The new plant in Gujarat will be 100 per cent subsidiary of the parent company.
_0_0.jpg "Suzuki to make Maruti cars at Gujarat facility")
New Delhi: Japan based Suzuki Motor Corporation, the majority shareholder in India’s largest carmaker Maruti Suzuki, has decided that the new plant to be built in Gujarat will be 100 per cent subsidiary of the parent company.
The new unlisted subsidiary — Suzuki Motor Gujarat Private Ltd. — will produce cars from the new Gujarat plant and will sell them only to Maruti Suzuki. Maruti Suzuki will inturn market cars produced at the Gujarat plant. Maruti Suzuki board approved implementing the expansion through a 100 per cent Suzuki subsidiary.
Maruti Suzuki’s shares tanked over eight per cent after the announcement. Maruti Suzuki will make no investments in the Gujarat plant. The new subsidiary in Gujarat will contract manufacture for Maruti Suzuki.
“We are surprised by the change in company’s growth strategy for the future. The stock rating is currently under review,” said Yaresh Kothari, research analyst, (auto and auto ancillary), Angel Broking.
Maruti Suzuki India, chairman, R.C. Bhargava defended the decision saying that it will be beneficial for the company as it will increase Maruti’s earning without making any capital investments.
“Maruti would financially benefit from the interest earnings resulting from not investing its money in this project. It would also benefit because the vehicles would be sold to Maruti by the Suzuki subsidiary without any return on capital employed,” he said. Suzuki Motor Corporation, chairman, Osamu Suzuki said that the new subsidiary will be set up by April.
( Source : dc )
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