Maruti’s board approves issuance of preferential shares to Suzuki Motor Corp; stock trades lower

Maruti share price: Shares of Maruti Suzuki India (MSIL), the country’s leading automobile company, traded with a cut of 0.45 per cent in the morning deals on Tuesday at Rs 10,660.95 apiece. The losses in the stock were triggered after the company’s board, in its meeting today, approved the issuance of equity shares on a preferential basis to its parent company, Suzuki Motor Corp.

“The Board has approved the issuance of 1,23,22,514 equity shares of the company having a face value of INR 5/- each to Suzuki Motor Corporation (“SMC”), at a price of INR 10,420.85/- per equity share (“Subscription Shares”), which shall not be less than the floor price,” said the company in a filing with the exchanges.

Post the allotment of securities on a preferential basis, Suzuki Motor Corporation, Japan’s stake in the country’s leading auto manufacturer, will increase from 56.48 per cent to 58.19 per cent.

Preferential share issuance refers to the process of bulk allotment or issuance of fresh securities to a specific group of individuals, investors, or any other person by listed or unlisted companies for capital raising. This is the fastest route for companies to raise capital.

Besides, the company’s board approved the acquisition of a 100 per cent stake in Suzuki Motor Gujarat Private, owned by Suzuki Motor Corporation, Japan, for a total consideration of Rs 12,841.1 crore.

“We wish to inform that the Board of Directors of the Company, at its meeting held on 17th October 2023, approved the acquisition of 12,84,11,07,500 equity shares of INR 10/- each representing 100% paid-up equity share capital (“Purchase Shares”) of Suzuki Motor Gujarat Private Limited (“SMG”), owned by Suzuki Motor Corporation, Japan (“SMC”), for a total purchase consideration of INR 12,841.1 Crores (“Purchase Consideration”),” said the regulatory filing.

The auto major chose the equity issuance route over cash payments as they found it to be a win-win for both the company and their shareholders. The companies would complete the acquisition by the end of FY24.

Shares of Maruti Suzuki in the last one year have climbed 24 per cent, with the stock’s 52-week low and high prices at Rs 8,076 and Rs 10,810.8 per share, respectively. 

The consensus recommendation on the stock from 39 analysts is a buy, Trendlyne data shows.

Maruti Suzuki is a large-cap company with a market capitalisation of Rs 3.22 lakh crore. The company is engaged in the manufacture, purchase, and sale of motor vehicles, accessories, and spare parts. Moreover, the company facilitates the sale of pre-owned cars and car financing, among others.