Sebi studying investors’ plea against Maruti Suzuki move

Mar 13 2014, 01:47 IST
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The Maruti stock lost more than 4% in intra-day trade on Wednesday but recovered by the end of the session. Reuters The Maruti stock lost more than 4% in intra-day trade on Wednesday but recovered by the end of the session. Reuters
Summary* Regulator to take up matter with MSIL if it feels grievances justified

The Securities and Exchange Board of India (Sebi) will formally take up with Maruti Suzuki India (MSIL) the issue relating to the auto manufacturer’s new plant in Gujarat if it finds institutional shareholders’ grievances are justified.

A clutch of fund managers has met with Sebi and the capital market regulator will study their arguments against Suzuki Motor Corporation (SMC) housing the Mehsana plant in its wholly-owned subsidiary.

“The funds have met us and we will go through their presentation. If we are convinced the move is not in the interests of minority shareholders, we will take up the matter formally with the Maruti management,” a senior Sebi official confirmed to FE.

Fund managers remain unconvinced that MSIL’s proposal to source vehicles from SMC’s subsidiary rather than manufacture them in-house will be a more rewarding proposition. “We would like to avoid any legal confrontation at the moment but are keeping our options open,” said a CEO of a leading fund house on condition of anonymity.

The Maruti stock lost more than 4% in intra-day trade on Wednesday but recovered by the end of the session to R1,764.60, about 0.5% higher than Tuesday’s close. Volumes in the counter at 16 lakh shares were higher than the 30-day average. The stock had hit a 52-week high of R1,864 per share on January 9, three weeks before the company announced it would not be setting up the plant in Gujarat.

The new Companies Act requires company promoters to seek prior approval by the audit committee for all material related-party transactions.

In February, Sebi’s board approved the resolution that such transactions would need to be approved by small shareholders through a special resolution, with related parties abstaining from voting.

The rules come into effect from October 1, 2014, while Companies Act 2014 is expected to come into force with effect from 1 April 2014. A material related party transaction is defined in the Companies Act 2013 as one which, in aggregate, exceeds 5% of the annual turnover or 20% of the net worth of the company during the financial year, whichever is higher.

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