Net margins are razor thin as a result.
Standing tall in the component segment
This company was incorporated some 26 years ago as an ancillary unit to the then Maruti Ltd. Setting up such ancillary vendors was one way for Maruti to overcome the shortfall of quality parts that went into the overall makeup of its plain Jane Maruti 800. It was also another way of reducing the exchange burden on Maruti who initially had to import all its components from Japan, and the progressively deteriorating rupee yen parity would have added to the hiccups of Maruti's cost accountants. The flip side of the coin was that the component units' got to be tagged with the forex differentials and had to absorb the cost increases, and besides, Maruti's books showed that the parts had been sourced domestically, entailing no forex outflow! Maruti got to kill several birds with one stone by resorting to this clever strategy.