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Maruti Suzuki shares tank after failing to allay concerns over Gujarat plant

Feb 28 2014, 16:12 IST
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Shares of Maruti Suzuki plunged 5.33 per cent over its previous closing price to a low of Rs 1,573 on the BSE today. Shares of Maruti Suzuki plunged 5.33 per cent over its previous closing price to a low of Rs 1,573 on the BSE today.
SummaryMaruti Suzuki shares hit one-month low on Friday as brokerages raised concerns

Maruti Suzuki shares hit one-month low on Friday as brokerages raised concerns over the proposed Gujarat project even after the automaker filed clarifications on the exchanges on Thursday after market hours. The scrip was trading 4.75% lower at Rs 1,582.80 on 12.30 pm IST.

Experts feel there are still uncertainties. "The press release still does not specifically clarify regarding the quantum of 'surplus’ that Suzuki Gujarat will charge to Maruti Suzuki India. Although the maximum surplus that Suzuki Gujarat can charge is defined as normal margin earned by Maruti Suzuki India. In the years when capex requirements are low, analysts will find it tough to forecast 'surplus’ unless proper guidance is given for every year," Nomura said in a report.

Last month, Japan’s Suzuki Motor had said it will invest $488 million in setting up a car factory in Gujarat by 2017. This had led to investor concerns related to pricing, funding of capacity expansion in the proposed contract manufacturing arrangement.

Analysts feel the move could have a negative impact on the company's earnings. "Maruti Suzuki's earnings profile will become more volatile depending upon the capex needs at Gujarat. In years of high capex, Maruti’s profit may remain flat despite higher volumes and higher revenues," Nomura added.

Maruti Suzuki shares tank over 5%, Gujaral plant clarifications fails to convince brokerages

(PTI) Shares of Maruti Suzuki India Ltd (MSIL today plunged over 5 per cent on the bourses over investor concerns regarding its Gujarat plant.

Last month, Japan's Suzuki Motor Co (SMC) had said it will invest USD 488 million (about Rs 3,050 crore) in setting up a car factory in Gujarat by 2017, which was proposed by its subsidiary MSIL.

This had led to investor concerns related to pricing, funding of capacity expansion in the proposed contract manufacturing arrangement.

Shares of Maruti Suzuki plunged 5.33 per cent over its previous closing price to a low of Rs 1,573 on the BSE today.

Similar movement was seen on the National Stock Exchange as well, where the stock opened at Rs 1,664.05, then lost further ground and slumped 5.47 per cent to an early low of Rs 1,573 on NSE.

Commenting on the decline in the counter, market analysts said investors are still concerned about the impact of Maruti Suzuki's plan to source cars from a plant to be built by its parent Suzuki Motor Co.

MSIL in a regulatory filing yesterday said: "The

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