Maruti Suzuki India Limited (MSIL) on October 9 stated in its presentation to shareholders that it will be acquiring the entire stake in Suzuki Motor Gujarat (SMG) from its Japan-based parent Suzuki Motor Corporation (SMC). The value of the deal was not disclosed in its presentation.
“With the challenges of the last 4 years behind us, MSIL is projecting a requirement of 4 million production capacity by 2030-31. This requires adding 2 million additional capacity in the next 7 years," MSIL stated in its presentation.
MSIL had earlier revealed that its board approved the acquisition of SMG. As a result, the termination of the company’s contract manufacturing agreement with SMG was also approved in the board meeting.
“Work has already started at Kharkhoda in Haryana where the first line of 250,000 units is expected to go into production in early 2025 and 1 million capacity reached in 2028. A second site for 1 million units is under selection and work will start in 2024. It should be noted that it took ~40 years for MSIL to reach a scale of ~2 million units and now it is looking to add another 2 million units in just 7-8 years,” added MSIL in the same presentation.
Prior to this transaction, SMC owned a 100 percent stake in SMG, which supplies its entire production to Maruti Suzuki. SMC’s facility, which is located at Hansalpur, had begun production in February 2017.
"Additional cash flows from the new capacities being added would come but there would be a lag between investments and income. Management believes that cash should be first available and not spent in anticipation of incomes. If excess cash accumulates at any time, and there are no available investment needs, it can then be used appropriately, including increasing the dividend payout band and payment of higher dividends," the company noted in the presentation.
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