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Toshihiro Suzuki, executive vice president of Suzuki Motor (left), and Kenichi Ayukawa, managing director and chief executive officer, pose with the company’s Ciaz concept sedan at its unveiling in Noida. India’s largest carmaker yesterday said it is planning to invest around Rs40bn in the next fiscal on various activities such as the introduction of new models, marketing and R&D.
Auto major will seek approval of minority shareholders on parent Suzuki Motor’s plan to build a fully-owned factory in Gujarat amid investor calls to scrap proposal
India’s largest carmaker Maruti Suzuki plans to invest around Rs40bn in the next fiscal on various activities such as the introduction of new models, marketing and R&D.
The company’s board, which met yesterday, approved the investment for the next fiscal besides coming out with new proposals for the proposed manufacturing facility in Gujarat.
“Board approved capex for 2014-15 will be around Rs40bn. The investments would be mainly for new models, marketing infrastructure and R&D,” a company spokesperson said.
The company, which had launched hatchback Celerio at the Auto Expo last month, showcased two concept cars – SX4 S-Cross and Ciaz during the show.
It is understood that the SX4 S-Cross may hit the Indian market later this year.
The company is also in the developmental stage of a compact sports utility vehicle that is likely to be launched early next year.
Besides, it has also been strengthening its research and development centre at Rohtak in Haryana, where it is building a test track as well at the facility that is spread over 600 acres. It is enhancing the capability of the centre in order to launch new models in the market faster.
For the ongoing fiscal, ending March 31, the company’s capex is around Rs 3,000 crore.
Amid increasing competition and a sluggish market, MSIL has been focusing on strengthening its leadership position by focusing on rural areas and niche segment to boost sales.
The company registered 1.8% increase in its domestic sales in February at 99,758 units as against 97,955 units in the same month last year.
Maruti Suzuki India also said it will seek the approval of minority shareholders on parent Suzuki Motor Corp’s plan to build a fully-owned factory in the state of Gujarat amid investor calls to scrap the proposal.
“Even though not required by law, the board decided, as a measure of good corporate governance, to seek minority shareholders’ approval,” Maruti, India’s biggest carmaker by volume, said in a statement yesterday.
Suzuki Motor in January said it will spend ¥50bn ($492mn) on the factory in western India that would start production in 2017 with an initial annual capacity of 100,000 cars, and will supply all its output to Maruti. Suzuki Motor owned 56.21% of Maruti as of December 31, according to data compiled by Bloomberg.
“Maruti has addressed minority shareholders’ concerns with today’s clarifications,” said Basudeb Banerjee, an analyst at Quant Broking Pvt. in Mumbai. “With clarifications on the funding, and also on the valuation of the plant, this is definitely a positive development.”
Maruti’s decision comes after as many as 16 investors representing mutual funds and insurers termed the company’s move as a “blatantly wrong and value-eroding oppressive transaction,” in a March 5 letter they wrote to Maruti, a copy of which was obtained by Bloomberg News. Chairman R C Bhargava confirmed receiving the letter, which was the second by investors to the board in as many months, and said the company stands by its decision.
Maruti Suzuki shares have dropped 1.4% this year, closing at Rs1,738.45 in Mumbai on Friday. The benchmark S&P BSE Sensex of top 30 Indian stocks has climbed 3% in 2014.
Depreciation and equity brought in by Suzuki Motor will fund the entire capital expenditure for the Gujarat unit, which would function on a no-surplus-no-loss basis, Maruti said in yesterday’s statement. The facilities of the Gujarat plant would be transferred to Maruti Suzuki at book value in the event that both parties mutually agree to terminate the contract manufacturing agreement, it added.
The plan would convert Maruti “into a shell company” over time, money managers including HDFC Asset Management Co., the nation’s biggest mutual fund, DSP BlackRock Investment Managers Pvt. and Birla Sun Life Insurance Co., wrote in the March 5 letter.
“This clearly is not in the best interests of MSIL and its shareholders and is in fact significantly detrimental to them,” they wrote. “We wish to remind you of your fiduciary duty and urge you to carry out the Gujarat project under the ownership of MSIL.”
The production of cars by a Suzuki-owned subsidiary would lead to lower earnings than from cars manufactured by Maruti directly, Ashvin Shetty and Ritu Modi, analysts at Ambit Capital, wrote in a research note on February 28.
The cost of production of vehicles at the Suzuki Gujarat factory would be calculated in an identical manner to those made by Maruti’s existing plants, Maruti said in a statement on February 26. The company will profit from the sale of the cars to dealers and will get a higher return on capital than if it had been the Indian automaker’s investment, Bhargava said on January 28.
Maruti to invest Rs40bn in 2015
Auto major will seek approval of minority shareholders on parent Suzuki Motor’s plan to build a fully-owned factory in Gujarat amid investor calls to scrap proposal
India’s largest carmaker Maruti Suzuki plans to invest around Rs40bn in the next fiscal on various activities such as the introduction of new models, marketing and R&D.
The company’s board, which met yesterday, approved the investment for the next fiscal besides coming out with new proposals for the proposed manufacturing facility in Gujarat.
“Board approved capex for 2014-15 will be around Rs40bn. The investments would be mainly for new models, marketing infrastructure and R&D,” a company spokesperson said.
The company, which had launched hatchback Celerio at the Auto Expo last month, showcased two concept cars – SX4 S-Cross and Ciaz during the show.
It is understood that the SX4 S-Cross may hit the Indian market later this year.
The company is also in the developmental stage of a compact sports utility vehicle that is likely to be launched early next year.
Besides, it has also been strengthening its research and development centre at Rohtak in Haryana, where it is building a test track as well at the facility that is spread over 600 acres. It is enhancing the capability of the centre in order to launch new models in the market faster.
For the ongoing fiscal, ending March 31, the company’s capex is around Rs 3,000 crore.
Amid increasing competition and a sluggish market, MSIL has been focusing on strengthening its leadership position by focusing on rural areas and niche segment to boost sales.
The company registered 1.8% increase in its domestic sales in February at 99,758 units as against 97,955 units in the same month last year.
Maruti Suzuki India also said it will seek the approval of minority shareholders on parent Suzuki Motor Corp’s plan to build a fully-owned factory in the state of Gujarat amid investor calls to scrap the proposal.
“Even though not required by law, the board decided, as a measure of good corporate governance, to seek minority shareholders’ approval,” Maruti, India’s biggest carmaker by volume, said in a statement yesterday.
Suzuki Motor in January said it will spend ¥50bn ($492mn) on the factory in western India that would start production in 2017 with an initial annual capacity of 100,000 cars, and will supply all its output to Maruti. Suzuki Motor owned 56.21% of Maruti as of December 31, according to data compiled by Bloomberg.
“Maruti has addressed minority shareholders’ concerns with today’s clarifications,” said Basudeb Banerjee, an analyst at Quant Broking Pvt. in Mumbai. “With clarifications on the funding, and also on the valuation of the plant, this is definitely a positive development.”
Maruti’s decision comes after as many as 16 investors representing mutual funds and insurers termed the company’s move as a “blatantly wrong and value-eroding oppressive transaction,” in a March 5 letter they wrote to Maruti, a copy of which was obtained by Bloomberg News. Chairman R C Bhargava confirmed receiving the letter, which was the second by investors to the board in as many months, and said the company stands by its decision.
Maruti Suzuki shares have dropped 1.4% this year, closing at Rs1,738.45 in Mumbai on Friday. The benchmark S&P BSE Sensex of top 30 Indian stocks has climbed 3% in 2014.
Depreciation and equity brought in by Suzuki Motor will fund the entire capital expenditure for the Gujarat unit, which would function on a no-surplus-no-loss basis, Maruti said in yesterday’s statement. The facilities of the Gujarat plant would be transferred to Maruti Suzuki at book value in the event that both parties mutually agree to terminate the contract manufacturing agreement, it added.
The plan would convert Maruti “into a shell company” over time, money managers including HDFC Asset Management Co., the nation’s biggest mutual fund, DSP BlackRock Investment Managers Pvt. and Birla Sun Life Insurance Co., wrote in the March 5 letter.
“This clearly is not in the best interests of MSIL and its shareholders and is in fact significantly detrimental to them,” they wrote. “We wish to remind you of your fiduciary duty and urge you to carry out the Gujarat project under the ownership of MSIL.”
The production of cars by a Suzuki-owned subsidiary would lead to lower earnings than from cars manufactured by Maruti directly, Ashvin Shetty and Ritu Modi, analysts at Ambit Capital, wrote in a research note on February 28.
The cost of production of vehicles at the Suzuki Gujarat factory would be calculated in an identical manner to those made by Maruti’s existing plants, Maruti said in a statement on February 26. The company will profit from the sale of the cars to dealers and will get a higher return on capital than if it had been the Indian automaker’s investment, Bhargava said on January 28.
Maruti to invest Rs40bn in 2015
