Maruti to acquire Gujarat facility from the parent

Along with it’s Q1 FY24 quarterly results, Maruti Suzuki India (MSI) has announced acquisition of it’s contract manufacturing facility, Suzuki Motor Gujarat Private Limited (SMG) from Suzuki Motor Corporation (SMC).

  • In 2014, MSI had taken shareholders approval to allow SMC set up SMG as a 100% subsidiary that will contract manufacture for MSI.
  • In line with the said approval, option was kept open for MSI to acquire SMG subsequently at book value from SMC. This option is now being exercised by MSI.
  • Book value of SMG is estimated at Rs 12,775 cr as on March 31, 2023
  • Mode of consideration (cash or shares or both) to be paid to SMC will be decided in subsequent Board meeting.
  • Acquisition is expected to be completed by March 31, 2024

Rationale for acquisition

MSI’s current annual capacity is 2.25 mn units. Company estimates the need to be 4mn units annually by 2030-31.

SMG’s current capacity is 7.5 lakh units.

MSI wants to acquire SMG so as to bring in all the capacity directly under own control instead of letting it operate like a contract manufacturer.

Interesting point to note is MSI on it’s own is also undertaking capacity expansion and expects to add 2 mn units over period.

Besides, SMC recently had also announced significant investments into the EV ecosystem at SMG (about Rs 10,400 cr). This deal may mean that MSI would also be funding that along with the above consideration payable to SMC.

Overall, it seems that given the current bullishness in the Indian car industry, SMC has decided to cash out and reduce it’s future direct commitments. It’s India play anyways would continue; being 56.48% owner of MSI.

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