Maruti Suzuki spurts after board reviews Gujarat project

Maruti Suzuki India jumped 6.93% to Rs 1,857.55 at 9:52 IST on BSE after the company said its board reviewed the proposed Gujarat project on Saturday, 15 March 2014.

The company made the announcement on Saturday, 15 March 2014.

Meanwhile, the BSE Sensex was up 157.16 points, or 0.72%, to 21,966.96.

On BSE, so far 1.38 lakh shares were traded in the counter, compared with an average volume of 1.01 lakh shares in the past two weeks.

The stock hit a high of Rs 1,899.90 so far during the day, which is also a 52-week high for the counter. The stock hit a low of Rs 1,850.85 so far during the day. The stock hit a 52-week low of Rs 1,217 on 28 August 2013.

The board of directors of Maruti Suzuki India (MSIL) on Saturday, 15 March 2014, reviewed the Gujarat project in the context of the views and opinions expressed and decided that the entire capital expenditure for the Suzuki Motor Corporation's (SMC) subsidiary in Gujarat (Gujarat Sub) would be funded by depreciation and equity brought in by SMC.

In the event that both parties mutually agree to terminate the contract manufacturing agreement, the facilities of the Gujarat Sub would be transferred to MSIL at book value. Even though not required by law, the board decided, as a measure of good corporate governance, to seek minority shareholders' approval as stipulated in Section 188 of the Companies Act 2013, MSIL said in a statement.

The impact of any direct or indirect taxes on account of the contract manufacturing agreement would be assessed before finalizing the agreement and as earlier stated, the Gujarat Sub would function on the basis that it would neither generate surpluses nor make losses, the company said.

On 28 January 2014, MSIL announced that it was planning to implement the expansion project in Gujarat through a 100% subsidiary of SMC. Following the announcement, MSIL received several queries from investors and media related to pricing and funding of capacity expansion in the proposed contract manufacturing arrangement.

The board of directors of MSIL had, on 29 October 2011, approved the purchase of land in Mehsana district of Gujarat for further expansion of manufacturing facilities. Following this decision, MSIL acquired approximately 640 acres of land in Becharaji and approximately 550 acres in Vithalapur. The expansion of facilities was kept on hold due to market conditions.

MSIL's total sales declined 0.4% to 1.09 lakh units in February 2014 over February 2013. Domestic sales rose 1.8% to 99,758 units in February 2014 over February 2013. Exports dropped 19.5% to 9,346 units in February 2014 over February 2013.

MSIL's net profit rose 35.9% to Rs 681.10 crore on 3.1% decline in net sales to Rs 10619.70 crore in Q3 December 2013 over Q3 December 2012.

Japanese parent SMC holds 56.21% stake in MSIL (as per the shareholding pattern as on 31 December 2013).

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