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Maruti gets green light from minority shareholders for Gujarat Project

Snapshot: In January 2014 MSIL announced a proposal that company Suzuki of Japan would set up a manufacturing plant in Gujarat.

Last year, Maruti Suzuki India Ld. (MSIL) announced a proposition, according to which the Japanese owned company, Suzuki would set up a fully owned subsidy to establish a manufacturing plant in Gujarat. This project would involve a total investment of Rs 18,500 crores from the parent company. And Maruti Suzuki has got a green light for this much anticipated approval from its minority shareholders.

Speaking on this, Mr R.C. Bhargava, Maruti Suzuki India (MSI) Chairman said“The resolution has passed comfortably with 89.75 per cent of the minority shareholder who cast their vote, voting in favour and 10.25 per cent voting against the proposal”.  

He also added, “The total investment in the plant will be Rs 18,500 crore for an overall capacity of 15 lakh units. There will be six lines, each with a capacity of producing 2.5 lakh units to be set up one after another.” Initially, the plant was proposed to be owned by Maruti. However, in January last year, Suzuki Motor Corporation announced that it would invest $488 million to build the plant.

A total of 6,58,33,152 votes were cast during the month-long voting procedure, out of which 5,90,84,468 voted in favour. About 50 per cent of the total minority shareholders refrained from voting, since several investors believed that such a step would eventually undervalue MSIL thereby giving all the primary manufacturing power going to Suzuki. Therefore, the proposition was presented in such a way that the markup over production cost is eliminated and instead of that the complete capex for the project would be sourced by Suzuki through depreciation and fresh equity.

The new subsidiary “Suzuki Motor Gujarat” will proceed with the construction of the manufacturing plant which will have a production capacity of 750,000 units per annum. The cars made here will be sold to MSIL at production costs. The country’s largest automajor would now invest the surfeit cash in boosting its local research and development centre, marketing and ramping up dealerships.

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