MFs, insurers meet Sebi on Maruti Suzuki

MFs, insurers meet Sebi on Maruti Suzuki

MFs, insurers meet Sebi on Maruti Suzuki

Maruti's institutional investors on Thursday approached Sebi, seeking its intervention to safeguard minority shareholder interest and ensure compliance with corporate governance norms with regard to the transfer of a Gujarat project to the car maker's Japanese parent Suzuki.

Maruti Suzuki India (MSIL) is facing stiff resistance from private sector mutual funds and insurance companies, which own almost 7 per cent, for its decision to allow Suzuki Motor to make cars for MSIL at proposed plant in Gujarat instead of manufacturing the vehicles itself.

Life Insurance Corporation of India (LIC) has sought clarifications from MSIL about the Gujarat project. Private institutions are trying to rope in LIC to jointly oppose the company's decision. Sources said representatives of 16 institutional investors met Sebi officials in Mumbai on Thursday and submitted a memorandum to Chairman U K Sinha.

Sebi was approached days after the 16 investors wrote to MSIL Chairman R C Bhargava and other board members, seeking quashing of the "oppressive transaction" to save the company from becoming a "shell" entity.

There have been reports that some independent directors of MSIL are becoming skeptical about the deal; the matter is expected to be discussed at  board meeting on March 15.Earlier, seven mutual fund investors in MSIL had written about their concerns and they were later joined by nine other institutional investors. 

Along with LIC's 6.93 per cent stake, institutional investors hold almost 14 per cent in MSIL. While new norms proposed by Sebi, which come into effect on October 1, requires such transactions to be approved by public shareholders of a listed company, there is some ambiguity about the existing law.

Promoters and related shareholders would not be allowed to vote while seeking approval for such transactions. 

The new Companies Act, effective from April 1, 2014, also requires related-party transactions, including those entered into with promoter entities, to be cleared by public shareholders. If the Maruti deal does not get completed by this month, it would be subject to the new norms.