Minority shareholders give thumbs up to Maruti's Gujarat proposal

Minority shareholders of Maruti Suzuki, the country's largest car maker, appear to have given their approval to allow Suzuki to invest and run its third plant in Gujarat.

Maruti has a contract manufacturing agreement with Suzuki for the Gujarat plant, under which the Japanese auto major will sell products to Maruti on a no-profit-no-loss basis.

All related party transactions need approval of minority shareholders, which is why the proposal had to be put to vote. Following this, Suzuki will manufacture cars at this plant and sell it to Maruti at no profit-no-loss basis while Maruti will sell the products.

According to sources in the mutual fund industry, the resolution has sailed through with more than 50 per cent shareholders voting in favour of the proposal.

All insurance companies, including Life Insurance Corporation, which owns five per cent in the company, are said to have voted in favour of the resolution.

HDFC Mutual Fund, Birla Sun Life MF and ICICI Prudential MF, which have the largest shareholding in the company, are understood to have abstained from the vote, while UTI Mutual Fund and SBI Mutual Fund may have voted against it, said sources.

Maruti needs an affirmative voting from a minimum 50 per cent of the votes cast. Sources in the insurance and mutual funds industries said that nearly 60 per cent of minority shareholders have voted in favour of the proposal, while many others abstained from voting.

Maruti refused to comment on the outcome of the voting. Chairman R C Bhargava could not be reached for comment. The voting of minority shareholders concluded on Tuesday and a formal announcement of the outcome will be made on Thursday evening.

A few proxy advisors like IIAS had appealed to shareholders to vote against the proposal claiming the proposal would weaken Maruti's control. The Gujarat plant is critical to Maruti's target of selling two million cars by 2020.