Maruti Suzuki Gets Board Approval To Issue Shares To Parent Suzuki Motor Corporation

The company announced that this move will help it acquire a 100 per cent stake in Suzuki Motor Gujarat. 

Maruti Suzuki's board gave its nod to acquiring SMG shares by issuing the company’s shares to SMC, terming it better for both the minority shareholders and the company.  ( Image Source :PTI )

Maruti Suzuki India received approval to issue shares on a preferential basis to parent company Suzuki Motor Corporation (SMC) by it’s board on Tuesday. The company announced that this move will help it acquire a 100 per cent stake in Suzuki Motor Gujarat. 

According to a PTI report, the automaker’s board approved the issue of it’s equity shares to the SMC to allow it to pay for Suzuki Motor Gujarat (SMG) shares. The company revealed in the exchange filing that SMG will become a wholly-owned subsidiary of Maruti Suzuki India (MSI) post the acquisition. 

The board will further decide the total number of shares to be issued to SMC to facilitate the acquisition of a 100 per cent stake in SMG. This decision will be taken on the basis of valuation reports, adhering to the applicable regulatory and statutory framework. 

In a meeting held on July 31, the company’s board approved the contract manufacturing agreement with SMG to be terminated. In the recent meeting, the board considered two options to acquire the larger Suzuki Motor Corporation’s equity in the Gujarat-based company. 

The options of cash payment and issue of MSI shares on a preferential allotment basis were discussed in the meeting. The company considered the implications of both the options on it’s profitability, earnings per share, and dividend payment to shareholders for every year till 2031 before making the decision, the report noted. Taking into consideration these factors, the Maruti Suzuki India board gave its nod to acquiring SMG shares by issuing the company’s shares to SMC, terming it better for both the minority shareholders and the company. 

MSI’s board further stated that minority shareholders’ approval should be sought at an EGM or through postal ballot, and approval for issuance of shares on a preferential basis should be also be sought via the same methods. 

Maruti Suzuki India announced earlier on July 31 that the Gujarat-based SMG will be acquired by the automaker to bring together all manufacturing-related entities in the country under one organisation. 

Suzuki Motor Gujarat is a fully-owned subsidiary of the larger Suzuki Motor Corporation and acts as an exclusive supply chain for Maruti Suzuki India. It was incorporated in 2014, and has a capacity of of 7.5 lakh units per annum at the moment.