Maruti Suzuki Board approves issue of shares to Suzuki Motor Corporation
Maruti Suzuki will issue equity shares on a preferential allocation basis to Suzuki Motor Corporation ahead of the purchase of SMC in Suzuki Motor Gujarat Private Limited (SMG), the firm stated in a public filing on Tuesday.
On Tuesday, Maruti Suzuki's board of directors approved the issuing of equity shares to the SMC. The business stated that the decision will be subject to any necessary regulatory and legislative clearances. SMG would become a completely owned subsidiary of Maruti Suzuki following the acquisition.
On July 31, the Maruti Suzuki board of directors authorized the termination of the contract manufacturing agreement (CMA) with Suzuki Motor Gujarat Private Limited and the acquisition of SMG shares from Suzuki Motor Corporation (SMC).
The board considered two alternatives for purchasing the SMC stock in SMG: cash payment and preferential issuance of MSIL equity shares. For each year through to 2031, the impact of both choices on MSIL's earnings was estimated.
Only after careful consideration of all factors did the board conclude that acquiring SMG shares through the issuance of Maruti Suzuki equity shares to SMC would benefit both minority shareholders and Maruti Suzuki.
In a press conference following the board announcement, Maruti management stated that given the 4 million car production objective and the spectrum of technologies being explored, including other fuel, there is a need to reorganize to address the challenges in the next ten years. According to Chairman RC Bhargava, the decision was made largely on the basis of changing circumstances and taking proper steps to be "ahead of the curve."
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