 "A worker is reflected on the body of a Maruti Suzuki car as he locks the door of another car at a Maruti Suzuki stockyard on Ahmedabad")
Maruti Suzuki India will seek shareholders’ nod for its new plant in Gujarat once all regulatory norms are put in place. The proposed plant had faced resistance from a section of shareholders who objected to certain clauses related to the pricing of the cars to be manufactured in the plant, which is being set up by parent Suzuki. Maruti needs new capacity to match its double-digit sales growth and expects the plant to be operational by May 2017.
“The minority shareholder voting on the Gujarat plant, which was delayed because we first found that the government had moved some amendments in 2013 Companies Act... We thought it would be imprudent of us to vote on under an Act which is under an amendment. So, we postponed that,” chairman
R C Bhargava said while addressing shareholders at the annual general meeting here on Friday.
As the Act was under amendment, other people who had to make changes, including the Securities and Exchange Board of India (Sebi) and the Gujarat government, held back their actions, he said. He added Sebi has now taken note of the change in the law and amended the listing requirements.
“So, one part of that is done. We expect that the Gujarat government’s action would also be completed possibly in the next week or 10 days. After that, we will come to all of you to vote in the support of the project,” said Bhargava.
The Gujarat government needs to transfer the state support agreement from Maruti to Suzuki.
Under the original plan, Maruti was to set up the Gujarat plant and it had acquired land for the same. In January last year, it was announced that the plant would be set up by Suzuki at an investment of Rs 3,000 crore. The new proposal had provisions for mark-up in prices of cars being sold to Maruti. This had triggered the opposition from a section of shareholders.
A revised agreement was put in place under which Suzuki would sell vehicles from Gujarat plant to Maruti only at production cost. Additionally, to assuage the concerns of institutional investors, who 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 the approval from minority shareholders. For the deal to go through, three-fourths of minority shareholders would have to give their assent via postal ballot.
The Gujarat plant is critical to Maruti’s plan to sell two million vehicles by 2020. Bhargava said the company would grow at double digits and produce 1.4 million vehicles in the current financial year. The Gurgaon and Manesar plants put together (1.5 million units annually) don’t have much more capacity left after that, he added. He said factors such as low inflation, low fuel prices, softening commodity prices are positive for the company.
