Maruti Suzuki Chairman RC Bhargava says growth would not be possible without reorganisation

Bhargava reassured shareholders that the acquisition of Suzuki Motor Gujarat will not make any immediate difference in terms of the production volume, sale volumes, or the cost of the car, but will improve efficiencies. "This merger will actually make the organisation capable of performing at a higher level of efficiency. And that will be to the shareholders' gain."

In an interview with CNBC-TV18 today, Bhargava said it makes sense if one management controls the total production of cars and technologies.

"Managing the kind of volume we will have and have already reached (about 2.2 million) is not going to remain possible without reorganising Maruti. Nobody in the world is doing this kind of volume under a single company with a single management," he said, adding the complication is compounded by the fact that the number of types of technologies is becoming much larger.

"This is actually one stage. I believe that once we have this part of it completed, and we are on our way towards starting big production at Kharkhoda and then we also pick the next site for expansion and start working there, there will be further reorganisations happening in Maruti."

Bhargava said that back in 2014, Suzuki Motors gave an offer that they would put in all the money as equity to set up the production facilities, which originally Maruti was planning to do. "So, that we would not have to make any investment there. And then they would make the cars and supply them to us under a contract manufacturing agreement at cost. And it seemed to a lot of people to be a transaction, which is too good to be true, but actually, it was in the interest of both parties."

"As a result of which, till now we have, as Maruti, earned an extra interest income from not investing something over Rs 5,000 crore. And the production has taken place smoothly. We didn't have to put in any resources, everything was going fine," he said.

Bhargava pointed out that in these nine years, a lot of things have changed. The market for Maruti has become much bigger. And that the company is now already at 2 million and expects to reach 4 million by 2030.

The chairman said that the capex plan doesn't change at all, the cost will not change at all, and the production volume will not change unless a little more capacity can be added to the plant in SMG.

The automaker's net profit for the June quarter surged more than two-fold year-on-year (YoY) to Rs 2,485 crore. The revenue from operations rose 22 percent YoY to Rs 32,327 crore. The steep growth in the net profit during the quarter was on account of larger sales volume, improved realisation, cost reduction efforts, and higher non-operating income. Maruti Suzuki's revenue, excluding other operating income, at Rs 30,845 crore was the highest-ever quarterly sales it has booked.

On Tuesday, shares of the company were trading at Rs 9,711.15, down 1.12 percent on the NSE. The stock has rallied 15.55 percent on a year-to-date basis, while it has risen 7.82 percent in the last year.