Maruti Gujarat unit suspense lingers

Mumbai, Oct. 23 (PTI): Domestic financial institutions led by state-owned LIC and mutual funds, who together hold around 14.49 per cent in Maruti Suzuki, are likely to firm up their stance on Maruti’s Gujarat plant after the auto major’s shareholders meeting next month.

The meeting is expected to discuss Maruti’s plans to set up a car plant in Gujarat as a fully owned subsidiary of its Japanese parent.

Ever since Maruti’s Japanese parent announced its plans to set up an assembly line in Gujarat as its fully-owned subsidiary eight months ago, minority investors were up in arms as they feared that Suzuki would later make Maruti just a contract manufacturer.

While the LIC is the single largest minority investor in the country’s largest car maker with a 6.8 per cent holding, mutual funds hold around 6.53 per cent.

“We are yet to take a call on the issue,” an LIC official said and pointed out that it was too early and Maruti was yet to get shareholders’ approval.

Mutual fund houses are, however, divided on the issue. Some feel the company should be able to set up its own plant, rather than setting it up through a subsidiary whose future was uncertain.

Maruti Suzuki will meet its shareholders at an extraordinary general body meeting next month to secure their approval for the project.

The company needs to secure the permission of at least 75 per cent shareholders for the investment in the plant.

“We haven’t formed an opinion on Maruti Suzuki’s move to set up its trading unit in Gujarat as of now and we will take a call at the Maruti shareholders meeting early November,” a senior official of LIC said.

When asked if the LIC will go by the recommendation of proxy advisers, the official said, “It’s wrong to believe that the LIC will go by the advice of proxy advisers. Let me reiterate that we are yet to form an opinion on the issue.”

The mutual fund houses are confused about what would be the future of the subsidiary once its 15-year agreement ended with Maruti Suzuki.

“We are currently evaluating the company’s plans before we finally come up with our own stand on the matter,” an official of a mutual fund house said.

However, another official said the company had assured that the proposed plant would function on the basis of no-profit-no loss and it was likely to transfer its assets to Maruti-Suzuki’s book in the future.

Maruti Suzuki India Limited