Maruti board approves preferential share issue to Suzuki Motor Corporation
Maruti Suzuki's Board of Directors has given the green light to issue over 1.23 crore equity shares to Suzuki Motor Corporation (SMC) on a preferential basis. This move follows Maruti Suzuki's October announcement to allot these shares to SMC. The transaction will enable the transfer of SMC's Gujarat manufacturing plant to Maruti Suzuki India Limited (MSIL).
Maruti Suzuki gets 100% stake in Suzuki Motor Gujarat
In return for the preferential shares, Maruti Suzuki will obtain full ownership of Suzuki Motor Gujarat (SMG), an SMC subsidiary that exclusively supplies its production to Maruti Suzuki India. This acquisition aims to improve management control and help the company better address customer needs in India. The total value of the ownership transfer is Rs. 12,800 crore.
Impact on Suzuki Motor Corporation's stake in Maruti Suzuki India
After the preferential allotment, SMC's stake in Maruti Suzuki India will rise from 56.48% to 58.19%. Since 2014, SMC has invested Rs. 18,000 crore in SMG, enabling it to produce 7,50,000 vehicles per year. The last known book value of SMG was Rs. 12,755 crore. Maruti Suzuki India Chairman RC Bhargava said that the share swap method used for SMG's acquisition is more beneficial for the company's shareholders.
Termination of contract manufacturing agreement with SMG
The Maruti Suzuki board approved the termination of the contract manufacturing agreement with SMG during a meeting on July 31, 2023. SMC will acquire SMG's shares at a price determined by all applicable laws and regulations. This strategic decision is expected to solidify Maruti Suzuki's standing in the Indian automobile market. At the time of writing, Maruti's shares traded 0.17% up at Rs. 10,506.05 apiece on the NSE.
