India's largest passenger vehicle maker Maruti Suzuki India (MSI) has announced that Japan's Suzuki Motor Corporation's (SMC) stake in the company will increase by about 1.8 percent, after the sale of the Gujarat plant.
MSI Chairman R.C. Bhargava, told reporters at a press conference, "Suzuki Motor's stake is likely to increase to 58.28 percent from 56.48 percent currently. Around 4 percent shares will be diluted basis the June 30 valuation. Having said that, the exact stake dilution will only be known once the AGM date is finalised.”
The board of Maruti Suzuki India (MSI), in its meeting held on 8 August, has cleared the way for the passenger vehicle market leader to acquire a 100 percent stake of Suzuki Motor Corporation (SMC) in Suzuki Motor Gujarat (SMG) at a price to be determined in accordance with all applicable laws and regulations. The board has also approved the termination of the contract manufacturing agreement with SMG.
The equity deal once complete will make SMG a wholly-owned subsidiary of Maruti Suzuki India.
The company's board, in its meeting held on the same day, evaluated two options for acquiring the SMC equity in SMG. The board discussed payment in cash or issue of MSI shares on a preferential allotment basis.
“The impact of both options on the profitability of MSI, the earnings per share and the dividend payment to shareholders was considered for each year up to 2031. After going through the data, the board concluded that the option of acquiring SMG shares by issue of MSI shares to SMC would clearly be beneficial to both minority shareholders as well as the company,” Maruti Suzuki said in its filing to the stock exchanges.
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The board also approved seeking of minority shareholders' approval at the Extraordinary General Meeting (EGM) to be held later or through postal ballot for issue of shares on preferential basis to SMC.
"The total number of securities proposed to be issued to SMC as consideration for the acquisition of 100 percent stake of SMC in SMG, shall be decided in a subsequent Board Meeting, basis relevant valuation reports," the filing said.
The details in relation to the subscription, including the issue price for the securities and the post-allotment holding of the investors are yet to be decided.
On July 31, MSI announced that it will acquire the Gujarat-based production facility of its parent firm Suzuki Motor Corporation to “reduce complexity” and bring all manufacturing-related activities in the country under one entity. A fully-owned subsidiary of SMC, SMG supplies its entire vehicle output exclusively to Maruti Suzuki India.
SMG, which was incorporated in 2014, currently has a production facility in Gujarat with an installed capacity of 7.5 lakh units per annum. Initially, the Gujarat plant was proposed to be owned by MSI but the plan was changed later with SMC announcing that it would invest US$ 488 million to build the plant. The plan was opposed by the institutional investors forcing the company to seek minority shareholders’ approval on the matter.
Maruti Suzuki's stock closed at Rs 9,536.20 on BSE, up 0.22 percent from the previous close.
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