Maruti Suzuki to seek minority shareholders’ nod for Gujarat plant

S Ronendra Singh New Delhi | Updated on March 12, 2018 Published on March 15, 2014

RC Bhargava, Chairman, Maruti Suzuki India   -  PTI

Company approves Rs 4,000 crore capex for next fiscal

The country’s largest passenger cars manufacturer Maruti Suzuki India on Saturday has decided to seek the approval of minority shareholders on the Gujarat plant issue.

At its meeting today, the MSIL board also approved a capex of around ₹4,000 crore for the next financial year, mainly for new car models, marketing infrastructure and R&D, a company spokesperson said.

The company had invested (approved) around Rs 3,000 crore for the current financial year.

On the Gujarat plant issue, the board of directors of MSIL has reviewed the project in the context of the views and opinions expressed and took some decisions including the entire capex, which the company said will be funded by depreciation and equity brought in by Suzuki Motor Corporation, Japan.

The decision was taken at the board meeting, attended by parent SMC’s Chairman Osamu Suzuki, RC Bhargava, Chairman, MSIL, Kenichi Ayukawa, Managing Director and CEO, MSIL, including independent directors Amol Ganguli (ex PwC head), who is Chairman of the Audit Committee. MSIL and DS Brar (Ranbaxy chief).

On the issues on Gujarat project, the board has decided that in the event that both parties mutually agree to terminate the contract manufacturing agreement, the facilities of the Gujarat subsidiary would be transfered to MSIL, the company said.

“Even though not required by law, the board decided, as a measure of good corporate governance, to seek minority shareholders' approval as stipulated in Section 188 of the Companies Act 2013,” RC Bhargava, Chairman, MSIL, told reporters here after the board meeting.

He said three-fourth of the minority shareholders, who hold 44 per cent stake in the company, would have to approve the proposal through a special resolution (postal ballot).

The entire capex of the Gujarat subsidiary will be funded by depreciation and equity brought by parent SMC without the ‘mark-up’ as was earlier proposed, he said.

In the event of termination of the contract manufacturing agreement, the facilities of the Gujarat subsidiary would be transferred to MSIL at book value, he said.

The impact of any direct or indirect taxes on account of the contract manufacturing agreement would be assessed before finalising the agreement, which will take at least two months, he said.

“Everything (in the agreement) remains the same. All the legal steps will be taken because we cannot sign any agreement and then go to the minority shareholders,” Bhargava added.

“The decision was gladly accepted by all the independent directors. Maruti could have invested directly but it means investing the capital, employing people and complying with the law among other things. It is an attractive proposal and we could have invested directly but we thought this is a better option,” Amal Ganguli, Member of the Board and Chairman of the Audit Committee, MSIL, said.

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Published on March 15, 2014
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