Maruti Suzuki Limited, the country's largest vehicle manufacturer, has the highest PE (price to earnings) ratio in the world, Chairman RC Bhargava said at the AGM. "The PE ratio of the company is an indication of how the market perceives management and the way of working. This has increased to 30 now. This is more than two times the highest PE ratio at any company in the world, post Tesla," Bhargava stated. 

He said that in 2013-14, Maruti Suzuki's PE ratio was 19 and now it is 30. 
Tesla's PE ratio is over 60. 

Just to contextualise, the next highest after Maruti Suzuki is Ford at 12.5, Toyota and Suzuki are at about 11. Honda's PE ratio is 11.5, BMW's is 5.9, and the PE ratio for General Motors Mercedes is 5. "So you can see that despite the cash reserves that we have built, the PE ratio of Maruti is 30 whereas others are 12 and below," he stated. 

Accumulating cash has not been bad at all for shareholders, he further stated. The company has seen its cash reserves increase from Rs 13,000 crore in 2014, to Rs 45,000 currently. 

Bhargava further said that emphasis on being frugal, and judgement of what is in the best interest of customers paid off, with Maruti's shares at a high of Rs  9,600 apiece. 

Raghu Nandan of Nuvama Securities explained that the reason that Maruti Suzuki gets a higher PE ratio is that it is a pure-play 4 wheeler manufacturer in India. "What you call the TINA effect, (There is no Alternative) as Maruti is the option," he said. Unlike Mahindra, which has a whole host of businesses, and similarly with Tata Motors' shares, one ends up buying the JLR business as well. 

Another reason he said is that since Maruti Suzuki is a multinational company, with 58.5% being held by Suzuki, it automatically warrants a higher PE, as MNCs get accorded a higher PE. 

Thirdly, he explained that global markets are always seen as low-growth markets, and in comparison, India is a high-growth market. 

In the Annual Report FY23 the Chairman said "I believe our share price could never have crossed Rs 10,000 if we had not followed prudent financial practices. The company expects the Indian car industry to grow at 6% growth rate till FY 2030-31. Along with the rising domestic demand, the company sees the prospects for exports improving as well. 

"Our exports rose to 259,000 units last year. We expect the demand for exports to continue to grow and export volumes are projected at 750,000-800,000 cars by FY 2030-31. The domestic plus export requirements have made it necessary for your Company to add another 2 million manufacturing capacity," the Chairman said in the report. 

He further added that work is progressing at the first site in Kharkhoda, Haryana, and it is expected that the first plant of 250,000 capacity will start production in the first half of 2025. Bhargava further mentioned that one similar plant will be added each year to reach a capacity of one million.

"At the same time, we are in the process of selecting a second site for adding another one million capacity by FY 2030-31," Bhargava added.

Also read: Maruti Suzuki to invest Rs 45,000 crore to ramp up production to 4 million units by FY31