Maruti Suzuki shareholders’ vote on Gujarat plant ends

The month-long voting on Maruti Suzuki’s proposal regarding its new plant in Gujarat, the ownership of which would vest with parent Suzuki Motor Corp, came to an end on Tuesday. The result will be announced on Thursday. In order to go ahead with its plan, the company needs at least 50% of the minority shareholders to approve the resolution.

The run-up to the voting and the period during which the voting was on saw advisory firms advising shareholders on which way to vote. Maruti Suzuki chairman RC Bhargava has expressed confidence that the proposal will sail through. “It is a very good deal for them. I don’t expect shareholders to let pass this bonanza,” Bhargava has said.

Minority shareholders including mutual funds such as HDFC AMC and Franklin Templeton Investment Management had opposed MSIL’s proposal, originally announced on January 28, 2014.

The opposition came mainly on the fears of MSIL losing out due to lack of transparency in the pricing of the product. Initially, the Gujarat plant was proposed to be owned by MSIL but the plan was changed later with Suzuki Motor announcing in January 2014 that it would invest $488 million to build the plant.

On the last day of the voting, fund houses gave mixed responses. Few top players indicated that, they will vote against the resolution.

“It’s one of the case where we are not happy with the response from the promoters and being a minority shareholder we will vote against the proposal,” said a top officials from the domestic fund house.

According to the data from Value Research as on September 2015, HDFC MF holds 1.77% stake while UTI MF holds 0.77% stake in MSIL. Some other funds like ICICI Prudential MF, Birla Sun Life MF, Reliance MF, SBI MF among others hold stake in the range of 0.5-0.7% in MSIL.

However, there are other fund managers who feel that, management had cleared some of the doubts which were raised during early 2014 and they would remain neutral during the voting. “I don’t think that there is anything negative which might impact the financials of MSIL.

Gauging both the advantages and disadvantages of the deal, we might abstain from the voting on the proposal,” said a chief investment officer of the leading fund house on condition of anonymity.

In October this year, MSIL said that the upcoming new facility will manufacture cars exclusively for the Indian unit for as long as 30 years, once the deal is approved by minority shareholders and receives regulatory approvals. The factory may be ready before the scheduled start date of May 2017, Bhargava has said.

The plant, SMC’s first fully-owned factory in India, is being planned with an initial capacity of 2,50,000 units a year, all of which will be supplied to Maruti and a final capacity of 7,50,000, half of Maruti’s current installed capacity.

In November, proxy advisory firm Institutional Investor Advisory Services had said that if the transaction is approved, “Maruti will lose all control over its own destiny, and Maruti’s shareholders will always remain subservient to the interest of Suzuki’s shareholders.”