The Hindu Business Line : MUL to buy Suzuki's stake in Maruti Suzuki Auto

Maruti Udyog Ltd (MUL) on Thursday said it would buy Suzuki Motor Corporation's 30 per cent stake in the joint venture Maruti Suzuki Automobile India Ltd (MSAIL). MUL holds 70 per centin the joint venture. The company will value the stake and merge by September 30, Mr Jagdish Khattar, Managing Director, MUL, said.

The purchase of the unit will be effective April 1, 2006. "Maruti will use its own reserves to purchase the stake," Mr Khattar said. MSAIL, with a paid-up capital of Rs 40 crore, has so far invested about Rs 300 crore in acquiring land and making initial payments for machinery. In order to arrive at the price of the Suzuki stake in MSAIL, a five-member committee had been set up to evaluate the implications of the merger.

`Profits intact'

Mr Khattar denied that the merger, which would see the debt raised by MSAIL being transferred to the books of Maruti, would hit the profitability of the car major.

Meanwhile, MUL indicated that it has no plans to buy additional stake in the diesel plant venture with Suzuki. Maruti has 49 per cent in the company, Suzuki Powertrain India Ltd, while Suzuki has 51 per cent.

Manesar plant

MSAIL is setting up a new plant at Manesar, at a cost of Rs 1,524 crore and capacity of 2.5 lakh cars per year by 2009. The initial capacity will be one lakh units and production will begin by the year-end. Buying the stake "will eliminate all potential issues relating to inter-company transactions," Mr Khattar said. Shares of Maruti rose to Rs 881.85 on Thursday. It closed trading at Rs 870.05, 3.4 per cent up over the previous day's price.

Meanwhile, Thursday's announcement puts to rest the confusion over which model would be launched from which company and the subsequent financial impact. Analysts had reacted with caution in September 2004 after Suzuki said it would form a joint venture with Maruti instead of allowing MUL to expand on its own. MUL had then taken majority control in the joint venture after the Government, the second-largest shareholder in MUL at the time, objected to equal ownership of the joint venture.

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