Maruti Suzuki’s Preferential Share Allotment to SMC for Suzuki Motor Gujarat Acquisition
Maruti Suzuki India has announced its board’s approval for the allotment of over 1.23 crore shares to its parent company, Suzuki Motor Corporation (SMC), on a preferential basis. This strategic move is part of Maruti’s acquisition of a 100 per cent stake in Suzuki Motor Gujarat. The allotment of shares signifies a significant step in consolidating SMC’s position within Maruti Suzuki India and underscores the ongoing collaboration between the two entities.
Allotment Details
Maruti Suzuki’s board has approved the allotment of 1,23,22,514 shares to SMC, with each share having a face value of Rs 5. The allotment price per share has been set at Rs 10,420.85, as per the regulatory filing submitted by the auto major. The valuation report issued by RBSA Valuation Advisors LLP validates this allotment price, equating to a total value of Rs 12,841.1 crore.
Stake Increase for SMC
Upon the completion of the share allotment, SMC’s stake in Maruti Suzuki India (MSI) will rise to 58.19 per cent from the previous 56.48 per cent. This increase in ownership reflects SMC’s continued commitment to Maruti Suzuki’s growth and development as a key player in the Indian automotive market.
Background and Context
The decision to issue shares on a preferential basis to SMC follows the approval received from Maruti Suzuki shareholders for the related party transaction involving the acquisition of a 100 per cent stake in Suzuki Motor Gujarat (SMG). This move aligns with MSI’s broader strategy to streamline its production operations and enhance efficiency under a unified management structure.
Strategic Rationale
R C Bhargava, Chairman of Maruti Suzuki India, emphasized the benefits of the share-swap method adopted for the acquisition of SMG. He reiterated the company’s focus on consolidating production operations to support future growth objectives. Maruti Suzuki aims to achieve a total annual production of 40 lakh units by 2030-31, positioning itself as a leading player in the Indian automotive industry.
Investment in Suzuki Motor Gujarat
Since its inception in 2014, SMC has made substantial investments totaling Rs 18,000 crore in SMG. As a fully-owned subsidiary of SMC, SMG plays a critical role in supplying its entire production exclusively to Maruti Suzuki India. With a production facility located in Gujarat and an installed capacity of 7.5 lakh units per annum, SMG contributes significantly to Maruti Suzuki’s manufacturing capabilities and operational efficiency.
Market Response
Shares of Maruti Suzuki India were trading slightly up at Rs 10,501.95 apiece on the BSE, reflecting positive market sentiment towards the company’s strategic initiatives and growth prospects.
In conclusion, Maruti Suzuki’s preferential share allotment to SMC underscores the deepening collaboration between the two entities and reinforces Maruti’s position as a key player in the Indian automotive sector. This strategic move is aligned with Maruti’s vision for sustainable growth and leadership in the dynamic Indian market.
