Maruti Suzuki India board of directors approves issuance of equity shares to SMC on a preferential basis for MSIL’s acquisition of 100% equity stake of SMC in Suzuki Motor Gujarat.
17 Oct 2023 | 5429 Views | By Autocar Professional Bureau
The Board of Maruti Suzuki India has approved the issuance of 1.23 crore equity shares of the company of face value of Rs 5 each to Suzuki Motor Corporation at a price of Rs 10,420.85 as part of integrating Suzuki Motor Gujarat to itself.
In a statement issued today to Bombay ...
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The Board of Maruti Suzuki India has approved the issuance of 1.23 crore equity shares of the company of face value of Rs 5 each to Suzuki Motor Corporation at a price of Rs 10,420.85 as part of integrating Suzuki Motor Gujarat to itself.
In a statement issued today to Bombay Stock Exchange, Maruti Suzuki India said: “The price shall not be less than the floor price as determined in accordance with Chapter V of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (‘ICDR Regulations’), for consideration other than cash, discharged by the company for the purchase of 100% of equity shares of Suzuki Motor Gujarat (SMG) owned by SMC, in accordance with the provisions of the Companies Act, 2013.”
Following the issuance of shares, Suzuki Motor Corporation's stake in Maruti Suzuki will increase from 56.48 percent to 58.19 percent.
The company has sought approval of shareholders for issuance of equity shares on a preferential basis through Postal Ballot. The necessary details of the Postal Ballot and e-Voting will be disclosed separately, said Maruti Suzuki.
In July 2023, the Board of Directors of Maruti Suzuki had approved the termination of the contract manufacturing agreement with Suzuki Motor Gujarat and announced plans to acquire the shares of SMG from Suzuki Motor Corporation (SMC). The book value of SMG at the time stood at Rs 12,755 crore.
Explaining the rationale, R C Bhargava, chairman of Maruti Suzuki, had said in July that the move was necessitated by the changing market environment and Maruti Suzuki evolving its structure based on the changing dynamics.
“The situation today is not the same as it was in 2014 when the structure of Suzuki Motor Gujarat was created. The volumes have increased, models have increased, the number of technologies have increased and all of this creates complications. Plus, we have to expand in the future. Hence the structure can't be the same as 2014, it would be rather sad, if management is not able to adjust its strategy, anybody who does not change with time, runs the risk of being obsolete,” Bhargava had explained.
Maruti Suzuki India expects that after the arrangement, the cost of production may remain the same but the scale will give the company the benefit of controlling the cost.
With the growth of the Indian passenger vehicle market and export potential, Maruti Suzuki India would need to increase its production capacity to about 4 million cars per annum by 2030-31, almost double from current levels. This would mean, the company will be investing Rs 1.25 lakh crore in the coming eight years, considered as the highest ever capacity creation by any automaker globally at present.