‘Maruti’s Gujarat plant deal adds to operational complexity’

The proxy advisory firm’s latest comments come within days of Maruti saying that it expects to save about Rs 10,500 crore in the first 15 years by not investing in the Gujarat facility.

By: Press Trust of India | New Delhi | Published:June 10, 2014 1:36 am

Maruti Suzuki India’s recent update on the Gujarat plant, proposed to be implemented by its Japanese parent Suzuki Motor Corp, is “razzle dazzle” and the transaction adds to the complexity of the operating structure, according to proxy advisory firm IiAS.

The proxy advisory firm’s latest comments come within days of Maruti saying that it expects to save about Rs 10,500 crore in the first 15 years by not investing in the Gujarat facility.

Institutional Investor Advisory Services (IiAS) on Monday said the recent update, details of the term sheet of the Contract Manufacturing Agreement (CMA) and the Lease Deed, and the road shows Maruti plans to conduct, are a “mere razzle dazzle”.

Noting that the transaction adds to complexity of the operating structure, the proxy firm said, “the balance of power, already in favour of Suzuki, will now tilt completely towards them and Maruti will have lost control over its own destiny”.

Last week, Maruti Suzuki India — which agreed to let parent Suzuki Motor Corp own an upcoming plant in Gujarat — had said it expects to save about Rs 10,500 crore in the first 15 years by not investing in the facility.

With regard to the contentious Gujarat plant, the company had said it proposes to enter into a CMA with Suzuki Motor Gujarat (SMG), a fully owned subsidiary of Suzuki Motor Corp (SMC).

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