According to an advisory firm, shareholders should be seeing through the supposed razzle dazzle and should question the logic behind the establishment of the proposed Suzuki plant at Gujarat.
According to proxy advisory firm named Institutional Investor Advisory Services or IiAS, institutional shareholders of Maruti Suzuki should vote against the resolution proposing the development of Japanese parent Suzuki’s Gujarat manufacturing plant for supplying parts and vehicles to its Indian subsidiary. According to the advisory organization, shareholders should realize the razzle dazzle behind all of this. The ballot period is ongoing and shareholders have voting powers till the 15th of December. The recommendation is crucial even though several mutual funds and institutions are seemingly veered towards supporting the Maruti Suzuki management. According to the proxy firm, instead of cowering, Maruti should be pushing for a role reversal. The discussions on the plant have been centered chiefly on the pricing structure and royalty payments.
The Gujarat transaction according to the advisory organization will see Suzuki attaining control over a large chunk of Maruti’s cash flows and operations. The power balance is already in favor of the Japanese parent and will shift completely towards it. Suzuki can then undermine Maruti’s criticality and scale up the relevance of Suzuki Gujarat by introducing new technologies and scaling up overall capacity. Maruti will lose control in its own future according to the report issued by IiAS. Maruti Suzuki has opposed this report and called it a negative perception on key counts like minority shareholder impact, governance and strategic issues.
Maruti has claimed that the report does not seem backed by complete knowledge of the automobile business and is based on misunderstandings without logical conclusions or facts in the picture. The Gujarat plant investment by Suzuki will be ushering in FDI to the tune of INR 8, 000-10, 000 crore without any cost incurred by Maruti.