Maruti Suzuki India on Saturday decided to seek the approval of minority shareholders for its Gujarat plant, which it has decided would be built and owned by its parent firm Suzuki Motor (SMC). As reported earlier by FE, the company does not need any such approval, as the relevant provisions of the Companies Act, 2013, have not yet been notified, but Maruti said it would do so “as a measure of good corporate governance”.
However, it remains to be seen whether the amended proposal finds favour with the fund houses, who were the first to raise objections. “We will convince all the domestic institutional investors to vote against the proposal so that it gets defeated, ” a fund manager from a public sector fund told FE.
A senior fund manager of a large fund conceded the changes made to the proposal were welcome. However, the fund manager said opposition to the plant being housed in Suzuki Motor Corporation’s wholly-owned subsidiary rather than in
"Even though not required by law, the board decided, as a measure of good corporate governance, to seek minority shareholders' approval as stipulated in Section 188 of the Companies Act 2013,” a company statement said, after a decision to this effect was taken at a board meeting earlier in the day, which was also attended by SMC chairman Osamu Suzuki.
In an unrelated development, the Maruti board also approved the capex for the next fiscal at around R4,000 crore, which would be mainly for new models, marketing infrastructure and research and development.
The company also made two other changes in its original proposal with regard to the Gujarat plant to make it palatable to fund houses and institutional investors who had written to it expressing their concerns.
It has now dropped the provision for ‘marking up’ the cars produced at the Gujarat plant to fund the capex. Now the entire capex would be funded by depreciation and equity brought by SMC. Further, in event of termination of the contract, the Gujarat facility would be transferred at book value to Maruti.
“The entire capex for the Gujarat subsidiary would be funded by depreciation and equity brought in by Suzuki Motor Corporation. In the event that both parties mutually agree to terminate the contract manufacturing agreement, the facilities of the Gujarat subsidiary would be transferred to Maruti Suzuki at book