Maruti Suzuki had obtained special permission from the Reserve Bank of India (RBI) to buy forex cover on behalf of its vendors in June 2011. But, it has rolled out such hedges only now. RBI allowed it to hedge on behalf of 200 vendors. But the company has hedged for only 25-30 suppliers, who account for 80% of yen exposure. The company can now hedge exposure on behalf of vendors like Suzuki Powertrain, Motherson Sumi, Subros, Denso and others. It took six months to get RBI approval. Maruti Suzuki buys about 90-95% of components locally, but many vendors in turn import critical parts, mostly from Japan.
Currently, Maruti Suzuki compensates vendors for forex losses incurred on the import of these parts, leaving them with little incentive to localise sourcing. But now, by hedging forex exposure of vendors and getting them to share the cost of the cover, the company is trying to get vendors to localise sourcing more aggressively. It is also promising to share cost savings from greater localisation with vendors. Maruti Suzuki hopes to slash yen-denominated imports by 30% in three years, bringing down the import bill by about Rs 2,000-2,400 crore. More localisation could yield cost savings of at least Rs 100-120 crore in the next few years.
| Company Name | CMP |
|---|---|
| Tata MotorsPassenger | 360.15 |
| Maruti Suzuki | 13452.25 |
| Mahindra & Mahindra | 3199.35 |
| Hyundai Motor India | 1901.25 |
| Mercury Metals | 35.39 |
| View more.. | |
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