Deepesh asked:


As a small kid, in the early 1980s, I grew up in the suburban town of Gurgaon – then more known for growing wheat and vegetables than rampaging Toyota Qualises ferrying sleepy teenagers.

Things changed in 1983 when the government set up Maruti, in collaboration with Suzuki, and its car manufacturing plant came up on the outskirts of the town in a huge tract of land – approximately five square kilometres, or more than a 1,000 acres. Those were dull times – land was cheap. The government probably paid not more than INR 20,000 per acre for the tract, if at all.

Cue 2007. Times have changed. Blame it to rapid industrialisation, the scorching growth pace of the service industry and the speculative behaviour of the realty business, land in the vicinity is floating at around INR 60,000 per square yard. Even if one was to look at a bulk deal, Maruti’s 1,000 acres will fetch a cool INR 150 billion!

That is USD 3.3 billion!!

That’s exactly the sum that Suzuki (Maruti’s parent) wants to invest in India over the next few years.

The above may be a completely worthless and stupid calculation, considering that Maruti has to make cars at the plant and while a potential fifty thousand luxury condominiums, ten malls, a couple of IT parks and some commercial buildings have the potential of turning the Gurgaon realty scene on its head, this is little more than wishful thinking…till I start looking at the scene from a different perspective.

Maruti’s second plant at Manesar is operational and being a huge facility in itself can be potentially expanded to a million units, the company’s target for the near future.

The Manesar facility is close to Maruti’s existing Gurgaon plant so it won’t affect logistics to a great extent. Theoretically, production can be shifted from the Gurgaon plant to the Manesar plant, in phases to maintain smoothness. Already the Swift line is at the Maneasr plant and the SX4 sedan should be getting put together there as well. The models that are not being built at Manesar currently can be shifted there, model-by-model, in 2-3 years, all except the 800, which might be on its last wind by then.

And in case the Manesar plant proves small then Maruiti-Suzuki can set up another one in the nearby upcoming Reliance SEZ. The SEZ plant can be used for exports and will benefit from duty waivers as well.

While looking at its plant as an asset in this sense may not be in Maruti’s idea of things for now, the plant itself is as juicy as they come. Once on the outskirts, it is now as central as one can be in a place like Gurgaon with easy connectivity to the old town as well as the new areas. The plant has a huge frontage on the old Delhi-Jaipur road and is a few hundred metres away from the busy NH-8 expressway. There are already premium residential complexes, a planned golf course and a large number of software and services companies (their employees would love to live in the luxury condos that come up at the MUL plant site) in near vicinity with a bunch of existing and planned five-star hotels within a 3-4 kilometre radius. Heck, even the international airport is a few kilometres away.

With MUL’s proven clout with the government, things like Change of Land Usage (CLUs) etc. will not matter,. The company’s management, alongwith potential prospective buyers DLF and Unitech, can even arm-twist the government to bring a Delhi Metro link from the planned Gurgaon extension to the existing plant’s rear gate. That should bump the price of the condos and ensure that the builder, who buys the land, makes a neat profit as well. The plant has the potential of becoming the largest single township in the NCR-Delhi region or even 2-3 big townships, in case one builder finds it difficult to shell out this much moolah.

So has Maruti ever thought of doing this? Maybe. More likely, maybe not!

Far more importantly, have the stock analysts factored in the land value in MUL’s share price? If not, spread the word, and watch the stock spiral away.