MSIL has announced a new manufacturing facility in Gujarat last year, and has also started implementation on the project. But as per the company source, it is being said that this plant would be wholly owned subsidiary of Suzuki Motor Corporation.
So this raised concern among the institutional investor and they demanded clarification regarding the same. Now, MSIL has clarified the issue that Gujarat Plant will be wholly owned by Suzuki Motor Corporation but it would sell the cars at a lower price than its own ex-factory sale price.
The company said that at the time of end of contract between two companies, if it will not be renewed with mutual consult of both the companies, the MSIL will buy the plant at fair value at the time of expiry of the contract.
According to MSIL’s statement, Suzuki Motor Corporation’s Gujarat plant “would operate on the basis that while it would not make any losses, it would also not accumulate any cash surpluses.” The production cost would be calculated in “an identical manner”, as that would be followed by MSIL in Haryana. The cost will not include any return on investment and profit to Suzuki Motor.
The company while further clarifying said that the capital expenditure needs of the Gujarat subsidiary would be met by “(i) the depreciation amount available with the subsidiary (ii) by an amount generated as net surplus from the car pricing and (iii) by Suzuki Motor Corporation infusing fresh equity, to the extent necessary.”
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