Maruti Suzuki again comes in controversy when
Company has planned to handover the proposed Gujarat Plant to Suzuki. Maruti
Suzuki will buy vehicles from that plant and sell them in open market.
Currently Maruti produces and sells its own vehicles.
This means that fingers will be
pointed out at business model of company as their manufacturing facility is
with other company and Maruti is just selling the same. This means that they
don’t concentrate on Manufacturing business.
This latest event is like 2004
incident when Suzuki Powertrain was formed for making diesel engines, (Majority
of Suzuki Powertrain was Held Suzuki). Independent directors of Maruti want
Suzuki to clearly state that Maruti will not be asked to fund the Gujarat
project later. There were also same concerns that Maruti Suzuki which commands
50% Market share in cars will get turn into Trading company instead of
Carmaker.
This brings strong protest from four
insurance firms and 12 mutual funds which holds shares in Maruti .They all
says that this is wrong act and will be a Value eroding oppressive Transaction.
12 Mutual fund companies which raised
their voice are like HDFC MF, ICICI Prudential MF, Reliance MF and insurance
leaders Reliance Life and SBI Life. Ever LIC India which Holds 7% in company
raised their concerns.
Maruti board Independent
directors which have opposed the decision are:-
The independent
directors includes corporate lawyer
àCorporate Lawyer Pallavi Shroff,
former Ranbaxy chief executive D S Brar
à NHAI chairman R P Singh
àEx-PwC head Amal Ganguli.
This decision was taken in last
meeting held by Maruti and they surprised all investors to Handover Gujarat
Plant. Meeting for the same will be held on 15th March. Osamu Suzuki Suzuki Chairman will also
come on Saturday to attend the meeting. But all Mutual fund Houses and
Insurance companies wants the decision to be reversed. Meeting is held for
discussion on budgetary allocation for next financial year.
This issue has been reached to
SEBI and angry Institutional investors are looking at a legal challenge to the
company's plan to company law Board to hand over the proposed Gujarat plant to
parent Suzuki.
Maruti management has said that
this deal will be profitable for both the company and investors and this is win-
win situation and that decision can’t be reversed.
Maruti Chairman Bhargava also said that there is no reason to re-consider
the decision. He said that they can’t accept
less profitable option for Maruti, Management always works for maximizing profit
and shareholders’ value and that is what
management is doing.
Fund houses can challenge the
decision in CLB only in case of three scenarios:-
àEither those holding 10% of the
issued capital (by value)
àOne-tenth of the shareholders.
àAt least 100 shareholders to
oppose decision.
Fund managers said that the “Maruti board did not maintain the highest levels of corporate governance”
Fund managers said that the “Maruti board did not maintain the highest levels of corporate governance”
All fingers are
crossed till board meeting Held on 15th March.