Maruti to buy SMG from Suzuki for 12,841 crore rupees

Proposed sale of Suzuki Motor Gujarat plant is expected to be completed before March 31, 2024, says carmaker.
Image used for representation.
Image used for representation.

NEW DELHI:  The country’s largest carmaker Maruti Suzuki (MSIL) is issuing shares worth Rs 12,841 crore ($1.54 billion) to Japanese parent company Suzuki Motor Corporation (SMC) to buy a 100% stake in Suzuki Motor Gujarat Private Limited (SMG). 

The proposed sale of the Gujarat plant is expected to be completed before March 31, 2024, the carmaker said in a regulatory filing. Maruti will issue 1.23 crore preference shares at Rs 10,420.85 each to SMC. Shares of MSIL closed marginally lower on Tuesday at Rs 10,706 apiece.

This is the first time Maruti has disclosed a value for SMC-owned Gujarat plant, which does exclusive contract manufacturing for the former. Maruti had first announced buying the plant in July. Giving reason for this purchase, MSIL said that with the growth of the Indian car market and including but not limited to, export potential, MSIL would need to increase its disclosure of reasons for acquisition of production capacity to about 4 million (40 lakhs) cars per target entity. 

“This would happen over several locations, some of which are known and some being studied. Several powertrain technologies like electric vehicles (EVs), Hybrids, compressed natural gas (CNG) and Ethanol will co-exist for a reasonably long period of time. Managing this scale and complexity of production with multiple powertrains, under different  managements, would pose several challenges,” the company  said. 

SMG, which clocked Rs 3,185 crore revenue last fiscal, currently has an installed production capacity of 7.5 lakh units per annum while MSIL can churn out 15,80,000 units. The fresh announcement comes after MSIL had last week announced an ambitious capital expenditure of about Rs 1.25 lakh crore till FY31, in 
addition to the regular capex it incurs for its existing plants at Gurgaon, Manesar and Gujarat.

Of the 4 million volume MSIL is targeting by FY31, over 3 million units are planned to be sold in domestic market and 750,000-800,000 units are expected to be exported. The proposed acquisition does not include Suzuki Motor’s battery manufacturing plan, which is outside of Suzuki Motor Gujarat’s purview. SMC last year had announced investing Rs 10,440 crore for local manufacturing of battery electric vehicles (BEV) and BEV batteries.

Maruti will issue 1.23 cr preference shares at Rs 10,420.85 each to SMC

Acquisition bid

This is the first time Maruti has disclosed a value for SMC-owned Gujarat plant

Maruti had first announced buying the plant in July

SMG clocked Rs 3,185 crore revenue last fiscal

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