Investor forum hails Maruti Suzuki move

Investor forum hails Maruti Suzuki move

Proxy advisory firm Institutional Investor Advisory Services India (IIAS) has welcomed Maruti's decision to put the decision around the controversial Gujarat plant to shareholders vote.

The controversy started after its Japanese parent Suzuki said it would own the proposed plant and will sell the cars to Maruti, making the country's largest car-maker just a distributor.

"By putting the decision on Gujarat plant to vote, Maruti board has broken through the current regulatory ambiguity and proactively mitigated the need for regulatory intervention," IIAS said in a statement here on Saturday.

"Maruti will seek the approval of minority shareholders as stipulated in section 188 of the new Companies Act. We welcome this decision as we believe this gives shareholders a chance to have their say," it added.

While parent Suzuki owns a little over 56 per cent in Maruti, minority shareholders own 43.79 per cent.

For the company to go ahead with Gujarat plant plan, it has to secure three-fourths votes of the minority shareholders or 32.8 per cent (of the 43.79 per cent).

As of December 2013, institutions (including mutual funds, banks) owned 35.45 per cent in Maruti, of which 21.47 per cent were held by FIIS and 13.98 per cent by domestic institutional investors. Less than 9 per cent of the equity is with retails investors and others.

Earlier in the day, under increasing pressure from institutional investors, Maruti Suzuki India decided to seek minority shareholders' approval after tweaking some of the earlier proposals for the Gujarat plant.

"We are not required by law to seek minority shareholders' approval but the board decided to do so as a measure of corporate governance,” Maruti Suzuki chairman R C Bhargava told reporters here after a board meeting in the Capital this morning.

The initial announcement that Suzuki will manufacture cars at the Gujarat plant and supply to Maruti Suzuki, changed the DNA of the company from primarily a manufacturer to a distributor.

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