Maruti Suzuki Offers Preferential Shares To Acquire Gujarat Plant From Suzuki Motor

Maruti Suzuki India is in the process of acquiring 100 per cent ownership of the Suzuki Motor Gujarat (SMG) plant. The company today announced that it will issue Maruti Suzuki India Limited’s equity shares on a preferential allotment basis to acquire the plant from parent company Suzuki Motor Corporation. The company’s board of directors have already approved termination of the contract manufacturing agreement (CMA) with SMG, in a meeting held on July 31, 2023. The price for the acquisition will be determined as per the CMA and all applicable laws and regulations.

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In a regulatory filing, Maruti Suzuki India said, “The Board of Directors, at its meeting held today, has approved issue of equity shares of the Company on preferential allotment basis to Suzuki Motor Corporation (SMC), as consideration for the acquisition of 100 per cent stake of SMC in Suzuki Motor Gujarat Private Limited (SMG). This will be subject to applicable regulatory and statutory approval(s), as may be required, including requisite approval of shareholders. Post such acquisition, SMG will become a wholly owned subsidiary of the company.”

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Maruti says the board’s decision was subject to all legal and regulatory compliances including minority shareholders’ approval. It also added that the board evaluated both the options for acquiring the SMC equity in SMG – payment in cash and the issue of MSIL equity shares on a preferential allotment basis. In fact, it has also considered, the impact on the profitability, the earnings per share and the dividend payment to shareholders, for each year up to 2031 before making the decision.

The data analysed by Maruti Suzuki India’s board of directors showed three things. Firstly, the company’s profit after tax (PAT) is expected to be higher in the share swap option, each year increasing by over Rs. 1400 crores in FY 2030-31. Secondly, the company earnings per share (EPS) will also be higher, starting from Rs 7 per share and going up to Rs. 20 per share in 2030-31. Finally, the dividend payable, with the same payout ratio, would be higher in the equity swap option.