MUMBAI, March 11 A group of investors in Maruti
Suzuki Ltd ratcheted up pressure on India's top
carmaker to abandon a plan for its Japanese parent to build a
new plant to make cars for the Indian firm, saying it would hurt
Suzuki Motor Co, which owns 56 percent of Maruti,
in January announced plans to invest $488 million on a new plant
in India and shelved an earlier plan for Maruti to set up the
A group of 16 big fund managers said in a letter to Maruti
management, dated March 5 and seen by Reuters, that the plan
would shift manufacturing activity away from the Indian company
and turn it into a "shell company" of its parent.
"The decision of the MSIL board is ill-conceived in its
entirety and results in outsourcing of the core manufacturing
activity that is fundamental and critical for MSIL," the letter
said, referring to Maruti Suzuki.
"This clearly is not in the best interest of MSIL and its
shareholders and is in fact significantly detrimental to them,"
the investors said, in a rare case of shareholder activism in
A spokesman for Maruti confirmed the company had received
the letter and said it was in talks with shareholders to convey
the "intent and purpose" of the deal.
A smaller group of shareholders sent a previous letter last
month, saying they were concerned that the contract for the
plant in Gujarat state meant the Japanese carmaker, rather than
Maruti, would reap the benefits of rising domestic sales.
Under the plan, Maruti will buy vehicles produced by Suzuki
at the new plant and sell them in the open market. Maruti
currently produces and sells its own cars.
Maruti will continue to produce cars at its existing
factories in Manesar and Gurgaon in north India, which have a
capacity of 1.5 million vehicles per year, but incremental
production would be sourced from the Suzuki plant.
The second letter was signed by HDFC Asset Management, DSP
BlackRock Investment Managers, Axis Asset Management and Birla
Sun Life Mutual Fund, among others.
(Reporting by Himank Sharma; additional reporting by Devidutta
Tripathy; Writing by Sumeet Chatterjee; editing by Jane Baird)