Maruti Suzuki to take consent of minority investors

Cites good governance behind move

After a tumultuous month of pressure from shareholders and institutional investors, Maruti Suzuki India on Saturday finally decided to take approval from its minority shareholders for the Gujarat plant which its parent Japanese Suzuki Motor Corp (SMC) intends to take over.

Talking to reporters after the decision by the company's board, Maruti Suzuki India Ltd (MSIL) Chairman R C Bhargava said the decision was taken in the context of views and opinions expressed by institutional investors. Three-fourth of the company’s minority shareholders, who hold 44 per cent stake in the company, would have to approve the proposal through a special resolution, he said.

"We are not required by law to seek minority shareholder approval but the board decided to do so as a measure of corporate governance," he said, adding, "We are hopeful. It's such a good deal that there is no reason why minority shareholders should oppose it. Apprehensions which were expressed have been absolutely made crystal clear."

SMC Chairman Osamu Suzuki also soaked up praise for agreeing to take minority shareholder nod.

“In Japan, there is nothing like minority protection law and they don't have this understanding of minority shareholder protection, voting by shareholders. So in those conditions, for Mr Suzuki to accept to do this here not knowing what really it is all about is actually a creditable thing,” Bhargava said.

In January, SMC announced that it would invest about Rs 3,050 crore on the Gujarat plant. The investment was to be funded by SMC via a wholly-owned subsidiary.

Bhargava assured that the funding will be done through equity brought in by the parent without 'mark-up' (a raise in the price of item for sale) on cost of production.

Besides, in case of termination of the contract manufacturing agreement, the facilities of the Gujarat subsidiary will be transferred to MSIL at book value and not at fair value as envisaged earlier.

Fund houses said that the decisions appeared to be in the interest of the company and the investors. The target of completion for the Gujarat plant is early 2017.