India’s largest carmaker Maruti Suzuki on Tuesday said that it would issue shares worth Rs 12,841 crore ($1.54 billion) to Suzuki Motor to buy a local manufacturing plant from the Japanese automaker, news agency Reuters reported. This is the first time that Maruti has disclosed a value for the plant in Gujarat. It first said it would buy the plant in July.
Maruti will issue 12.3 million preference shares at Rs 10,420.85 each, which is a 2.7 per cent discount to the stock's closing price on Monday. The stock dropped 0.6 per cent on the day. The share issue will raise Suzuki's stake in Maruti to 58.19 per cent from the existing 56.48 per cent, roughly in line with the company's estimate in August. Since 2014, Suzuki has invested about Rs 18,000 crore in the plant, which manufactures cars for Maruti. The plant began operations in 2017 and has an annual capacity of 750,000 units.
Maruti has said it expects that full ownership of the plant will give it a better grip on production, including of electric vehicles (EVs), and help it adjust production to changes in demand. The company's first EV offering a sport utility vehicle (SUV) will be manufactured in the Gujarat plant. It plans to have six EV models by 2030, each of which will be produced at the plant.
Maruti's shares fell as much as 1.3 per cent after the news, before paring some losses to last trade at Rs 10,635. They have risen over 8 per cent since Maruti announced the deal along with its quarterly results on July 31.
On October 17, Maruti Suzuki India’s board of directors will consider issuing shares to SMC instead of cash consideration. In turn, Maruti Suzuki will acquire SMC’s entire equity stake in Suzuki Motor Gujarat. Maruti Suzuki told stock exchanges on July 31 that its board approved the termination of the contract manufacturing agreement with Suzuki Motor Gujarat Private Limited (SMG).
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