In a significant move within the Indian automotive industry, Maruti Suzuki India, the country’s leading car manufacturer, announced plans to issue shares valued at Rs 12,841 crore (approximately $1.54 billion). This financial maneuver is aimed at purchasing a local manufacturing plant from its Japanese parent company, Suzuki Motor. The disclosure of this substantial transaction signifies a notable step for Maruti, as the company had initially revealed its intention to acquire the plant located in the western state of Gujarat back in July.

Share Issuance and Ownership Stake Increase

As part of this financial arrangement, Maruti Suzuki will issue 12.3 million preference shares at a price of Rs 10,420.85 each. Notably, this share price represents a modest 2.7 per cent discount compared to the closing price of the company’s stock on the day prior to the announcement. Following the issuance and completion of this transaction, Suzuki Motor’s ownership stake in Maruti will increase from its existing 56.48 per cent to 58.19 per cent, aligning closely with the company’s estimate shared in August.

Expanding Control Over Manufacturing

The Gujarat-based manufacturing plant has been a notable investment site for Suzuki since 2014, with the Japanese automaker having committed around Rs 18,000 crore to its development. This facility specializes in producing cars for Maruti Suzuki and commenced its operations in 2017. Importantly, it boasts an annual production capacity of 750,000 units. With this acquisition, Maruti Suzuki aims to solidify its control over the plant, giving the company enhanced flexibility in managing its production processes, especially in the context of the burgeoning electric vehicle (EV) market.

EV Production and Growth Strategy

Maruti Suzuki’s decision to acquire full ownership of the Gujarat plant is underpinned by its ambitions in the electric vehicle sector. The company plans to manufacture its inaugural EV, a sport utility vehicle (SUV), at this facility. Furthermore, this move aligns with Maruti’s strategic vision to expand its EV portfolio and aims to introduce six EV models by 2030, all of which will be produced at the Gujarat plant.

Market Response and Company Performance

The news of Maruti Suzuki’s share issuance and plant acquisition had an immediate impact on its stock performance. Following the announcement, Maruti’s shares experienced a dip of up to 1.3 per cent, before subsequently recovering to trade at Rs 10,635. Since the unveiling of the acquisition deal in conjunction with the company’s quarterly results on July 31, Maruti’s stock had already risen by over 8 per cent, reflecting positive sentiment surrounding the strategic direction the company is taking.

This transaction underscores Maruti Suzuki’s commitment to securing a prominent position in India’s growing EV market and its drive to maintain a strong manufacturing foothold in the country. As the automotive industry continues to evolve and transition towards electric mobility, this acquisition positions Maruti Suzuki favourably for future growth and adaptability to changing market dynamics.