First line in Gujarat by 2017: Bhargava

The raging controversy on Maruti Suzuki India’s Gujarat plant finally ended on Thursday with the company’s shareholders voting in favour of the proposal.

The plant is being commissioned at Becharji on the outskirts of Ahmedabad. It will kick off with 2.5 lakh cars per annum in 2017 and will eventually have a capacity of 1.5 million units. Suzuki will invest ₹18,500 crore, perhaps, over a decade.

“The resolution has been passed quite smoothly. It has taken a long time to reach this stage,” RC Bhargava, Chairman, MSIL, told reporters here. Investors from far-flung centres such as Boston, New York, London, Hong Kong and Singapore voted as also shareholders in Mumbai and Chennai.

However, 50 per cent of the shareholders did not vote, while 65,833,152 opted for a mix of e-voting and the ballot box. Eventually, 89.75 per cent gave the nod for setting up the Gujarat plant.

“It is never possible for a 100 per cent favourable vote. I think 10 per cent vote against (the proposal) is not something which should worry us at all,” said Bharagava.

“However, I think the issue is now closed. The first line in Gujarat will get commissioned in early 2017. We need the capacity as we are actually running out of capacities in Haryana (Gurgaon and Manesar combined). We have 100 per cent utilisation there and need to make some improvised capacity because of demand next year,” he added. The Haryana plants have an annual capacity of 1.4 million cars right now.

Suzuki Motor Gujarat (SMG) will make cars that MSIL, in turn, will buy and sell in the market.  The company will start the first production line in 2017 and increase this to six as demand grows.

Equal benefits Asked if the dissenting shareholders would want to exit and sell their shares, Bhargava said each of them would get all the benefits equally. “Their shares will be treated equally and get all the benefits as rest of the 90 per cent voters,” he said. According to him, 50 per cent of the shareholders, which included LIC, did not vote as they would “only vote when something is damaging to them”.

The Gujarat plant was initially proposed to be Maruti Suzuki-owned but the plan changed later when parent, Suzuki Motor Corporation, announced in January last year that it would invest $488 million to build the plant.

Under pressure from institutional investors, MSIL decided to seek minority shareholders’ approval after tweaking some of the earlier proposals for the plant. It also sought SEBI intervention to safeguard the interests of minority shareholders.

According to analysts, the alliance with the parent company is fine but both need to work closely now with growing competition. “Working jointly in product development, new technologies, manufacturing, marketing and after-sales will be important. The alliance partner could share responsibility in these areas,” says Abdul Majeed, Partner and Auto Expert at Price Waterhouse.

Shares of MSIL closed at ₹4,666 on the BSE on Thursday, up 1.02 per cent from the previous close.

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