Maruti Suzuki India Ltd will take shareholders' vote for a new manufacturing plant in Gujarat after receiving the pending government approvals, its chairman RC Bhargava said.
With regulatory norms in place, country’s largest carmaker Maruti Suzuki India expects the delayed minority shareholders’ voting on allowing parent Suzuki to own and invest in the Gujarat plant to happen soon.
“The minority shareholder voting on the Gujarat plant which was delayed because we first found that the government had moved some amendments in 2013 Companies Act… We thought it would be imprudent of us to vote on under an Act which is under an amendment. So, we postponed that,” Maruti Suzuki India Chairman RC Bhargava said while addressing shareholders at the company’s annual general meeting here.
As the Act was under amendment, other people who had to make changes, including Sebi and the Gujarat government, held back their actions, he said, adding that Sebi has now taken note of change in the law and amended the listing requirements.
“So one part of that is done. We expect that the Gujarat government’s action would also be completed possibly in the next one week or ten days. After that we will come to all of you to vote in the support of the project,” Bhargava said.
MSI had initially planned to set up a new plant in Gujarat, its third, to meet growing demand. However, In January last year, parent Suzuki Motor Corporation announced it would invest USD 488 million to build the Gujarat plant.
Opposing the move, Maruti’s institutional investors approached capital markets regulator Sebi, seeking its intervention to safeguard the interests of minority shareholders. Private sector mutual funds and insurance companies, which own almost 7 per cent of the company, led the opposition.
Later, under pressure from institutional investors, Maruti decided to seek the approval of minority shareholders after tweaking some of the earlier proposals for the Gujarat plant, which SMC had decided to take over.
Highlighting the importance of the Gujarat plant in the company’s scheme of things, Bhargava said: “This year if we grow in double digits our capacity utilisation will become almost 100 per cent. We will be producing over 1.4 million vehicles during this fiscal.”
The Gurgaon and Manesar plants put together (1.5 million units annually) don’t have much more capacity left after that, he added.
“Certainly in 2016-17 we hope that we will somehow manage. In 2017-18 we will need the Gujarat plant. Work is going on the plant at full swing and we will be on schedule to commission the plant,” he said.
The Gujarat plant is envisaged to have a total installed capacity of 7.5 lakh units annually. It is expected to be operational by May 2017.
On the current market situation, Bhargava said: “Competition in India is becoming stronger and stronger. All the global majors are looking at the Indian market. They are seeing good growth, which is possible here”. Bhargava said MSI had to work harder to ensure that the company is able to handle the competition and maintain market share, if not increase it, as the global players are determined to get a bigger market share in India.
On sales prospects for the ongoing fiscal, he said: “We have stated that we would get double digit growth this year and I believe we are on track for that. The growth in the first five months is around 13 per cent.
“The fact that we have grown faster than the competition means that our market share has gone up. Last year we ended at at market share of over 45 per cent and this year we are already up to 47 per cent.”
In 2014-15, the company’s domestic sales stood at 11,70,702 units, up 11.1 per cent, from 10,53,689 units in 2013-14 fiscal.
During the April-August period of the current fiscal MSI’s sales were 5,22,880 units as against 4,59,040 units in the year-ago period, up 13.9 per cent.
Commenting on the company’s initiatives on foraying into new segments, he said MSI has entered for the first time in the SUV segment, where it wasn’t represented earlier, with the S-Cross.
“I think this SUV and other launches in this segment would help us in carving out a market share in the SUV segment, which comprises of 21 per cent of the passenger and UV sales. We were hardly represented in the past in the segment,” Bhargava said.