Domestic investors plan to seek FIIs support on Maruti deal

Maruti's domestic institutional investors are looking to garner the support of foreign institutional supporters against the Indian firm's plan to transfer Gujarat project to Japanese parent Suzuki Motor Corporation. Besides, domestic institutional investors are mulling to move the Company Law Board on the deal.

Maruti Suzuki India is facing stiff resistance from private sector mutual funds and insurance companies, which own almost 7 per cent of the company, for its decision to allow Suzuki to make cars for the Indian car-maker at a proposed plant in Gujarat instead of manufacturing vehicles itself.

Separately, state-run Life Insurance Corporation of India has sought clarifications from Maruti Suzuki about the Gujarat project.

The private institutions are trying to rope in LIC to jointly oppose the company's decision.

A final decision with regard to drumming up support of FIIs as well as moving the CLB will be taken only after the outcome of Maruti Suzuki's board meeting tomorrow is known, according to sources.

FIIs, including HSBC, Credit Suisse and Norway's government pension fund together hold 21.5 per cent stake in Maruti Suzuki.

Maruti Suzuki, on Thursday, approached market regulator Sebi, seeking its intervention to safeguard minority shareholders' interests and to ensure compliance with good corporate governance norms with regard to the deal.

Representatives of 16 institutional investors met Sebi officials at its headquarters in Mumbai yesterday and submitted a memorandum addressed to Chairman U K Sinha.

Sebi was approached days after the 16 investors wrote to Maruti Suzuki Chairman R C Bhargava and other board members, seeking quashing of the ‘oppressive transaction’ to save the company from becoming a ‘shell’ entity.

Maruti Suzuki has maintained the deal is in the best interests of shareholders and is in compliance with all norms.

There have been reports that some independent directors of Maruti Suzuki are becoming sceptical about the deal and the matter is expected to be discussed in detail during the company's board meeting.

Earlier, seven mutual fund investors in Maruti Suzuki had written to the company about their concerns and they were later joined by nine other institutional investors.

Along with LIC's 6.93 per cent stake, the institutional investors hold almost 14 per cent in Maruti Suzuki, while the promoters have a 56.21 per cent shareholding.

The Securities and Exchange Board of India had already started looking into the issue and is currently studying the regulatory framework with regard to its possible line of action against the company and its promoters.

Image: Maruti WagonR