However, it remains to be seen whether the amended proposal finds favour with the fund houses, who were the first to raise objections. “We will convince all the domestic institutional investors to vote against the proposal so that it gets defeated, ” a fund manager from a public sector fund told FE.
A senior fund manager of a large fund conceded the changes made to the proposal were welcome. However, the fund manager said opposition to the plant being housed in Suzuki Motor Corporation’s wholly-owned subsidiary rather than in
"Even though not required by law, the board decided, as a measure of good corporate governance, to seek minority shareholders' approval as stipulated in Section 188 of the Companies Act 2013,” a company statement said, after a decision to this effect was taken at a board meeting earlier in the day, which was also attended by SMC chairman Osamu Suzuki.
In an unrelated development, the Maruti board also approved the capex for the next fiscal at around R4,000 crore, which would be mainly for new models, marketing infrastructure and research and development.
The company also made two other changes in its original proposal with regard to the Gujarat plant to make it palatable to fund houses and institutional investors who had written to it expressing their concerns.
It has now dropped the provision for ‘marking up’ the cars produced at the Gujarat plant to fund the capex. Now the entire capex would be funded by depreciation and equity brought by SMC. Further, in event of termination of the contract, the Gujarat facility would be transferred at book value to Maruti.
“The entire capex for the Gujarat subsidiary would be funded by depreciation and equity brought in by Suzuki Motor Corporation. In the event that both parties mutually agree to terminate the contract manufacturing agreement, the facilities of the Gujarat subsidiary would be transferred to Maruti Suzuki at book value. The impact of any direct or indirect taxes on account of the contract manufacturing agreement would be assessed before finalising the agreement and as earlier stated, the Gujarat subsidiary would function on the basis that it would neither generate surpluses nor make losses,” the statement said.
Maruti Suzuki chairman RC Bhargava said three-fourths of minority shareholders, who hold 44% stake in the company, would have to approve the proposal through a special resolution.
The special resolution would not see Maruti or Suzuki directors voting on the proposal, as they are ‘related party’. “We are not required by law to seek minority shareholders' approval but the board decided to do so as a measure of corporate governance," Bhargava said.
An independent director on the Maruti Suzuki board told FE that voting by the minority shareholders is likely to happen in the next two months when the detailed arrangement between Maruti and parent Suzuki is ready. We are happy with the board decision taken on Saturday. It is our role to take up issues on behalf of minority shareholders and this decision should squash all speculation about independent directors just giving their rubber stamp. We believe this arrangement will be beneficial for the company and its shareholders, but if there are doubts, it is necessary to address them. The worry that any party is trying to push through an agreement is over. Minority shareholders now have a chance to express their concerns,” he said.
The controversy regarding the Gujarat plant started when on January 28 Maruti announced its board has decided that it would be owned and built by SMC at an investment of around R3,000 crore.