The aggressive pricing of Baleno – Maruti Suzuki’s premium hatchback – has surprised analysts and lifted sentiments in the stock for the second straight day. Maruti Suzuki shares traded at the top of the 50-share Nifty index in morning trade on Tuesday.
Nomura said Baleno is Maruti’s “most significant” launch in recent times and added that the Baleno will pose a “strong” challenge for incumbents like Hyundai’s i20, Honda’s Jazz and Volkswagen’s Polo.
Baleno starts at Rs. 4.99 lakh, which makes it at least Rs. 30,000 cheaper than Hyundai’s i20, the market leader in the fast-growing premium hatchback segment with average sales of around 12,000 units per month.
“Baleno is attractively priced, at 5-7 per cent lower than rivals, which should be a boost for the model. Given the segment’s size is nearly 20,000 units per month, we expect Maruti to garner incremental monthly volumes of 5,000-6,000 units,” said Deepak Jain and Saksham Kaushal of IDFC.
Nomura expects Maruti to notch 2,000-2,500 units of Baleno sales per month in FY16/17, but it added that there can be upsides given the attractive pricing.
Nitesh Sharma of PhillipCaptial said Baleno offers a better bang for its buck than peers. Baleno offers more room than its rivals and even its base variant is equipped with dual airbags and anti-lock braking (ABS) system, analysts noted.
“In terms of features, Maruti Suzuki has upped the ante by providing a host of safety features which are usually absent in the base models… Interestingly, even Baleno’s Delta variant (above base variant) is quite loaded with automatic climate control, not available in similar variants of peers,” said Nomura’s Kapil Singh and Siddhartha Bera.
Fears of Cannibalization
Baleno is priced between Swift and Dzire, which has led to concerns that it could hurt sales of both of these best-selling models from Maruti’s stable.
According to IDFC Securities, Baleno is lighter than the Swift by 95 kg (better power-to-weight ratio), which means it will be peppier and more fuel-efficient (around 10 per cent higher) than the Swift.
PhillipCapital said Baleno could cannibalise Swift-family sales due to proximity in pricing.
Fewer Nexa outlets May Limit sales
The Baleno is the second model after premium crossover S-Cross which would be sold through Nexa outlets in the country. But analysts said the limited number of Nexa outlets could limit sales of Baleno.
Brokerages Bullish
Most brokerages retained their bullish stance on Maruti Suzuki post Baleno’s launch.
“While it might be a bit early to make predictions, our first take on Baleno is positive. We remain positive on Maruti which, given a strong product pipeline, is well-positioned to take advantage of potential growth of the car market. Maintain Outperformer, with a target price of Rs. 4,950,” said IDFC Securities.
Nomura retained its “buy” call on Maruti (target Rs. 5,034) citing lower commodity costs and discounting. Royalty rates have peaked out at 5.5 per cent of sales, it added.
PhillipCapital said Maruti is still the best play on a recovery in Indian automotives. It reiterated “buy” on Maruti with a target price of Rs. 4,700.
As of 10.47 a.m., Maruti Suzuki shares traded 0.9 per cent higher at Rs. 4,424 as compared to a 0.5 per cent fall in the broader market.