Maruti Suzuki, a key player in the automotive industry, is set to issue equity shares to Suzuki Motor Corp (SMC) in a strategic move to acquire full ownership of Suzuki Motor Gujarat Private Limited (SMG). The preferential allotment of shares, subject to regulatory approvals, signifies Maruti Suzuki’s commitment to enhancing its position in the market.
Should the shares be allocated at the prevailing market price, this move could potentially raise Suzuki Motor’s stake in Maruti Suzuki from 56.4% to nearly 58%, marking a significant shift in ownership dynamics. The final share price will be determined during an upcoming Board meeting, ensuring a fair valuation process.
Maruti Suzuki’s Board has greenlit the issuance of equity shares to SMC, constituting the payment for SMC’s complete stake in SMG, a deal initially disclosed on July 31. This strategic acquisition is poised to transform SMG into a wholly owned subsidiary of Maruti Suzuki, as confirmed by a statement to the Bombay Stock Exchange.
Elaborating on the specifics, the company stated, “The exact number of securities to be issued to SMC as part of the 100% SMG acquisition will be determined in a subsequent Board Meeting, based on relevant valuation reports and in adherence to regulatory and statutory guidelines.”
Critical details such as subscription details, issue price of securities, and post-allotment investor holdings will be finalized during a forthcoming Board meeting, ensuring alignment with regulatory requirements.
Earlier, on July 31, 2023, the Board endorsed the termination of the contract manufacturing agreement with Suzuki Motor Gujarat (SMG), while simultaneously securing the shares of SMG from Suzuki Motor Corporation (SMC) at a valuation consistent with the contract and legal norms. This decision was contingent upon meeting all legal obligations, including minority shareholder consent.
In a recent session, the Maruti Suzuki Board scrutinized two viable strategies for acquiring SMC’s equity in SMG: cash payment or preferential allotment of Maruti Suzuki equity shares. The implications of both approaches were thoroughly evaluated to assess their impact on Maruti Suzuki’s profitability, earnings per share, and shareholder dividends until 2031.
Maruti Suzuki’s forward-thinking maneuver to acquire its Gujarat subsidiary underscores the company’s dedication to strategic expansion, setting the stage for a potential shift in ownership dynamics while adhering to regulatory requisites.