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Maruti hopes to get clearance for Gujarat plant

PTI 01 Sep 2014, 10:28:07 AM IST

New Delhi: Maruti Suzuki India Ltd is confident of getting minority shareholders' approval to let parent Suzuki Motor Corp. own and invest in its Gujarat facility and said it has no backup option. “We are thinking of getting voting (done) in October... There is no plan B, I can't see why it should not happen,” Maruti Suzuki India chairman R.C. Bhargava told PTI in an interview.

In March, under pressure from institutional investors, Maruti had decided to seek minority shareholders' approval after tweaking some of the earlier proposals for the controversial Gujarat plant. The company needs three-quarters of the minority shareholders, who hold 44% stake, to approve the proposal through a special resolution. Bhargava said the management had been busy explaining to its investors, both domestic and overseas, over the past couple of months and they have understood the company's position.

“By bringing in that money (Suzuki's) here we get a very low cost money instead of putting our money. So I get the benefit of low cost money and we get a benefit of having more liquidity, money that I can use without much concern about straining my balance sheet,” he said. The move by parent Suzuki to invest in Gujarat is mainly due to the increasing significance of India in the Japanese firm's global operations, he said.

“Essentially, what has driven the decision to let Suzuki to finance the Gujarat plant is really that Suzuki now understands that their future as a global car maker is going to be increasingly dependent on India,” he said. Bhargava further said: “Today we (Maruti) contribute something like 40% of the total sales volume of Suzuki and about 25% of the profit last year.”

On apprehensions about Maruti becoming just a trading channel of the Gujarat plant, he said: “In all respects, the Gujarat plant will function as a Maruti plant...we control when the production lines are established, when we need more capacity, we will determine what needs to be produced and how much is to be produced.

We will control the supply chain. We will control the sale. So in what way it is different from as if I have put the plant? And that's what we have been telling the investors.” The Gujarat plant is expected to be commissioned by the middle of 2017.