NEW DELHI: Maruti Udyog Limited (MUL) will buy out the Suzuki stake in its subsidiary joint venture, Maruti Suzuki Automobile India Limited (MSAIL). The company will then be merged into MUL. This was decided by the MUL's board at a meeting here on Thursday.

MUL holds 70 per cent stake in MSAIL, while Suzuki Motor Corporation (SMC) of Japan holds the balance. MUL will buy out the entire 30 per cent stake held by SMC in MSAIL.

According to the company's Managing Director, Jagdish Khattar, the merger will add value for shareholders and eliminate all potential issues relating to inter-company transactions.

Mr. Khattar said the merger would be completed by September, ahead of the scheduled commercial production from the new facility which would have an initial capacity of one lakh units that will be scaled up to 2.50 lakh units by 2008-09. A five-member committee had been set up to evaluate the price of the Suzuki stake in MSAIL, which has a paid-up capital of Rs 40 crore, and the financial, legal and company law implications related with the merger, he said.

Mr. Khattar said the merger would not affect the parent company's profitability even though loans taken by MSAIL would be transferred to MUL's books. There could, however, be some change in the company's debt-equity ratio, he said.

The MUL Chairman, S. Nakanishi, said "the merger of MSAIL and MUL will create value for all stakeholders. It will retain all the benefits of the earlier arrangement and enable the management to focus on critical issues of business operation.''

The new facility under MSAIL involves an investment of Rs. 1,524.20 crore and it will begin commercial production by the end of this calendar year. The merger will be effective April 1.

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