Maruti’s Bhargava brushes aside concerns about the EV project, saying the plans do not go against shareholders’ interests


All models produced by Suzuki at the Gujarat plant, including electric vehicles, would be sold by Maruti: MSI Chariman

All models produced by Suzuki at the Gujarat plant, including electric vehicles, would be sold by Maruti: MSI Chariman

RC Bhargava, chairman of Maruti Suzuki, brushed aside concerns from proxy consultancy IiAS over Suzuki’s investment in the EV project, claiming on Thursday that there is nothing against the interests of the company and its shareholders as the investment was part of a previous agreement.

Mr Bhargava countered IiAS’ criticism that all models produced at Suzuki Motor Gujarat (SMG), including electric vehicles (EVs), would ultimately be sold in the market by Maruti Suzuki India (MSI).

IiAS has raised serious questions regarding Suzuki Motor Corporation (SMC)’s decision to invest directly in the EV project rather than MSI doing so.

“This proxy company had also opposed the establishment of the Suzuki Motor plant in Gujarat. Shareholders overwhelmingly rejected the proxy firm’s advice. The vote was overwhelmingly in favor of this project. What has happened now only affects this project, there was no new agreement,” Mr Bhargava told PTI.

He said the deal had already been approved by shareholders and there was nothing new to disagree with.

“It’s already a done deal, it’s not a new thing. I don’t know why they (IIAS) are against it. The cars made in Gujarat will be delivered to Maruti for a fee, we will sell the car.” the agreement was approved in 2014, so what’s new here,” he noted.

On MSI’s plans to launch an electric vehicle by 2025, Mr. Bhargava said, “They (SMG) will manufacture it in Gujarat and sell it by 2025.”

He continued: “There are so many models that SMG makes. They have a production capacity of 7.5 lakh units. So this (EV) is part of it.”

When asked if the EV model would also be part of the same deal with SMG, Mr Bhargava said: “Yes…nothing was said that the car that would be made there (SMG) would only have internal combustion engines…Any one Cars that are made there are sold by us.”

SMG, a wholly owned subsidiary of SMC, supplies cars exclusively to MSI.

On March 20, SMC announced it would invest about 150 billion yen (about £10,445 million) in local manufacturing of battery electric vehicles (BEV) and batteries in Gujarat by 2026.

The company has signed a memorandum of understanding (MoU) with the government of Gujarat.

As part of the MoU, SMG will invest £7,300m to build a BEV battery factory by 2026 on land adjacent to SMG’s existing factory.

IiAS (Institutional Investor Advisory Services) has stated in its report that the bigger problem continues to be this inherent conflict of interest – between owning a 100% subsidiary and owning a public company in the same market.

“These structures make it easier for multinational corporations to hollow out the listed subsidiary and depreciate its value. Maruti shareholders need to work constructively with SMC to understand how this structure will work. If they ask the right questions now, hopefully their concerns can be incorporated into the project.”

For Maruti, its future could be at stake, the consultancy noted, adding that the company needs to define its role in the EV venture.

Consultation with its stakeholders – as it was at the time the Gujarat plant was established – will allow Maruti to create a mutually beneficial business structure and remain relevant, it noted.

“Will Maruti shareholders benefit from SMC’s decision to enter the EV space in India? That is a question that Maruti SMC shareholders must ask,” the report reads.

IiAS had also opposed SMC’s decision to establish a wholly owned subsidiary in Gujarat on land allotted to Maruti.

“This problem is playing out again. SMG will invest in building the EV factory. SMC will argue that this will save Maruti shareholders capital, but Maruti had Rs 30 crore in cash and little debt on its balance sheet as of 30th September 2021 – Investing Rs 104.45 crore over the project years becomes the financial profile probably not burdened by Maruti,” it stated.

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