MarutiÃ¢â‚¬â„¢s Investors: Legal Options?

Published on Sat, Mar 15,2014 | 14:09, Updated at Sat, Mar 15 at 14:09Source : CNBC-TV18 | Watch Video :

It all started in January when Maruti announced that instead of it building a manufacturing facility in Gujarat, it will sell the land to a 100% subsidiary of parent Suzuki. The Suzuki Gujarat plant will supply Maruti cars at cost of production plus cash adequate to cover incremental capital expenditure. A group of institutional investors opposed the plan calling it unfair to Maruti. Their concern is that this arrangement will shift value from Maruti to the Suzuki Gujarat subsidiary and that Maruti would indirectly be paying for subsequent expansion of the plant. They asked for more information but Maruti has failed in quelling their concerns. Last week more investors joined the battle.

MARUTI'S GUJARAT MODEL!
Jan 28th, 2014

Maruti says
Suzuki to build Gujarat plant via 100% subsidiary
Suzuki Gujarat will supply cars to Maruti
Maruti will pay only cost of production + cash to cover incremental capital expenditure

MARUTI'S GUJARAT MODEL!
Feb 13th, 2014

'Moving this critical and highly profitable project into a 100% subsidiary of Suzuki instead of Maruti is neither fair nor in the interest of Maruti and its shareholders and will lead to significant erosion of value for Maruti and its shareholders'
- Group of 7 Mutual Fund Managers

MARUTI'S GUJARAT MODEL!
Feb 26th, 2014

Maruti says
Capex needs of the Gujarat Sub would be met by
i) the depreciation amount available with the Sub
ii) by an amount generated as net surplus from the car pricing
iii) by Suzuki infusing fresh equity

MARUTI'S GUJARAT MODEL!
March 5th, 2014

'The decision of the Maruti Board is ill-conceived in its entirety…'
'Intriguing that….Maruti's directors have chosen to lend themselves to such a blatantly wrong and value eroding, oppressive transaction…'
'Suzuki had tried this very contrivance in 2004…'
- Group of 16 Insurance & MF Fund Managers

In a rare show of strength 16 institutional investors have taken on the Maruti management - they are fighting against what they call a 'value eroding oppressive transaction' which is 'ill-conceived' 'blatantly wrong' and a 'contrivance'. Will letter writing be enough? Well the Maruti management shows no signs of capitulation. Then what legal action can Maruti's investors take? To discuss that I am joined by Anil Singhvi, Founder, IiAS; Anand Desai of DSK Legal; Mohit Saraf of Luthra & Luthra; and Virendra Jain of Midas Touch Investor Forum.