Maruti Suzuki dips after clarification on Gujarat project

The stock has dipped over 4% to Rs 1,595 on the National Stock Exchange

Maruti Suzuki India (MSIL) has slipped over 4% to Rs 1,595 levels, after the company clarified regarding its board's decision on the proposed Gujarat project.

The stock opened at Rs 1,640 and touched a low of Rs 1,591 on the National Stock Exchange (NSE). A combined 477,000 shares changed hands on the counter till 1000 hours on the NSE and BSE.

MSIL said that if the contract manufacturing agreement between the company and Suzuki Motor Gujarat expires and in case not extended by mutual consent, the assets of the Gujarat subsidiary would be transferred to MSIL at a fair value to be determined by independent valuation.

It also clarified in a statement that the proposed Gujarat plant by wholly owned subsidiary of Japanese Suzuki Motor Corporation would sell the cars at a lower price than its own ex-factory sale price.

Earlier, on January 28, 2014, MSIL had announced that it was planning to implement the expansion project in Gujarat through a 100% subsidiary of Suzuki Motor Corporation. Originally it was MSIL that would have set up the Gujarat plant.

The decision had raised concerns among institutional shareholders who had written to MSIL seeking a clarification. Based on the queries, MSIL had clarified that the Suzuki Motor Corporation'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.