Maruti's Gujarat plant: LIC, MFs say awaiting shareholders meet

The mutual fund houses are likely to firm up their stance after the auto major's shareholders meeting next month about its plans to set up a car plant in Gujarat as a fully-owned subsidiary of its Japanese parent

Domestic financial institutions led by state-owned LIC and mutual funds, who together hold around 21.3% in Maruti Suzuki, are likely to firm up their stance after the auto major's shareholders meeting next month about its plans to set up a car plant in Gujarat as a fully-owned subsidiary of its Japanese parent.

While LIC is the single largest minority investor in the country's largest car maker with 6.8% holding, mutual funds hold around 6.53% and domestic financial institutions hold 7.95%.

Ever since Maruti's Japanese parent announced its plans to set up an assembly line Gujarat as its fully-owned subsidiary eight months ago, the minority investors were up in arms, as they feared that Suzuki would later make Maruti just a contract manufacturer and not full-fledged car company.

"We are yet to take a call on the issue," an LIC official said, and pointed out that it's too early and the company is yet to get its shareholders' nod.

On the other hand, mutual fund houses are divided on the issue. They feel that why should the company not set up its own plant, rather than setting up it through a subsidiary whose future is uncertain.

Maruti Suzuki will meet its shareholders at an extraordinary general body meeting next month to secure their approval for the project. The company needs to secure the permission of at least 75% shareholders for the investment in the plant.

"We haven't formed an opinion on Maruti Suzuki's move to set up its trading unit in Gujarat as of now and we will take a call at the Maruti shareholders meeting early November," a senior official of LIC told PTI requesting anonymity.

When asked if the LIC will go by the recommendation of proxy advisors, the official said, "it's wrong to believe that LIC will go by the advice of proxy advisors. Let me reiterate that we are yet to form an opinion on the issue."

The mutual fund houses are confused about what will be the future of the subsidiary once its 15-year agreement ends with Maruti Suzuki.

"We don't know what will happen to the subsidiary after 15 years when its agreement with Maruti-Suzuki comes to an end," CIO of a MF house said, adding, "we are currently evaluating the company's plans before we finally come up with our own stand on the matter.