Maruti rises to record on funding for new plant

India’s biggest carmaker by volume rose 7.5 per cent to Rs1,868.20 at the close, the highest since the shares listed in July 2003. Indian markets were shut yesterday for a holiday.

By (Bloomberg)

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Published: Wed 19 Mar 2014, 10:48 AM

Last updated: Fri 3 Apr 2015, 5:16 PM

Maruti Suzuki India Ltd rose to a record in Mumbai trading after providing details of funding for a factory that will be wholly owned by parent Suzuki Motor Corp and saying it will seek minority shareholders’ opinion.

India’s biggest carmaker by volume rose 7.5 per cent to Rs1,868.20 at the close, the highest since the shares listed in July 2003. Indian markets were shut yesterday for a holiday.

Maruti will ask minority investors for their view on a planned 50 billion-yen ($492 million) plant that will be owned by Suzuki and supply all output to the Indian company, the New Delhi-based carmaker said March 15. The factory’s depreciation and Suzuki’s equity contribution will fund its entire capital expenditure, and assets will be transferred to Maruti at book value if both companies terminate their contract, it said. The details provided by Maruti “addressed some of the major concerns investors had over the Suzuki plant,” said Yaresh Kothari, an analyst at Angel Broking Pvt in Mumbai.

The timing of the minority shareholder vote hasn’t been fixed, and management will meet with institutional investors before that, Maruti Chairman R.C. Bhargava said today. “Legally it’s not binding but how we take it is another matter.” Suzuki Motor owned 56.21 per cent of Maruti as of December 31, according to data compiled by Bloomberg.

The factory, to be located in Gujarat, western India, is scheduled to start production in 2017. The production of cars by a Suzuki-owned subsidiary would lead to lower earnings than from vehicles made by Maruti directly, Ashvin Shetty and Ritu Modi, analysts at Ambit Capital Pvt, wrote in a note on February 28.


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