The facility will enable the firm to develop modern and efficient plants as well as recover high real estate value on the Gurgaon site once the project is completely executed.
Maruti Suzuki plans to shift its Gurugram facility that rolled out the first Maruti 800 in 1983, reported The Economic Times. The company is reportedly in talks with the Haryana government seeking allocation of a 1,200-1,400-acre plot of land in Sohna, about 25 km south of Gurugram.
"There was a long pending request from residents to decongest the Gurgaon area. The movement of trucks was also an issue and the local administration is also very well aware of it," a person aware of the development told the paper.
The company has reportedly requested the Haryana government to directly allocate the plot in Sohna, which is not too far for the company's vendor belt and employees, at a fair price. The state, however, has a policy of auctioning land and not allotting directly.
The Haryana government is yet to take a call on the demand.
Maruti India may need an investment of Rs 10,000-15,000 crore to carry out its plan to build three-four assembly lines in the proposed facility. Analysts believe Maruti will be able to fund its new facility through free cash flow on books of Rs 6,600-8,200 crore a year during FY18-21. The firm also has cash and cash equivalent of Rs 34,000 crore.
The facility will help it expand capacity for its existing models while the Japanese parent, Suzuki could also use its resources to develop a new generation of products including electric and hybrid vehicles.
The facility will enable the firm to develop modern and efficient plants as well as recover high real estate value on the Gurugram site once the project is completely executed.
As of now, Maruti manufactures 6-7 lakh units out of the Gurugram facility, which translates to one in every two passenger vehicles sold in the country today.
It would take 4-5 years for the new facility to be operational and the shifting process would happen in phases, a top Maruti executive told the paper.
Shareholders may consider Maruti's move to invest in a new capacity as a positive development as it would help in a productive use of free cash flow generated by the firm, the report said.