Maruti Suzuki hits a low in trade markets owing to speculation around curbed investment in Gujarat

Wednesday 16 May 2012, 21:02 PM by

In response to reports that Maruti Suzuki India (MSI) has lowered the sum it will invest on a plant in Mehsana, Gujarat, the company's stock has now gone done by 3 per cent and settled at Rs. 1,214. The country's largest car maker earlier said that it is planning to invest Rs. 6000 crores in the state in order to establish a manufacturing unit in Bechraji near Mehsana. The plant was supposed to have yearly production capacity of 10 lacs units in the first stage of its expansion plans. According to sources, the company has already started building the plant, but with a significant decrease in the capacity from the figures it declared previously.

In comparison with the 5 per cent decrease in the benchmark index, the stock price of Maruti Suzuki has gone down by 13 per cent over the course of the eleven trade sessions. The stock opened at Rs. 1,238 on May 15, 2012 and slumped to a low of Rs. 1,205 on the National Stock Exchange (NSE). A total of 4,26,008 shares of the company have been traded on the Bombay Stock Exchange (BSE) and the NSE.

Previously, a senior official of the company who wished to remain anonymous stated, “The Mehsana plant will have the capacity to produce 1 lac cars in a year initially as against 10 lac cars planned earlier. However, the capacity would be scaleable upwards in the future.” However, there has been no announcement of the reduced investment figures for Mehsana plant from the company's side till now.

Moreover, this news about reduction in the sum being infused in the state comes as a surprise to a spokesperson for Maruti Suzuki as well, since he said he did not have any knowledge of the said change in plans. On the other hand, the industries minister of the state of Gujarat, Saurabh Patel too contradicted the reports of investment cut by the company. He said, “We have not received any communication from Maruti Suzuki in this regards.” The automotive giant is all set to sign the deal with the state government in coming weeks after having acquired nearly 600 acres of land in Bechraji for the new plant.

The domestic automotive leader earlier declared a delay of a few months in its expansion plans owing to the economic turmoil, together with a sharp reduction in sales figures. Against the sales volume of 1.27 vehicles in 2010-11, the company faced a sharp downfall of 11 per cent as it sold 1.13 lac units in the following year. Maruti Suzuki also declared that the Gujarat unit will only start operating after it completely utilised the installed capacity of its Manesar plant. The car maker is planning to raise its total annual production to 17 lac units in the next two years from the current manufacturing capacity of 13 lac units. However, nothing can be said of its plans till the status of its investment in the plant in Gujarat becomes clear.

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