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Suzuki Motor Corporation of Japan will set up a plant in Gujarat to manufacture cars for its Indian unit, Maruti Suzuki India. The fully-owned subsidiary, Suzuki Motor Gujarat Pvt Ltd, will have a paid-up capital of ₹100 crore and be in place by April.
Maruti Suzuki India’s board has approved the proposal, which is expected to result in substantial financial benefits for the company and its minority shareholders.
However, the stock market did not take kindly to the announcement and Maruti Suzuki’s shares fell 8 per cent to close at ₹1,563.20 on the Bombay Stock Exchange.
Maruti Suzuki had proposed setting up a car plant in Gujarat, for which it acquired about 1,200 acres in Mehsana district. The company had also signed an agreement with the State Government to set up a plant with an annual capacity of 250,000 units with an initial investment of about ₹4,000 crore.
“This (Suzuki Motor Gujarat – SMGPL) will not be a public listed company. It will only be a manufacturing entity. All the marketing and expansion of the dealer network will be taken care of by MSIL (Maruti Suzuki) and, in return, all three entities — Suzuki Motor Corp, MSIL and SMGPL — will share the profits,” Osamu Suzuki, Chairman, Suzuki Motor, told newspersons here.
The Gujarat plant will start operations from 2017 and roll out vehicles from early 2018, the company said. The cost of the new plant is estimated at ₹4,000 crore in the first phase (till 2017), and this expenditure will now be incurred by Suzuki Motor. However, ownership of the land will remain with Maruti, which will, in turn, lease it out to Suzuki Motor. The Japanese parent said it would also fully support Maruti’s existing plants in Gurgaon and Manesar, Haryana. In addition, the upcoming research and development centre in Rohtak, also in Haryana, will be under Maruti.
The Suzuki subsidiary would not sell vehicles to anybody else, said RC Bhargava, Chairman, Maruti Suzuki.
The company would benefit because the vehicles would be sold without any return on capital employed, Bhargava said, adding that Maruti would avoid all risks inherent to any investment.
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