Across emerging markets, shareholder activism tends to be rare, with unhappy investors typically expressing discontent by dumping their shares. In the case of Maruti, that would have meant ditching a company that sells half the passenger cars in India and is a staple of institutional portfolios.
"This particular episode has brought many of the fund managers and institutions together," said Chandresh Nigam, chief executive of Axis Asset Management, one of the seven fund firms that succeeded this month in their challenge to the deal between Maruti and Suzuki Motor Corp.
Previous attempts by investors to take on controlling shareholders in India, known as promoters, have run out of steam. Last year, Swiss cement maker Holcim Ltd's plan to consolidate holdings in two Indian cement makers stirred up investors, but proceeded after a divided opposition was unable to muster enough votes.
The revolt against Maruti was different because seven fund managers running a combined $80 billion, or more than half the assets under management in India, joined forces in an unprecedented show of cooperation.
"Normally, just a single institution acting will not work anyway. The next stage should be if we can formalize or semi-formalize a platform," Nigam said.
In India, regulators have long tried to force fund managers to be more vocal. Securities Exchange Board of India (SEBI) Chairman U.K. Sinha has criticised money managers for not complying with a 2010 requirement that funds vote at annual meetings.
Last year, India replaced a five-decade old companies law in a bid to curb the power of promoters. New rules restrict the number of board seats held by promoters and give oversight of audit and remuneration to independent directors.
"Shareholder activism has been gaining popularity in India and Maruti just cements that," said Simone Reis, co-head of M&A at law firm Nishith Desai Associates. "Just because a promoter is a bigwig doesn't mean the investors won't voice their concerns," she said.
A bigger test, however, would be taking on one of the family-run firms that predominate in corporate India including big names like Reliance Industries Ltd and Adani Enterprises Ltd, fund managers say.
Family-run firms in India often have few senior professional managers, making it harder for public shareholders, which are seen as outsiders, to effect changes.
The failure of local fund managers to stand up more for their investors has had a damaging impact on the investment culture in India, where retail investors have been heavy sellers of stocks since markets crashed in 2008.
Even India's rally to record highs this month has failed to sway individual investors, with gains driven primarily by foreign institutions.
Some industry insiders, who declined to be identified, said fund managers are reluctant to challenge corporate decisions in part because companies are themselves huge fund investors, accounting for nearly half of assets under management.
Maruti Suzuki, for example, has over 70 billion rupees ($1.16 billion) invested in funds, according to its annual statement, equivalent to more than 1 percent of the combined assets in money market and debt funds in India.
Fund houses dismissed the notion of a conflict.
"These are two independent things. Some investor investing in liquid or treasury products is independent of our duty which is to take care of the retail investor," said Sundeep Shikka, president and CEO of Reliance Capital Asset Management Ltd, which was among the group to take on Maruti.
Investors in Maruti worried that a January plan under which it would buy cars from a new Suzuki plant in India instead of making them in-house was a move by the Japanese company to reassert control over Maruti and deprive it of the benefit of an expected surge in sales in coming years.
"This is highway robbery," one of the fund managers who spearheaded the opposition recalled thinking.
Like other individual fund managers opposed to the deal, the manager declined to be identified because of the sensitivity of the matter.
Starting with a secret meeting of three managers at the Trident Hotel in south Mumbai, the group grew to seven from fund houses including HDFC Asset Management, DSP Blackrock, ICICI Prudential, UTI Asset Management, and SBI funds Management.
The managers worried that other global firms with Indian-listed subsidiaries, such as Unilever Plc or Nestle SA might try something similar.
"If we don't do this now, then tomorrow every other company will do it," another of the seven told Reuters.
What followed was behind-the-scenes lobbying of regulators and Maruti Suzuki's independent directors, culminating in a letter that was eventually signed by 16 institutional investors.
Victory came on March 15, when Maruti Suzuki said it would seek minority shareholders' approval and made key changes regarding how the production plant would be funded and valued in case the deal is terminated.
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