Mumbai: Proxy advisory firm Institutional Investor Advisory Services India (IIAS) has welcomed Maruti's decision to put the decision around the controversial Gujarat plant to shareholders vote.
The controversy started after its Japanese parent Suzuki said it would own the proposed plant and will sell the cars to Maruti, making the country's largest car-maker just a distributor.
"By putting the decision on Gujarat plant to vote, Maruti board has broken through the current regulatory ambiguity and proactively mitigated the need for regulatory intervention," IIAS said in a statement here today.
"Maruti will seek the approval of minority shareholders as stipulated in section 188 of the new Companies Act. We welcome this decision as we believe this gives shareholders a chance to have their say," it added.
While parent Suzuki owns a little over 56 percent in Maruti, minority shareholders own 43.79 percent.
For the company to go ahead with Gujarat plant plan, it has to secure three-fourths votes of the minority shareholders or 32.8 percent (of the 43.79 percent).
As of December 2013, institutions (including mutual funds, banks) owned 35.45 percent in Maruti, of which 21.47 percent were held by FIIS and 13.98 percent by domestic institutional investors. Less than 9 percent of the equity is with retails investors and others.
Earlier in the day, under increasing pressure from institutional investors, Maruti Suzuki India decided to seek minority shareholders' approval after tweaking some of the earlier proposals for the Gujarat plant.
"We are not required by law to seek minority shareholders' approval but the board decided to do so as a measure of corporate governance," Maruti Suzuki chairman R C Bhargava told reporters here after a board meeting in the Capital this morning.
The initial announcement that Suzuki will manufacture cars at the Gujarat plant and supply to Maruti Suzuki, changed the DNA of the company from primarily a manufacturer to a distributer.