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Rarely has a single company benefited from a fiscal measure, as has Maruti from this year's Budget. A cut in the excise duty by eight percentage points and a liberal definition of what a `small car' is has given the company a distinct advantage that could flow through to the earnings over the next two-to-three years. Maruti will corner a lion's share of the likely benefit to the industry as a result of this fiscal incentive. Models such as the Alto, the Wagon-R, the Zen, the Omni and the 800 will be priced substantially lower. The company will benefit from higher volumes.

Its peers will be forced to drop prices even for models that do not qualify for the excise cut to stay competitive. The Maruti stock has zoomed 20 per cent in five days. Shareholders can remain invested, though exposures may be tempered in the wake of a price spurt.

S. Muralidhar

More Stories on : Cars | Budget | Maruti Udyog Ltd

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