Maruti Suzuki and Suzuki motor Gujarat (SMG) have come to an arrangement where Suzuki will be establishing a manufacturing facility on leased land from Maruti Suzuki.
As per reports, Maruti Suzuki, the largest car manufacturer in India opened e-voting through postal ballot on Monday for taking approval from its minority shareholders with regard to allowing parent Suzuki Motor Corporation (SMC) to own and invest the upcoming manufacturing plant in Gujarat. E-voting will remain open till 5 pm on the 15th of December and the results of the same will be announced on the 17th of December.
The new plant was initially supposed to be owned by Maruti Suzuki but SMC stated in January 2014 that they would invest $488 million to ramp up the new plant and own it. Under the new arrangement, Suzuki will be setting up this manufacturing facility on land that is leased from Maruti Suzuki. The arrangement holds good for a period of 15 years and can be automatically increased for a similar period if there is no termination. SMG will be supplying and manufacturing vehicles and parts exclusively for Maruti Suzuki. This would be on the basis that there is no profit or losses for SMG at the end of the financial year.
The deal format was announced in January 2014 and several shareholders voiced their anxieties relating to the deal with the view that it was not conducive for the company’s interests and their own. Several disclosures have been given by the company to soothe shareholders along with organization of road shows to clear investor apprehensions overseas.
The growth volumes for Maruti Suzuki have been promising in FY16 and analysts are expecting further momentum with new launches for the next fiscal year as well.