What Maruti Suzuki's acquisition of the SMG plant means for minority shareholders

livemint.com:

₹12,755 crore. This was a surprising move, given in 2014 Maruti Suzuki had a hard time convincing its investors, including minority shareholders, that its decision to have its parent invest in a factory while it invests its cash stockpile on strengthening its brand and distribution, was fair game. Eight years later, changing market dynamics and the need to streamline a mammoth capacity of 4 million units it is going to build over the ongoing decade, Maruti Suzuki wants direct control.

But what about minority shareholders? Will this company, with ₹46,800 crore in cash reserves, be able to ensure the transaction is fair to them? Experts and analysts tracking the company feel the deal is kosher and has sufficient safeguards for minority investors. In 2014, MSIL decided not to invest directly in a new manufacturing facility but invest its cash instead in its sales and marketing infrastructure. The transaction got the approval of minority shareholders, thanks to the provision that MSIL could obtain a stake in the factory at book value.

Now, the same provision is likely to give minority investors relief at MSIL’s buying price for SMG. To be sure, MSIL had a cash stockpile of ₹46,800 crore as of 30 June. “A quarter of MSIL’s production is managed by SMG, which could cause complications in our management structure going forward.

Both SMC and MSIL agree it is best if both production and production-related activity is brought under a single company," Bhargava told reporters in a conference call after the decision was announced. Maruti Suzuki's shares closed 0.94% lower at ₹9,625.00 on the National Stock Exchange (NSE). The decision to terminate the contract manufacturing agreement was made with the consent of both parties, and