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Maruti Suzuki Corporate Governance

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Maruti Suzuki Corporate Governance

  1. 1. MARUTI-SUZUKI: Failure of Corporate Governance Case (Gujrat Based Plant ) Shrund Kalse: A-30 Atif Ghole: C-29 Business Ethics & Corporate Governance
  2. 2. About Maruti-Suzuki Gujarat Plant • Maruti Suzuki had acquired 1,190 acre of land in Mehsana district (approximately 640 acres in Becharaji & 550 acres in Vithalapur) in Gujarat in 2011 for its expansion plans
  3. 3. • Japanese parent Suzuki Motor Corporation would invest $485 million in a wholly owned manufacturing facility in Gujarat to make cars and other vehicles on contract for sale by its listed Indian subsidiary, an arrangement that jolted its investors because of its complexity. • Maruti had taken advantage of regulatory ambiguity, as certain sections of the new Companies Act • the company begins to strategically shift its business model from manufacturing to distribution More than mere shareholder issues, Suzuki's decision to run its Gujarat plant as a 100 percent subsidiary brings larger benefits for both Maruti, Suzuki and India.
  4. 4. (More of Maruti Suzuki's shareholders may be joining forces against what they see as the Japanese parent's intransigence over the new plant in Gujarat.)
  5. 5. • The Japanese company will own the factory with production being earmarked for the local unit as this will shield it from the need to lock up Its own funds. • Therefore, more of Maruti Suzuki's shareholders may be joining forces against what they see as the Japanese parent's intransigence over the new plant in Gujarat. • Stakeholders fail to see how this benefits India's largest car maker by volume. • Mutual fund houses and insurance companies are planning to unite against the decision, said people aware of the development. Why Corporate Governance Fail?
  6. 6. Bringing down shareholder wealth in the company by almost Rs 5,800 crore to Rs 47,918.96 crore
  7. 7. • There seems to be some short-term disappointment among traders, who expected the stock to rise further. The stock had been rising for four months since October till the announcement was made. • Many traders cut their bullish bets on Maruti.
  8. 8. • The huge cash flows generated by Maruti are expected to be used for research and development and expansion of distribution network. Thank You…

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