Maruti board approves INR 12,800 crore preferential issue to Suzuki Motor Corp

Source : PTI | India’s largest carmaker Maruti Suzuki on Friday said its board has approved the allotment of 1,23,22,514 equity shares of the company to Suzuki Motor Corporation on a preferential basis as consideration for the acquisition of a 100% stake of SMC in Suzuki Motor Gujarat (SMG).

The decision to allot shares at a price of INR 10,420.85 per equity share for a total consideration of INR 12,841.1 crore was taken at a board meeting this morning. Maruti shares were trading 0.3% higher at INR 10,525 on BSE in the opening session.

Following the preferential allotment, Suzuki Motor Corporation Japan’s stake in Maruti Suzuki India will increase from 56.48% to 58.19%.

Back in August, Maruti Suzuki said it would acquire parent Suzuki Motor’s manufacturing facility in Gujarat to ensure better management control over the unit. The local car market leader said this will help it respond faster to customer needs in India.

Japan’s Suzuki Motor owns a 100% stake in SMG, which supplies its entire production to Maruti Suzuki. Suzuki Motor in 2014 decided to set up a separate manufacturing facility in Gujarat as its wholly owned subsidiary. SMC has invested INR 18,000 crore to manufacture 750,000 vehicles annually in SMG. The last known book value of SMG was INR 12,755 crore.

MSI board, in its meeting held on July 31, 2023, had approved the termination of the contract manufacturing agreement with SMG and the acquisition of its shares by SMC at a price to be determined in accordance with all applicable laws and regulations.

MSI Chairman R C Bhargava had said that the share swap method adopted for the acquisition of SMG is far better for the shareholders of the company.

Since 2014, SMC has invested INR 18,000 crore in SMG. A fully-owned subsidiary of SMC, SMG supplies its entire production exclusively to Maruti Suzuki India.