Giving up to the rising pressure from institutional investors, Maruti Suzuki India limited (MSIl) decided to seek minority shareholders' approval for the transfer of the Gujarat plant to its parent company Suzuki Motor Corporation (SMC). This was decided in the company's board meeting held on Saturday after institutional investors of company, holding almost 14 per cent stake, strongly opposed the move to transfer the plant to SMC.
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.
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 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 added, "We are hopeful. It's such a good deal that there is no reason why minority shareholders should oppose it."
When asked as to how long it would 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.