Maruti confident of shareholders' nod on Guj, says no plan B

  • PTI, New Delhi
  • Updated: Aug 31, 2014 23:30 IST

Maruti Suzuki India is confident of getting minority shareholders' nod to let parent Suzuki Motor Corp own and invest in its Gujarat facility and has no second 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 RC Bhargava told PTI in an interview.

He was responding to a query on whether Maruti had other plans if it failed to get the minority shareholders' nod. He was sure of the minority shareholders' nod and that was why the company was not having any second option.

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 3/4th 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."

Dispelling 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. When it becomes fully operational, Maruti's total available annually capacity will be 3 million, up from its current 1.5 million from the Gurgaon and Manesar plants.

"Gujarat will ultimately make 1.5 million cars that's what the capacity is. This new capacity can not be commissioned till middle of 2017," Bhargava said.

On the investments envisaged, he said without all the replacement capex, "our estimate is that the first unit to commission will cost about Rs 3,000 crore and at today's cost we think the subsequent units each would be about Rs 2,500 crore".

When asked about the performance and policies of Prime Minister Narendra Modi's government, Bhargava said in 12 to 18 months, there would be significant changes on the ground.

"The indications are good but things still have to happen, nothing much has happened yet... but I think in 12 to 18 months, we should see significant changes on the ground, significant changes which will actually impact on the investment and the economic growth," he said.

Having had the experience of working with Modi when he was the chief minster of Gujarat, where the company is setting up a new plant, Bhargava said his track record speaks for itself.

"I think Modi's track record is of actually getting things done. He doesn't just talk about things. If Gujarat experience is to be looked at, he actually gets things done," he said.

Expressing confidence that Modi will deliver, Bhargava said: "When he has talked about certain things, it will happen. I believe, actually a lot of people believe, he would actually get things done. It wouldn't just remain a talk."

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