development facility, including a test track at Rohtak in Haryana. It will be entering the SUV segment in the country early next year. "Maruti has not been present in the SUV segment and Suzuki Japan has been aware of it. Early next year we will launch our SUV and a compact SUV will follow a year later. With these we will have sizeable presence in the SUV segment and fill unutilised capacity at Gurgaon and Manesar plants," Bhargava said. Bhragava also requested the shareholders to vote excessively in the voting process that is scheduled to take place sometime later in the next month so that Suzuki own and invest at the Gujrat facility.

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