Maruti Suzuki India on Tuesday said its board has approved issue of shares on preferential basis to Suzuki Motor Corporation (SMC) as consideration for the acquisition of 100 per cent stake in Suzuki Motor Gujarat.

Post such acquisition, Suzuki Motor Gujarat (SMG) will become a wholly-owned subsidiary of the company, Maruti Suzuki India (MSI) said in a regulatory filing.

"The Board approved the issue of MSI equity shares to SMC to pay for the SMG shares," it added.

The total number of securities proposed to be issued to SMC as consideration for the acquisition of its 100 per cent stake in SMG, shall be decided in a subsequent board meeting, basis relevant valuation reports subject to and in compliance with the applicable regulatory and statutory framework, the auto major stated.

MSI board, in its meeting held on July 31, 2023 had approved termination of the contract manufacturing agreement with SMG and acquiring its shares SMC at a price to be determined in accordance with all applicable laws and regulations.

The company's board, in its meeting held today, evaluated two options for acquiring the SMC equity in SMG, MSI noted.

The board discussed payment in cash and issue of MSI shares on a preferential allotment basis, it said.

The impact of both options on the profitability of MSI, the earnings per share and the dividend payment to shareholders was considered for each year up to 2031, the auto major said.

After going through the data, the Board concluded that the option of acquiring SMG shares by issue of MSI shares to SMC would clearly be beneficial to both the minority shareholders as well as the company, MSI said.

The board also approved seeking of minority shareholders' approval at an EGM or through postal ballot.

Besides, the board also gave its nod to seek approval of all shareholders at the same EGM or through postal ballot for issue of shares on preferential basis to SMC.

On July 31, MSI announced that it will acquire the Gujarat-based production facility of its parent firm Suzuki Motor Corporation to reduce complexity and bring all manufacturing-related activities in the country under one entity.

A fully-owned subsidiary of SMC, SMG supplies its entire production exclusively to Maruti Suzuki India.

SMG, which was incorporated in 2014, currently has a production facility in Gujarat with an installed capacity of 7.5 lakh units per annum.

Initially, the Gujarat plant was proposed to be owned by MSI but the plan was changed later with SMC announcing that it would invest USD 488 million to build the plant.

The plan was opposed by the institutional investors forcing the company to seek minority shareholders approval on the matter.

MSI shares were trading 0.67 per cent up at Rs 9,579.35 apiece on the BSE.

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