Maruti's minority shareholders eagerly awaiting EGM outcome

Indian financial institutions led by the state-owned Life Insurance Corp and mutual funds, who together hold around 14.49 per cent in car maker Maruti Suzuki, are likely to firm up their stance on the hiving-off of Maruti's Gujarat plant to Japanese parent Suzuki after the auto major's shareholders meeting next month.

The meeting is expected to discuss Maruti's plans to set up a car plant in Gujarat as a fully-owned subsidiary of Suzuki Motor Corp.

Suzuki announced its plan to set up the upcoming assembly plant in Gujarat as its fully-owned subsidiary eight months ago, and ever since then minority investors are up in arms as they fear that Suzuki would later make Maruti just a contract manufacturer.

LIC is the single-largest minority investor in the country's largest car maker with a 6.8-per cent holding, while mutual funds hold around 6.53 per cent.

According to a PTI report, mutual fund houses are divided on the issue. Some feel the company should be able to set up its own plant, rather than setting it up through a subsidiary whose future was uncertain.

Maruti Suzuki will meet its shareholders at an extraordinary general body meeting next month to secure their approval for the project.

The company needs to secure the permission of at least 75 per cent shareholders for the investment in the plant.

''We haven't formed an opinion on Maruti Suzuki's move to set up its trading unit in Gujarat as of now and we will take a call at the Maruti shareholders meeting early November,'' a senior official of LIC said, according to the agency report.

When asked if the LIC will go by the recommendation of proxy advisers, the official said, ''It's wrong to believe that the LIC will go by the advice of proxy advisers. Let me reiterate that we are yet to form an opinion on the issue.''

The mutual fund houses are confused about what would be the future of the subsidiary once its 15-year agreement ended with Maruti Suzuki.

''We are currently evaluating the company's plans before we finally come up with our own stand on the matter,'' an official of a mutual fund house said.

However, another official said the company had assured that the proposed plant would function on the basis of no-profit-no loss and it was likely to transfer its assets to Maruti-Suzuki's book in the future.