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Maruti Suzuki India will seek minority shareholder approval to set up a plant in Gujarat as a unit of Suzuki Motor Corp, after the proposed move drew opposition from the company's leading institutional investors.
The decision was taken at a board meeting held here, which lasted for over four hours and was attended by parent Suzuki Motor Corp (SMC) Chairman Osamu Suzuki.
"Even though not required by law, the board decided, as a measure of good corporate governance, to seek minority shareholders' approval," the company said in a statement after a board meeting on Saturday.
He said 3/4th of the minority shareholders, who hold 44% stake in the company, would have to approve the proposal through a special resolution.
The entire capex of the Gujarat subsidiary will be funded by depreciation and equity brought by parent SMC without "mark-up" as was earlier proposed, he added.
It added that in case of mutual agreement to terminate the contract manufacturing agreement, the facilities of the Gujarat plant would be transferred to Maruti at book value.
When contacted, a top official at one of the fund houses, which have been opposing the proposal, said the decisions taken by the board appear to be in the interest of the company and the investors.
"Today's decision to seek minority shareholders' approval is a welcome move. We will convey our official stand after studying the fine-prints and discussing the same among all 16 investors," the official added.
Suzuki Motor Corp, which owns 56% of Maruti, in January announced plans to invest $488 million in a new plant in India, shelving an earlier plan for Maruti to set up the factory itself.
The move has been opposed by institutional investors of Maruti.
In a letter to Maruti management dated March 5, a group of 16 big fund managers said the plan would shift manufacturing activity away from the Indian company and turn it into a "shell company" of the parent.
