Funds rip Maruti Suzuki Gujarat unit plan in second letter

Mar 12 2014, 01:59 IST
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Maruti had called the Gujarat plant proposal from Suzuki on January 28 an 'attractive one'. Reuters Maruti had called the Gujarat plant proposal from Suzuki on January 28 an 'attractive one'. Reuters
SummaryIndependent directors also understood to have raised concerns.

terms have been changed. While earlier, the Gujarat unit was to remain an SMC subsidiary, the company later said that if the contract manufacturing agreement expires, and in case is not extended by mutual consent, the “assets would be transferred to MSIL at a fair value to be determined by independent valuation”.

The company also later said the capex needs of the Gujarat subsidiary will be met by the depreciation of the subsidiary, an amount generated as net surplus from the car pricing and equity infusion from SMC, to the extent necessary. Analysts have maintained that it is not clear exactly how much the ‘net surplus’ will be though the company has said that the sum of the surplus and cost of production would be less than the price at which MSIL sells cars to dealers.

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