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Maruti investors cry foul over Suzuki’s solo plant in Gujarat

February 24, 2014, 12:32 PM IST by Selvin Jose
Maruti investors cry foul over Suzuki’s solo plant in Gujarat

Suzuki is coming up with a new fully-owned manufacturing facility in Gujarat which is assumed to be functional by 2016-17. But seven fund houses have raised concerns over the Japanese company’s strategy to set up a plant in Gujarat and have asked them to “rethink” the idea. Their arguments are that the new development is not in the interest of its 56 per cent owned Indian arm, Maruti Suzuki, and its minority shareholders.

Maruti Suzuki was to lease the land for the production and related work which was to be owned by Suzuki. On the lines of this strategy MSIL acquired about 640 acres of land in Becharaji and 550 acres in Vithalapur. This was for the further expansion of manufacturing facilities.  

Investors like Axis Mutual Fund, DSP Blackrock, HDFC MF, Prudential ICICI, Reliance MF, SBI MF and UTI, which are stakeholders in MSIL have demanded complete clarity over this issue of a 100 per cent Suzuki owned plant. This, might cause harm to the minority investors. Raising all these concerns, the fund houses wrote a joint letter to MSIL chairman last week. 

Life Insurance Corporation of India (LIC), the biggest institutional investor, with a stake close to seven per cent, has demanded details of the strategy separately. Maruti has surplus cash, which was over Rs 7,000 crore during September end and this is estimated to rise to Rs 25,000 crore by 2015-16. The fund houses questioned, in their letter, the need for Suzuki to invest directly. The investors also raised concerns saying this move by Suzuki is aimed to divert its profits back home. 

Source: ET
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