- Gujarat plant may be commissioned before May 2017 target
- Minority shareholder vote to open Nov. 16 for one month
Maruti Suzuki India Ltd., which makes almost half the cars sold in the country, is asking minority shareholders to vote on a plan they had opposed.
The maker of DZire sedans and Swift hatchbacks wants shareholders to vote on a proposal to allow parent Suzuki Motor Corp. to build a fully-owned factory in India’s Gujarat state. The monthlong voting exercise will begin Nov. 16, Chairman R.C. Bhargava said at a briefing in New Delhi Tuesday. The company will meet investors in Hong Kong and the U.K. in November, and has already held meetings in Mumbai and Singapore, he said.
Investors including HDFC Asset Management Co., the nation’s biggest mutual fund, Franklin Templeton Investment Management Ltd. and DSP BlackRock Investment Managers Pvt. opposed the $417 million plant first proposed in January 2014 saying it would convert Maruti “into a shell company” over time. Maruti this month said the factory will manufacture exclusively for the Indian unit for as long as 30 years, once the deal is approved by minority shareholders and receives regulatory approvals.
“While this plan is good for the company, customers and other stakeholders as it helps Maruti add capacity and boost market presence, it’s not necessarily good for shareholders,” said Mahantesh Sabarad, deputy head of research at SBI Capital Markets Ltd. in Mumbai.
Maruti this month said its board approved an agreement with a local unit of parent Suzuki to source vehicles and parts from a new factory in Gujarat. The plant will start production in 2017, have an initial annual capacity of 100,000 cars, and all its output will go to Maruti, Suzuki said at the time. The factory may be ready before the scheduled start date of May 2017, Bhargava said on Tuesday.
Maruti shares rose 2.6 percent to 4,497 rupees in Mumbai. The stock is the second-best performer this year among the 30-company S&P BSE Sensex index and has surged 35 percent, compared with the index’s 0.9 percent drop. Maruti said Tuesday net income in the second quarter climbed 42 percent to 12.3 billion rupees ($189 million). That compares with the 12.6-billion rupee average of analysts’ estimates compiled by Bloomberg.
Revenue in the quarter rose to 139.3 billion rupees from 123.2 billion rupees.