Maruti Suzuki dips 2% as FII investments reaches trigger limit

NEW DELHI: Maruti Suzuki India Ltd slipped as much as 1.94 per cent in trade on Tuesday, after the Reserve Bank of India (RBI) notified that the foreign share holding in Maruti Suzuki India by Foreign Institutional Investors ( FIIs) under Portfolio Investment Scheme (PIS) has reached the trigger limit of 22 per cent.

At 09:30 a.m.; Maruti Suzuki was trading 1.6 per cent lower at Rs 1556. It hit a low of Rs 1551 and a high of Rs 1579 in trade today.

Foreign share holding limit in Maruti Suzuki India has reached trigger limit and any further investment by FIIs will be allowed only after RBI's approval, PTI reported.

With Maruti, the number of companies where 22 per cent FII limit has been reached and further purchases will be allowed with prior approval of RBI has increased to 10.

The other companies, including, Multi Commodity Exchange of India (w.e.f September 26, 2013), Titan Industries (w.e.f. November 6, 2013) and Tata Chemicals (w.e.f. December 13, 2013).

Shares of Maruti Suzuki have been under pressure so far in the year 2014 as doubts persisted about the impact of the automaker's plan to source cars from a plant to be built by its parent Suzuki Motor in Gujarat.

The stock has plunged little over 10 per cent in the same period, as compared to 1.4 per cent rise seen in the BSE Auto index.

According to analysts, there are some uncertainties and challenges still remain with regards to the Gujarat plan despite management clarrification. Most of the investors are still not clear on conpany's arrangement for Gujarat plant.

There is some uncertainty revolving merger ratio or plant sale once the contract expires and higher earnings volatility for MSIL is expected by analysts. Maruti’s profit may main flat despite higher volumes, revenues, they say.

The earlier release stated that Suzuki Gujarat (SG) will always remain a Suzuki subsidiary, but the latest release states that if the contract manufacturing agreement expires, and if it is not extended by mutual consent, SG’s assets would be transferred to MSIL at a fair value to be determined by independent valuation.