MFs send second letter to Maruti opposing Gujarat Plant

Fund houses also met Sebi last week to express their concerns

Even as Maruti Suzuki plans to push ahead with the controversial Gujarat plant proposal, mutual fund houses have decided not to go down without a fight.

In fact, they have upped their ante against Maruti by writing another letter to the Japanese carmaker.

The second letter follows an 'unsatisfactory response' by Maruti to the initial letter sent jointly by top fund houses, said a source.

In the first letter, that ran into seven pages, fund houses had highlighted their concerns not just about the Gujarat plant but also on high royalty payments made by Maruti Suzuki to its parent Suzuki.

"Maruti has received our second letter on Monday. The press release answering the first letter wasn't satisfactory. We will wait for a few days for their response," said a fund manager.

Sources have said that fund houses have once again raised the issue of high royalty payments and also have questioned the role of independent directors of Maruti while clearing the Gujarat Plant proposal.

Fund houses had earlier expressed their concern that Maruti might end up being just a trading company if Japan's Suzuki's wholly-owned subsidiary develops the Gujarat unit. The fund managers had also sought a detailed and unambiguous explanation from Maruti on 'incremental capex, cash flows and initial investments.

Fund houses also met market regulator Securities and Exchange Board of India (Sebi) over Maruti issue last week.

A fund manager said Sebi hasn't promised any action but noted all the concerns that we raised.

Mutual funds' total exposure in Maruti Suzuki is over Rs 2,000 crore across schemes.