Comments
Several major private life insurers have joined forces with top mutual fund houses to oppose Maruti Suzuki India’s decision to allow Suzuki Motor Corporation to implement its Gujarat project through a 100 per cent subsidiary. They want Maruti to pursue the project on its own, or through a fully owned subsidiary.
The life insurers which oppose the Maruti Board’s decision include HDFC Standard Life, Birla Sun Life Insurance, Reliance Life Insurance and SBI Life Insurance. This is the first time they have voiced their opposition to the decision on the Gujarat plant.
In all, 16 institutional investors — comprising both life insurance players and mutual fund houses — have written a joint letter to the company’s Board. They have asserted that its decision to let Suzuki Motor Corporation implement the Gujarat plant through a subsidiary was “ill-conceived” in its entirety.
Together, these institutional investors are said to represent “adequate ownership” of Maruti’s equity capital.
Value erosionSuzuki Motor Corporation undertaking the Gujarat project will over time convert Maruti Suzuki into a shell company, the letter has said. Also, it will result in outsourcing of the core manufacturing activity, which is fundamental and critical for Maruti, it added.
“Worse, such outsourcing is given to the wholly-owned subsidiary of Suzuki through a related-party transaction on terms that are very unfavourable to MSIL and its shareholders and blatantly favouring the future prospects and interests of Suzuki, the promoter of MSIL,” the letter said.
Investors also want to know whether the Maruti Board invited such a proposal or merely accepted an unsolicited proposal made by Suzuki.
Second letterFor mutual fund houses, the latest letter is the second one to the Maruti Board on the Gujarat plant.
In an earlier letter, they had highlighted, among other things, that Suzuki has been charging royalty at a rate of 5.7 per cent, which they feel is “extraordinarily high”.
This point has been reiterated in the second letter as well.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.