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Maruti Suzuki today said that the benefits of developing its Gujarat manufacturing facilities through a wholly-owned subsidiary of Japanese parent Suzuki Motor Corporation (SMC) are being conveyed to investors by a Maruti Suzuki team led by the Chairman R C Bhargava and Managing Director K Ayukawa.
Responding to a query on whether investment banks Kotak Mahindra Capital and Axis Capital have been appointed to woo minority shareholders, a company spokesperson said, "The benefits of the Gujarat project are being conveyed to investors by a Maruti Suzuki team led by the Chairman, Mr R C Bhargava and the Managing Director, Mr K Ayukawa."
The investment banks have merely been given the mandate to facilitate the process.
"The investment bankers are required to identify the investors in various parts of the world, arrange the meetings with them and the necessary logistical support. They are also involved in discussions with MSIL in finalizing the presentations and strategy for the discussions, but the final decisions are of MSIL" the spokesperson added."
Earlier in March this year, Maruti Suzuki revised key terms of the agreement with SMC for setting up of the Gujarat facility to address concerns raised by institutional investors. The company has since not received any concerns about the proposal. The changes made to the agreement in March aimed at making the deal more tenable, include removal of mark-ups on cars sold by Suzuki to Maruti.
Also, the company had said it will seek minority shareholders' approval and execute the plan only after assent from three-fourths of them. The company decided to rework the financing model for additional capacity expansion in Gujarat to address investor concerns.
Maruti Suzuki India Ltd (MSIL) Chairman R C Bhargava had at the time said: "The entire capital expenditure for the Gujarat project will be funded by depreciation and equity brought in by SMC. There will be no mark-up on cars sold by Suzuki to Maruti to fund incremental capex requirements.
"According to a deal announced by MSIL on January 28, a 100% subsidiary of SMC is to set up manufacturing facilities on land owned by Maruti. The proposed unit will manufacture cars for the Indian carmaker according to its requirements. Suzuki is to fund the initial capex of Rs 3,000 crore, while further expansion is to be funded through an "incremental capex cost", depreciation costs and fresh equity brought in by the parent company to the extent necessary.
The incremental capex cost or mark-up, which will be over and above the cost of production of vehicles, is to be borne by Maruti Suzuki. According to the revised agreement, MSIL will buy vehicles from the Gujarat plant only at manufacturing cost.
The price at which MSIL will get the cars from Suzuki will be lower than the cost of producing vehicles in Haryana, as there will be no mark-up. The price will also not include the cost of capital employed.
Additionally, to assuage the concerns of institutional investors, which had accused Maruti Suzuki of flouting good corporate governance norms by accepting a proposal that might affect minority shareholders' interests adversely, the company said it would seek approval from minority shareholders, three-fourths of whom would have to give their assent via postal ballot for the deal to go ahead.
The company is not required under the law to seek minority shareholders' approval.
