While work on Suzuki Group's manufacturing site in Gujarat has begun, the company, a subsidiary of Japan-based Suzuki Motor Corporation (SMC), is likely to sign the state support agreement with the Gujarat government, after the nod from Maruti Suzuki India Ltd's (MSIL) minority shareholders comes through.
According to sources in the know, "The company is waiting for the minority shareholder approval to come through, before it signs a final agreement with the government." This would basically be a reworked SSA after MSIL decided to transfer the Gujarat project to its Japanese parent company SMC around January last year. MSIL had originally signed an SSA with the Gujarat government in June 2012 with regard to purchase of land and setting up of a manufacturing facility here.
A senior government official who is working closely with the carmaker on the project said that while there were no major issues pertaining to the signing of a fresh SSA, the company has indicated that it would sign an agreement after the minority shareholder voting is done.
SSAs typically contain guidelines related to payment of installments, dates of commissioning, and sops extended to the company like value-added-tax refund etc. For example, MSIL has been offered a VAT refund for 15 years provided the amount did not exceed the company's investment here.
However, according to the changed arrangements between MSIL and SMC, a subsidiary of SMC, Suzuki Motor Gujarat Private Limited (SMGPL) would exclusively contract manufacture and sell vehicles to MSIL. Hence, there was need to draft a fresh SSA in this case.
As R C Bhargava, chairman of MSIL has indicated, the state government is committed to the project and there were no issues related to the signing of a fresh SSA.
After running into trouble with institutional investors over the transfer of the Gujarat project to its Japanese parent SMC, MSIL had decided to seek minority shareholder approval for the project last year. While the company had planned to seek shareholder approval for the transaction in November, it was deferred.
As Bhargava said the company is waiting for the final print of the amended Companies Act before it goes to seek shareholder approval. "The Company Law has been put up for amendment in the Parliament, and the Lok Sabha has already passed the amendments. So, as it is a work in progress in a way, it would have been incorrect for us to have proceeded under an Act for which at least one house of the Parliament has said that we want an amendment," Bhargava said adding that they were waiting for the Parliament to take a decision, post which it would go ahead with the shareholder vote.
The move is obvious, as according to the current regulatory framework under the Companies Act 2013, a proposal like MSIL would require approval from 75 per cent of minority shareholders, while if the proposed changes to the Act are approved by the Parliament, such proposals could be approved through an ordinary resolution with a simple majority of just over 50 per cent. The commission date planned for the first phase of the Gujarat project is around May 2017.
The capacity of the first plant at Hansalpur would be around 250,000 vehicles per year, that would come up with an investment of Rs 3,000 crore.
