Ahead of a crucial voting by minority shareholders on the company’s upcoming Gujarat factory, India’s largest car maker, Maruti Suzuki India, on Thursday sought to cheer its investors by hiking dividend payout and limit of shareholding for foreign institutional investors (FIIs) in the company.
Both decisions were taken by the company’s board on a day when Maruti reported a 28.7% year-on-year rise in net profit to Rs 862.5 crore during the July-September quarter. Net sales rose 17.5% to Rs 11,996.3 crore during the quarter on the back of a 16.8% increase in vehicle sales.
Maruti, in January, took a controversial decision to let a Suzuki subsidiary construct and operate its Gujarat factory slated to be operational by mid-2017. The decision immediately met with criticism from minority shareholders, who feared Maruti was being reduced to a trading company and were sceptical on the price at which
Suzuki would sell cars to Maruti. In March, the company decided to seek approval from shareholders and it needs a two-third verdict in favour for the proposal to go through.
“We have been conservative in paying dividends as we were saving for future investments. Most of our expansions have been funded through internal accruals,” said RC Bhargava, chairman, MSIL.
“With Suzuki investing for us in Gujarat and a healthy cash surplus of Rs 9,000 crore we decided to increase our dividend payout. Going forward our intention would be to keep the dividend payout ratio between 18-30% from the current 15%,” he added.
The company expects to grow at over 10% in 2014-15.