Two-phase MUL divestment to give Suzuki total control

NEW DELHI: The government has finalised the manner in which management and ownership control would be transferred to Suzuki Motor Company, joint venture partner in Maruti Udyog, through its two-stage divestment.

The operational freedom would be granted by the government limiting its presence on MUL’s board to two part-time directors after the proposed rights issue. This would give SMC a majority stake as well as dominant presence on the board.

The dominant position on the board would permit SMC to dictate such sensitive decisions as the pricing of the imported kits, the level of indigenisation, the pricing of and the introduction of models, royalty and technology fee payments.

The government would also willing step down from interfering with the appointment and management of the company’s wide vendor and dealer networks. Price sensitive information would also be available to the government through the mechanism of the board.

“The idea is to give SMC total operational freedom,� a senior government official said.

As a result, such boardroom battles as the transfer of gear box technology,which caused a vertical divide on the MUL board, would henceforth be relegated to the realms of record-keeping.

In the second stage, the government’s post-rights issue holding (which would about 43-44 per cent) would be sold to the public.

As a result, the ownership control would automatically pass on SMC, since no single stakeholder in MUL would be able build sufficiently strong position through the public issue to block special resolution.

Under company law, a special resolution has to be passed by 75 per cent of the shareholders present at a meeting.