The Hindu Business Line : Maruti shares take a knock over Suzuki Motor plans

THE Maruti Udyog stock slipped for the second consecutive day after parent company, Suzuki Motor Corporation, announced plans to set up a new car plant in the country through a separate joint venture.

Maruti shares lost 6.34 per cent to close at Rs 354.65 on the BSE on Tuesday.

An auto analyst at a local brokerage said: "The whole direction of the announcements made by the parent company seems negative for Maruti. With both the engine unit and the new car assembly unit coming under separate companies, the move seems to be to sideline Maruti in the long term. There is uncertainty in the market over the reasoning behind the setting up of separate companies and also on what shareholding Maruti would have in these."

There is also confusion in the market over the status of the diesel engine unit set to come up in Haryana.

In a communiqué to the BSE, Maruti said that its directors, through a resolution dated September 13, have approved a proposal that the forthcoming diesel engine manufacturing plant will be controlled and managed by Suzuki Metal India Ltd, a joint venture between Maruti and Suzuki.

Suzuki Metal India currently operates a foundry plant.

Also, earlier the proposed diesel engine manufacturing plant was expected to meet only Maruti's requirements.

According to a company statement, it has now been decided that in addition, diesel engines manufactured here will also be exported to Suzuki subsidiaries and joint venture companies in Asia, including in Indonesia, China and Japan.

News agencies today, however, quoted officials at Suzuki in Tokyo as saying that no decision had been made yet on Maruti's participation in the diesel engine plant.

Conflicting statements on the ownership of the two units further added to the dip in Maruti's share price.

Suzuki had announced in Tokyo on Monday that a new company - tentatively called Suzuki Engineering India - will be established to manufacture automobile engines, and that this company will merge with Suzuki Metal India.