India’s leading carmaker, Maruti Suzuki India, has revealed its plan to issue shares worth INR 128.41 billion (USD 1.54 billion) to Suzuki Motor, allowing them to acquire a local manufacturing facility previously owned by the Japanese automaker.
First Time Value Disclosed
This announcement marks the first instance where Maruti has disclosed the value associated with this plant situated in the western state of Gujarat. The initial intention to acquire the facility was conveyed in July.
Share Issue Details
To facilitate this transaction, Maruti Suzuki will be issuing 12.3 million preference shares, each valued at INR 10,420.85 , which reflects a 2.7% discount in relation to the stock’s closing price on Monday. The share issue is anticipated to raise Suzuki’s stake in Maruti from 56.48% to 58.19%, in line with a company estimate made in August.
Significant Investments and Production Focus
Suzuki has made substantial investments, approximately 180 billion rupees, in this facility since 2014. It is responsible for manufacturing cars on behalf of Maruti and initiated operations in 2017. The plant boasts an annual production capacity of 750,000 units.
Maruti Suzuki aims to have full ownership of this plant, providing them with enhanced control over production, including electric vehicles (EVs), and the flexibility to adapt to changes in market demand. The plant will serve as the production site for the company’s inaugural EV offering, a sport utility vehicle (SUV). The carmaker envisions manufacturing six EV models by 2030, all of which will originate from this plant.
Market Response
The news regarding the share issue has influenced the stock value of Maruti Suzuki, with shares initially declining by up to 1.3%. However, they later managed to recover. Notably, the company’s shares have increased by over 8% since the announcement of the acquisition alongside their quarterly results on July 31.