Maruti shares jumped as much as 9.8 per cent on Tuesday after the car maker said it will seek minority shareholder approval for the Gujarat plant to be built by its parent Suzuki Motor. Maruti is supposed to buy cars produced at the plant from Suzuki.
Maruti's decision to source cars (rather than produce and sell cars) has not gone down well with institutional investors, who said the plan would shift manufacturing activity away from the Indian automaker and turn it into a "shell company" of its parent.
In a bid to assuage investors' concerns, Maruti on Saturday said it will seek minority shareholder approval for the deal. It also said that the entire capex for the Gujarat project would be funded by depreciation and equity brought in by Suzuki.
It further added that the Gujarat plant would be transferred by Suzuki to Maruti at book value in case both sides agreed to terminate their contract manufacturing agreement, and not at fair value as proposed in January.
CLSA said these new terms will make the deal even more free cash flow accretive. Credit Suisse said all key concerns on Gujarat plant have now been addressed. It expects the stock to trade at higher multiples. Macquarie said investor focus will now shift to fundamentals.
As of 09.17 a.m., Maruti traded 7 per cent higher at Rs. 1,860 as against a 0.5 per cent gain in the broader Nifty. The stock was the top gainer on the 50-share Nifty benchmark.
Maruti's decision to source cars (rather than produce and sell cars) has not gone down well with institutional investors, who said the plan would shift manufacturing activity away from the Indian automaker and turn it into a "shell company" of its parent.
In a bid to assuage investors' concerns, Maruti on Saturday said it will seek minority shareholder approval for the deal. It also said that the entire capex for the Gujarat project would be funded by depreciation and equity brought in by Suzuki.
It further added that the Gujarat plant would be transferred by Suzuki to Maruti at book value in case both sides agreed to terminate their contract manufacturing agreement, and not at fair value as proposed in January.
CLSA said these new terms will make the deal even more free cash flow accretive. Credit Suisse said all key concerns on Gujarat plant have now been addressed. It expects the stock to trade at higher multiples. Macquarie said investor focus will now shift to fundamentals.
As of 09.17 a.m., Maruti traded 7 per cent higher at Rs. 1,860 as against a 0.5 per cent gain in the broader Nifty. The stock was the top gainer on the 50-share Nifty benchmark.