Under pressure from institutional investors, Maruti Suzuki India today decided to seek minority shareholders' approval after tweaking some of the earlier proposals for the controversial Gujarat plant, which its parent Suzuki Motor Corp had decided to takeover from it.
Although investments at the Gujarat plant will be funded by SMC via a wholly-owned subsidiary, they will now be done through depreciation and the equity brought in by parent without 'mark-up' on cost of production.
Also, in case of termination of the contract manufacturing agreement between them, the facilities of the Gujarat subsidiary would be transferred to Maruti Suzuki India Ltd (MSIL) at book value and not at fair value as was envisaged before.
The decision was taken at a board meeting held here, which was also attended by SMC Chairman Osamu Suzuki.
Fund houses, which have been opposing the proposal, said the decisions taken by the board appeared to be in the interest of the company and the investors.
Explaining the decision take by the company's board, MSIL Chairman R C Bhargava said: "We are not required by law to seek minority shareholders' approval but the board decided to do so as a measure of corporate governance."
Speaking to reporters here after the meeting, he said the decision was taken in the context of the views and opinions expressed by institutional investors and 3/4th of the minority shareholders, who hold 44 per cent stake in the company, would have to approve the proposal through a special resolution.
Expressing confidence that the proposal would be approved by the minority shareholders, he said: "We are hopeful. It's such a good deal that there is no reason why minority shareholders should oppose it. The apprehension which were expressed have been absolutely made crystal clear."
On the financing of the Gujarat plant, Bhargava said 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.
"Funding remains the same except there is no mark up now," he said.
Also, in the event of termination of the contract manufacturing agreement, the facilities of Gujarat subsidiary would be transferred to MSIL at book value.
Earlier, it was proposed that the assets of the Gujarat subsidiary would be transferred to MSIL at a fair value to be determined by independent valuation.
When asked as to how long would it take to get nod from the minority shareholders, he said: "The decision has been taken, so give us a little time to decide how to go about doing it. Final agreement will be after all processes have been completed, like legal process needs to be completed. There is minority shareholders before we sign the agreement.
