It is reported that the largest car brand in India, Maruti Suzuki India (MSI) will decide to share the issue with the parent company. Reportedly, the board members of Maruti Suzuki India will gather to discuss whether to share with parent company Suzuki Motor Corp. issue to buy its controlling stake in Suzuki Motor Gujarat. On Thursday, October 12, 2023, the Indian car manufacturing brand Maruti Suzuki India told exchanges that the board members will meet on October 17 to decide to issue preferential shares to Suzuki Motor Corp. to acquire the controlling shares in Suzuki Motor Gujarat. In this article, we have a lot more to discuss with you about it. Continue reading this article and read it till the end.
Suzuki Motor Gujarat which has been the contract manufacturer for Maruti Suzuki India since 2014, reportedly manufactures nearly 750,000 cars in a year. Maruti Suzuki India expressed its intention to buy out Suzuki’s entire stake in Suzuki Motor Gujarat and terminate its manufacturing agreement with the Japanese parent company Suzuki Motor Corp. which would simplify its manufacturing operations, in July. Reportedly, MSI is working hard to quickly put in place new capacities to manufacture vehicles with various eco-friendly powertrains over the next decade.
Maruti Suzuki India said on Thursday, October 12, 2023, that instead of paying for Maruti Suzuki India’s stake in cash to minimize the adverse impact on earnings the company will deal at a net book value of Rs12,755 crore through the allotment of preferential shares to Suzuki Motor. As of Thursday, October 12, 2023, Maruti Suzuki has a market value of Rs 3.19 trillion. Kindly note that Suzuki Motor is currently holding 56.48 percent controlling stakes in Maruti Suzuki. Shift to the next section and read more details.
The company claimed in a presentation, “The period from 2014 till now shows that Maruti not spending cash on the Gujarat plant enabled the company to become much stronger, and its price-to-earnings ratio increased from 21 to 33. Having cash reserves and maximizing profits has benefitted everyone, including shareholders. There is no evidence to show that reducing cash would be of greater benefit to the company or shareholders when a better option is available,” to explain a share transfer deal instead of an all-cash deal. If this deal happens, the shareholding of Suzuki Motor in Maruti Suzuki will increase by nearly 1.6% based on its current market price and the book value of the SMG plant which is Rs 12,755 crore.