Maruti's Guj plant: LIC, MFs say awaiting shareholders meet

Written By Unknown on Jumat, 24 Oktober 2014 | 21.03

While LIC is the single largest minority investor in the country's largest car maker with 6.8 percent holding, mutual funds hold around 6.53 percent and domestic financial institutions hold 7.95 percent.

Domestic financial institutions led by state-owned LIC and mutual funds , who together hold
around 21.3 percent in  Maruti Suzuki , are likely to firm up their stance after the auto major's shareholders meeting next month about its plans to set up a car plant in Gujarat as a
fully-owned subsidiary of its Japanese parent.

While LIC is the single largest minority investor in the country's largest car maker with 6.8 percent holding, mutual funds hold around 6.53 percent and domestic financial institutions hold 7.95 percent.

Ever since Maruti's Japanese parent announced its plans to set up an assembly line Gujarat as its fully-owned subsidiary eight months ago, the minority investors were up in
arms, as they feared that Suzuki would later make Maruti just a contract manufacturer and not full-fledged car company. 

"We are yet to take a call on the issue," an LIC official said, and pointed out that it's too early and the company is yet to get its shareholders nod. On the other hand, mutual fund houses are divided on the issue. They feel that why should the company not set up its own plant, rather than setting up it through a subsidiary whose future is uncertain.

Maruti Suzuki will meet its shareholders at an extraordinary general body meeting next month to secure their approval for the project. The company needs to secure the
permission of at least 75 percent shareholders for the investment in the plant.

"We haven't formed an opinion on Maruti Suzuki's move to set up its trading unit in Gujarat as of now and we will take a call at the Maruti shareholders meeting early November," a senior official of LIC told PTI requesting anonymity.

When asked if the LIC will go by the recommendation of proxy advisors, the official said, "it's wrong to believe that LIC will go by the advice of proxy advisors. Let me reiterate that we are yet to form an opinion on the issue."

The mutual fund houses are confused about what will be the future of the subsidiary once its 15-year agreement ends with Maruti Suzuki.

"We don't know what will happen to the subsidiary after 15 years when its agreement with Maruti-Suzuki comes to an end," CIO of a MF house said, adding, "we are currently
evaluating the company's plans before we finally come up with our own stand on the matter." 

Maruti Suzuki stock price

On October 23, 2014, Maruti Suzuki India closed at Rs 3164.60, down Rs 17.1, or 0.54 percent. The 52-week high of the share was Rs 3195.00 and the 52-week low was Rs 1484.20.


The company's trailing 12-month (TTM) EPS was at Rs 96.45 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 32.81. The latest book value of the company is Rs 694.45 per share. At current value, the price-to-book value of the company is 4.56.


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