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Follow-up on MSIL Gujrat deal after the Board Meeting that happened on 15th March, 2014
On 31 january, two days after Maruti Suzuki India’s (MSIL) board decided to let its parent, Suzuki Motor Corporation (SMC), set up a 100 per cent subsidiary in Gujarat, a suburban five-star hotel in Mumbai witnessed a spectacle not many would associate with Indian shareholders and company officials. While it was way short of what many would want to describe as fireworks, it certainly ended up as a heated argument between fund managers and top Maruti Suzuki officials.
Maruti Suzuki had acquired 1,190 acres of land in Gujarat’s Mehsana district in 2011 from the state government soon after it announced its intention to set up a third manufacturing unit (besides Gurgaon and Manesar in Haryana) in the state. It planned to invest Rs 3,000 crore on a greenfield plant. However, the announcement that the plant would be set up by a 100 per cent subsidiary of SMC (which owns 56.21 per cent in Maruti Suzuki) — and not by Maruti Suzuki — left shareholders, investors and fund houses, who collectively own the remaining 43.79 per cent, stunned.

Under the new proposal, Maruti Suzuki will be buying all of the plant’s production and selling it in the domestic market for a profit. Shareholders feared SMC was shortchanging Maruti Suzuki shareholders for its own gains.
Maruti Suzuki’s call to review its decision came only after the Securities and Exchange Board of India (Sebi) took note of the controversy. Sebi wrote a letter to the company, to find out the price at which the SMC-run Gujarat plant would sell cars to Maruti Suzuki. Then, fund houses, along with some other minority shareholders, wrote to Maruti Suzuki, threatening to lodge a complaint with the Company Law Board.
The board of directors of Maruti Suzuki India (MSIL) on Saturday, 15 March 2014, reviewed the Gujarat project in the

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