Maruti Suzuki will be seeking the shareholders’ approval on its plans to let the parent firm Suzuki Motor invest and own its upcoming plant in Gujarat in the current calendar year itself, once the Gujarat government approves the amended state support agreement, chairman RC Bhargava said on Tuesday.
“We were hoping to do it by September but there has been some delay in Gujarat…it got delayed by a couple of months. They are yet to give the formal approval for the SSA (state support agreement) getting transferred from Maruti to Suzuki. We are hoping it will happen this month. And the moment that happens, we will work out a schedule…It will happen within this calendar year certainly,” Bhargava said at the Express Group’s Idea Exchange programme.
In the interim, Parliament has approved the amendments to the Companies Act that has relaxed the requirement of a special resolution to an ordinary resolution for a related-party transaction under which the proposal gets covered.
A special resolution would have meant the company seeking approval of 75% of the shareholders. However, with the amendments to the Companies Act, which came through in May, the proposal would be deemed approved if it is passed by 50% shareholders.
Suzuki Motor Corporation had in 2014 announced it would invest $488 million to construct the Gujarat plant, which Maruti had earlier proposed to set up. The plant, which would be Suzuki’s first fully-owned factory in India, is being planned with an initial capacity of 2,50,000 units a year, all of which will be supplied to Maruti.
The move, when anounced, was opposed by institutional investors as there were provisions relating to mark up in prices of cars produced at the plant while being transferred to Maruti for sales.
However, later Maruti removed the contentious clauses. Bhargava said that there has not been any opposition after the company had given a clarification the last time.
“Look at the share price. If people were unhappy about what we are doing, I don’t think they would be buying the shares and pushing up the price,” Bhargava said, adding that the shareholders of Maruti are going to benefit “enormously” from the Gujarat plant.
“Because the entire profit of manufacturing in Gujarat, 100%, is going to come in to Maruti, which means each shareholder of Maruti will have a part in that profit. Suzuki as a shareholder will also get 56% of that profit,” the chairman said.
The company has already begun construction at the plant and is aiming to put it on stream by 2017.