Maruti Suzuki to issue preferential shares to parent Suzuki Motor for 100% stake in Gujarat plant

Maruti Suzuki on Tuesday said its board has approved issue of equity shares of the automaker on preferential allotment basis to Suzuki Motor Corporation (SMC), as consideration for the acquisition of 100 per cent stake of SMC in Suzuki Motor Gujarat Private Limited (SMG).

In a filing to BSE, Maruti Suzuki said the decision would be subject to applicable regulatory and statutory approvals, as may be required, including requisite approval of shareholders. Post such acquisition, SMG will become a wholly owned subsidiary of Maruti Suzuki.

"The total number of securities proposed to be issued to SMC as consideration for the acquisition of 100 per cent stake of SMC in SMG, shall be decided in a subsequent board meeting, basis relevant valuation reports subject to and in compliance with the applicable regulatory and statutory framework," Maruti Suzuki said.

Shares of Maruti Suzuki were trading 0.62 per cent higher at Rs 9,574.45 on BSE.

To recall, Maruti Suzuki's board, in its meeting held on July 31 approved termination of the contract manufacturing agreement (CMA) with Suzuki Motor Gujarat Private Limited (SMG) and acquiring of shares of SMG from Suzuki Motor Corporation (SMC).

Maruti Suzuki said its board evaluated two available options for acquiring the SMC equity in SMG: payment in cash and issue of MSIL equity shares on a preferential allotment basis. The impact of both options on the profitability of MSIL, the earnings per share and the dividend payment to shareholders was considered for each year up to 2031.

After examining the two options, Maruti board concluded that the option of acquiring SMG shares by issue of Maruti Suzukie quity shares to SMC would clearly be beneficial to minority shareholders and to Maruti Suzuki.

Further the board decided that minority shareholders’ approval would be sought at an EGM or through postal ballot on a date to be fixed for terminating the CMA. This would be regarding the acquisition of SMG shares from SMC and approval of the acquisition by issue of Maruti Suzuki equity shares equal to the book value of SMG, as calculated according to the CMA and subject to relevant valuation reports and in compliance with the applicable regulatory and statutory framework including FEMA/SEBI guidelines.

"The approval of all shareholders would be sought at the same EGM or through postal ballot for issue of equity shares on preferential basis to SMC, it said.

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