Maruti Sukuzi to seek minority shareholder nod for plant

MUMBAI Sat Mar 15, 2014 5:26pm IST

A worker cleans a Maruti Suzuki Swift Dzire car as he is being reflected on a car at the company's stock yard at Sanand in Gujarat October 30, 2012. REUTERS/Amit Dave/Files

A worker cleans a Maruti Suzuki Swift Dzire car as he is being reflected on a car at the company's stock yard at Sanand in Gujarat October 30, 2012.

Credit: Reuters/Amit Dave/Files

Related Topics

Stocks

   
Border Security Force (BSF) soldiers ride their camels as they rehearse for the "Beating the Retreat" ceremony in New Delhi January 27, 2015. REUTERS/Ahmad Masood

"Beating The Retreat" Rehearsals

Rehearsals are on for "Beating the Retreat" ceremony which symbolises retreat after a day on the battlefield, and marks the official end of the Republic Day celebrations.  Slideshow 

MUMBAI (Reuters) - Maruti Suzuki India (MRTI.NS) said on Saturday it will seek minority shareholder approval for a plan to outsource production at a new factory to its largest shareholder, Suzuki Motor (7269.T), after its leading investors opposed the move.

Suzuki Motor Corp, which owns 56 percent of Maruti, in January had announced plans to invest $488 million in a new plant in Gujarat and then sell cars produced at the plant to Maruti, shelving an earlier plan that would have seen Maruti set up the factory itself.

But the move has been strongly opposed by leading institutional investors, in a rare case of shareholder activism in India. They have argued the transfer of manufacturing to Suzuki would mean the Japanese carmaker, rather than Maruti, would reap the benefits of rising domestic sales.

Maruti Suzuki, which accounts for almost 1 out of every 2 cars sold in India, also announced key changes regarding how the production plant would be funded and valued in case the deal is terminated, in a bid to further assuage shareholder concerns.

"There was a misunderstanding amongst investors and a lot of scepticism about what we were doing, so we have removed the major issues that were bothering investors," Maruti Chairman R.C. Bhargava told Reuters.

"We are now confident we will get minority shareholder approval."

Maruti Suzuki did not announce a timeframe for minority shareholder approval in a statement issued after a board meeting on Saturday.

Seeking shareholder approval will give institutional investors opposed to the plan more time to gather support.

Life Insurance Corporation of India is Maruti's largest public shareholder with a 6.93 percent stake. Foreign investors in Maruti Suzuki include HSBC Global Asset Management and Norway's sovereign wealth fund Norges Bank Investment Management.

"We were really hopeful of something like this. (We are) planning to have a call over the extended weekend to discuss the details (and) will decide after that on the next steps," said one of the fund managers, who had opposed the move.

Maruti Suzuki has faced strong opposition from institutional investors, with a group of 16 big fund managers and private insurers writing a letter on March 5 to the auto maker's management opposing the plan.

Maruti on Saturday also said the Gujarat plant would be transferred by Suzuki to Maruti at book value in case both sides agreed to terminate their contract manufacturing agreement, and not at fair value as proposed in January.

The auto maker also said the entire capex for the Gujarat project would be funded by depreciation and equity brought in by Suzuki, a key change in how the cost of the cars produced would be valued that had been demanded by institutional investors.

(Editing by Clarence Fernandez and Robert Birsel)

FILED UNDER:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Reuters Showcase

Divestment Plans

Divestment Plans

ONGC share sale scheduled for this fiscal - oil minister.  Full Article 

Market Eye

Market Eye

Sensex, Nifty retreat from record highs on profit-taking.  Full Article 

Coal India

Coal India

Government to sell up to 10 pct of Coal India on Friday  Full Article 

Tech Talk

Tech Talk

Apple takes high road in China smartphone standoff with Xiaomi.  Full Article 

Business Strategy

Business Strategy

Uber scraps commissions for its New Delhi taxis.  Full Article 

Currencies

Currencies

China's yuan breaks into the world's top five as payment currency - SWIFT.  Full Article 

Job Cuts

Job Cuts

Sony to cut 1,000 jobs in smartphone business - sources.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage