Maruti Suzukis Gujarat plant to get additional boost of Rs 3,000 crore

Suzuki Motor Corporation will have to infuse additional amount of Rs 3,000 crore into its upcoming manufacturing facility in Gujarat. This is nearly double the equity amount the company had planned earlier to put into this plant. This is the result of opposition faced from minority shareholders and analysts, which has ultimately brought about some changes to the planned structure.

Commenting over this, RS Bhargava, Chairman, says, "The structure remains unchanged. The only difference is, under the earlier plan, Suzuki was to invest Rs 3,000 crore as equity in the new plant. But now, it might have to invest close to Rs 6,000 crore, depending on growth, timing and the amount accruing from depreciation, and when the plant reaches production of 1.5 million cars, he says."

He adds saying that the move will benefit both MSIL and its shareholders. “Yes, it will increase the quantum of profit for Maruti Suzuki.” The report also suggests that Bhargava doesn’t expect the deal to receive closure before August-September this year. Commenting more on this, he said, “The new plan does not mean they (shareholders) would not have made profits under the earlier one... If they are making 'x' profit now, they would have made 60 per cent of x earlier, that's not small. If everyone is saying the second deal is very good and share prices are going up, there was no reason for shares to fall earlier, either. A deal, even under the earlier proposal, would have been better than no deal. No shareholder ever said he was opposing the deal because he wanted more profits... they said it was bad for company's shareholders, which is not true."

Bhargava said that the fundamentals of the deal remain intact: “Our fundamental position - that Suzuki will set up a 100 per cent subsidiary - remains unchanged. That the subsidiary will undertake contract manufacturing exclusively for Maruti Suzuki also remains unchanged."

Maruti Suzuki will introduce three new models this year- Ciaz sedan, facelift models of both Swift hatch and Swift Dzire- and will be utilising cash reserves of Rs 8,000 crore in new product development.