Axis Capital was the advisor to Maruti Suzuki’s voting resolution.
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Maruti needed 51 percent of its minority shareholders to support its proposal for a contract manufacturing agreement with Suzuki, according to a revised Indian law which lowered the threshold from 75 percent.
During 2014, under pressure from institutional investors, Maruti Suzuki had made a decision to hunt for minority stockholders’ nod after tweaking a few of the former plans for the controversial Gujarat facility that it had primarily proposed to establish on its own.
Minority shareholders of Maruti Suzuki – who had earlier baulked at a proposal submitted by SMC to make cars for the Indian auto maker under a contract manufacturing agreement – finally approved the plan under a special month-long voting process ordained by the Companies Act 2013. As of now, Maruti has two functional plants in India at Gurgaon and Manesar which have a combined annual production capacity of 15.5 lac units. The plant is to be set up by Suzuki and then, it will sell these cars at cost price to Maruti Suzuki which will be introduced in the market as Maruti Suzuki’s products.
New production lines at the Gujarat plant will be added as and when demand rises, which will also determine the pace of investment by Suzuki, said Bhargava. “Maruti can use the money instead for strengthening its R&D and on extending the marketing and distribution network”. “There will be six lines, each with a capacity of producing 2.5 lakh units to be set up one after another”.
“Out of the total votes cast by the minority shareholders, 89.75% voted in favour while 10.25% voted against the resolution”, MSIL chairman R C Bhargava told reporters here. LIC (which holds almost 6%), index funds, passive funds proxy advisory firm Institutional Investor Advisory Services many retail investors and those holding participatory notes abstained from voting, company officials said.
Maruti Suzuki hit back by asserting that it will have full control over upcoming plant in Gujarat despite letting parent Suzuki own and invest there. The company has faced slowing sales growth of its flagship smaller cars such as the Alto and WagonR, but new models such as the Ciaz sedan have helped spur sales growth of larger vehicles.
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MSIL consistent with the production needs of the latter.
