Responding to investors concerns over Suzuki Motor Corp. floating a separate subsidiary to invest in Gujarat, the BSE-listed Maruti Suzuki India Ltd. (MSIL) said that if its contract manufacturing deal with Suzuki expires and is not extended, the Japanese parent will transfer the Gujarat assets to Maruti at an appropriate valuation.
“If the contract manufacturing agreement expires, and in case is not extended by mutual consent, the assets of the Gujarat subsidiary would be transferred to Maruti at a fair value to be determined by independent valuation,” the company said in a statement.
The Suzuki’s subsidiary in Gujarat would operate on the basis that while it would not make any losses, it would also not accumulate any cash surpluses.
“The capex needs of the Gujarat subsidiary would be met by i) the depreciation amount available with the subsidiary, ii) by an amount generated as net surplus from the car pricing and iii) by SMC infusing fresh equity, to the extent necessary,” the company said.
To be sure, in January, Suzuki said that it will invest Rs3,000 crore for expansion in Gujarat under a new subsidiary, instead of Maruti which is sitting with a cash surplus of Rs7,000 crore. This in turn raised concerns from various shareholders, including Life Insurance Corporation (LIC) that controls 6% stake in Maruti.
In the statement, company further added that the capex needs of the subsidiary would be determined jointly by MSIL and the subsidiary, consistent with the production needs of MSIL from the Gujarat project.
Source: Auto News in Hindi
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