It has also been decided that while the sum of Rs 600 crore will be generated from internal accruals over the next two years, the remaining Rs 900 crore will be raised through debt instruments.
Maruti's balancesheet, which boasts of a very low debt-equity ratio of 0.41:1 at the end of 1995-96, is ideal for raising borrowings. Additionally, the company's excellent rating in the market will entitle it to very fine rates on their borrowings, officials added.
The approval, in effect, clears only part of the nearly Rs 2400 crore investment first proposed in the detailed project report (DPR) drawn up by the company to fund its expansion and modernisation plans by 2000.
The board has also agreed to look at the GDR option in the future. This is, however, conditional on the fact that the current equity stakes of the government and Suzuki will be retained, board sources said.
"We are looking at the option of inserting a non-convertibility clause in the GDR issue, which will restrain the subscriber from converting warrants into Indian equity. The share will not be listed in the domestic stock exchange," sources said.
If the GDR route is approved soon, the debt component of the company's investment will come down proportionately.
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The board meeting was attended by O Suzuki, president of Suzuki Motor Corporation, MUL chairman T R Prasad, MUL managing director R C Bhargava, joint managing directors RSSLN Bhaskarudu and Kobayashi, K Senga director marketing, AR Halasyam director finance, Suzuki nominee Sugimori and government nominees Anup Mukherji and ES Sarma.
O Suzuki is scheduled to meet the industry minister Murasoli Maran tomorrow.
The Maruti board has also okayed a three-phase replacement and upgradation programme of the existing paint shop, earmarking Rs 160 crore for the first phase, as part of the Rs 1500 crore plan.
The meeting also approved research and development work on a new engine for the existing Maruti 800 cc which, company executives say, will lead to an almost new car.
The board also recommended a dividend payout of 20 per cent in 1995-96 as against 15% last year which was passed at the AGM that was held in the afternoon today. This is estimated to result in a pay-out aggregating to over Rs 80 crore.
The Board also approved the annual accounts of the company which showed an income of Rs 6673 crore in 1995-96 against Rs 4388 crore in the previous year, and after tax profit of Rs 409 crore this year as against Rs 248 crore in 1994-95.
Meanwhile, the committee appointed to advise on the location of the expansion project has yet to submit its report. It is awaiting certain information and clarifications from the Haryana government, depending on which it will recommend whether the expansion should be in Haryana or some other site, said a company press note.
The orginally detailed project report submitted by Maruti last year had worked out an expansion cost up to 2000 to Rs 2,371 crore. At the disaggregate level, the estimates are Rs 1,146 crore for expansion, Rs 282 crore for automation and modernisation, Rs 425 crore for paint shop replacement, Rs 50 crore for facelifting and Rs 468 crore for engine upgradation.
This was to be achieved over three phases ending 2000. The investments are Rs 1,675 crore in phase-I, Rs 168 crore in phase-II and Rs 528 crore in phase-III. After taking into account the funds to be generated internally, the total financing gap works out to Rs 950 crore in 1997-98.