How Maruti handles the excess cash flow is important: Anish Damania

In a chat with ET Now, Anish Damania, Head-Institutional Equities, IDFC Securities, shares his views on Maruti.

ET Now: Coming on Maruti over the weekend they have informed exchanges that they would enter into a contract manufacturing agreement with Suzuki. Maruti in the presentation to the BSE has indicated that Maruti Ltd. which is the listed entity they would save about 2$ billion plus, what do you make of that announcement is that good news for shareholders in the short term because cash flows will improve?

Anish Damania: This was already there in the news and Maruti was consistently saying that things will be in that direction. Now they have put it in right thing and showed the entire agreement to the investors so this is a kind of a first from Maruti and want to show to investors that they will be as transparent as possible in this process. So this is probably already there in the price but, however, having said that if you put that in writing and in front of full public domain than that also has its positive implication. So this is definitely positive news as far as the shareholders are concerned. All what they want to understand is that the certainty about certain things which are expected to happen. Now it remains to be seen as to what Maruti does with that excess cash flow which it will generate on its own, will it payout as dividend to shareholders or will it continue to hold back and utilise those proceeds elsewhere let us say for example R&D or Development of new products etc.