Maruti Suzuki, India's top automaker by sales, said on August 8 it would pay Suzuki Motor in preference shares to take over a local manufacturing plant in a deal that will also boost the Japanese automaker's stake in the company.
The share allotment will boost Suzuki's stake in the Indian automaker by about 1.8%, Maruti's chief financial officer Ajay Seth said. Suzuki currently has a 56.48% stake in Maruti.
The final deal value, which will be based on the plant's book value as of Aug. 29, along with the number of shares to be issued and the price will be decided later, Maruti said, without specifying a date.
The plant, located in the western Indian state of Gujarat, currently has a book value after depreciation of around 128 billion Indian rupees ($1.55 billion).
Suzuki owns the plant, in which it has invested about 180 billion rupees since 2014, but manufactures cars for Maruti. The plant has an annual capacity of 750,000 units.
The deal, which Maruti announced last week, will give the company a better grip on production, including of electric vehicles (EVs), and will help it adjust production to changes in demand, Chairman RC Bhargava had said.
Maruti plans to roll out six EVs by 2030, each of which will be produced at the Gujarat plant.
"With Maruti engineers taking over production at the plant, we will get a better understanding of EV manufacturing which will be important for the future," Bhargava said.
He added the deal will require the approval of minority shareholders. The share issue will dilute Maruti's outstanding shares by a little over 4%, the company said.
Maruti's shares were up 0.54% on the day. They have fallen 2.5% since Maruti announced the deal along with its quarterly results on July 31. ($1 = 82.7900 Indian rupees)
(Additional reporting by Varun Vyas and Nishit Navin in Bengaluru; Editing by Nivedita Bhattacharjee and Savio D'Souza)
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