The Telegraph
Thursday , March 13 , 2014
CIMA Gallary

Suzuki bid to resolve row

Suzuki: Crucial role

New Delhi, March 12: Suzuki Motor chairman Osamu Suzuki is likely to fly in for a board meeting of Maruti Suzuki India Ltd on Saturday.

The veteran Suzuki official will try to resolve differences within the board over plans to let Suzuki set up a plant to make cars for Maruti in Gujarat. The move has been opposed by financial institutions.

Sources said the Suzuki chief would try to reason with financial institutions who had sought clarifications and expressed concern that the new Suzuki-owned plant would lead to a transfer of profits to the parent firm and reduce Maruti to a mere marketing company.

He is also likely to coax independent directors, who are believed to have sought clarifications after having given an in-principle approval to Suzuki’s plans, to accept the details. Maruti has four independent directors — former chairman of PriceWaterhouseCoopers Amal Ganguli, Pallavi Shroff, lawyer with Amarchand Mangaldas, R.P. Singh, an ex-IAS officer and former chairman of Punjab & Sind Bank, and former Ranbaxy chief executive D.S. Brar.

Plans on using Maruti’s huge cash pile of around Rs 7,500 crore also needs to be settled. According to analysts, Maruti intends to use part of that money to buy land abroad for Suzuki factories, becoming rentiers to its parent, besides investing in funds and financial instruments.

There are concerns over plans to merge the Gujarat facility with Maruti Suzuki after 15 years, thereby increasing Suzuki’s stake in the joint venture beyond 56.21 per cent. This will reduce the value of stakes held by minority shareholders. Many small shareholders have argued that Maruti Suzuki can invest its cash surplus to set up the Gujarat plant instead of leasing out land to Suzuki.

In a report, Nomura Securities has said its analysis of the cost of cars from the Gujarat plant shows that Maruti “will not buy cars from the Suzuki plant at negative margins. This is incrementally positive as investors were earlier concerned that in years when capex requirements will be high, MSIL might have losses on Gujarat production”.