Maruti Suzuki seeks shareholder approvals for Gujarat plant

Maruti Suzuki has sought approvals from its minority shareholders though postal ballot to let its parent Suzuki Motor Corporation (SMC) invest and own the upcoming plant in Gujarat.

The other transactions will include a lease deed in relation to the land, deed of assignment and any other documentation or agreement required to give effect to the above.

Under the new arrangement between Maruti Suzuki and Suzuki Motor Gujarat (SMG), the former’s wholly owned subsidiary, Suzuki will setting up a manufacturing facility on land leased from the Maruti.

The upcoming plant in Gujarat was initially proposed to be owned by Maruti Suzuki, but the plan was altered in January last year when Suzuki Motor announced that it will own the new plant and would invest  $488 million to build the new plant.

“The contract manufacturing agreement shall continue for a period of 15 years to be automatically extended for a further period of 15 years at the end of the initial period without any further action or documentation on the part of either party, unless terminated by the parties by mutual agreement”, as per the proposed agreement.

“After the expiry of an aggregate period of 30 years from the commencement date, Maruti Suzuki India and Suzuki Motor Gujarat may mutually discuss and agree to extend the period of this agreement,” the contract agreement document said.

Opposing the move, Maruti’s institutional investors had approached capital markets regulator SEBI, seeking its intervention to safeguard the interests of minority shareholders.

Later, under pressure from institutional investors, Maruti decided to seek the approval of minority shareholders after tweaking some of the earlier proposals for the Gujarat plant.

The Gujarat plant is envisaged to have a total installed capacity of 750,000 units annually. It is expected to be operational by May 2017. At present, Maruti Suzuki India’s two facilities at Gurgaon and Manesar have a total production capacity of 1.5 million units annually.

The e-voting will be open till 5pm of December 15 and results of postal ballot will be announced on December 17.