Maruti Suzuki gains on plan to acquire Gujarat facility

The Maruti Suzuki stock was trading higher early on October 13, with India’s biggest car maker planning to issue preferential shares to parent Suzuki Motor Corporation (SMC) to acquire a 100 percent stake in Suzuki Motor Gujarat.

On October 17, Maruti Suzuki India’s board of directors will consider issuing shares to SMC instead of cash consideration. In turn, Maruti Suzuki will acquire SMC’s entire equity stake in Suzuki Motor Gujarat.

At of 10.58 am, the stock was trading at Rs 10,604 on the BSE, up 0.26 percent.

Maruti Suzuki told stock exchanges on July 31 that its board approved the termination of the contract manufacturing agreement with Suzuki Motor Gujarat Private Limited (SMG).

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SMG entered into a contract manufacturing agreement to supply the entire production for sale to Maruti Suzuki. Maruti Suzuki now plans to end its contract manufacturing agreement by acquiring 100 percent of shares held by SMC.

Nomura maintained its “neutral” call on the stock, with a target price of Rs 10,422 on Maruti Suzuki after the company shared its plans to proceed with its proposed acquisition of SMG.

The brokerage factored in a dilution of around 4 percent in its valuation, saying, “We do not expect any significant change to our valuation if the share issue route is ultimately approved by shareholders.”
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