carmaker Maruti Suzuki has sent a clarification to market regulator Securities and Exchange Board of India (SEBI) over

the recent decision to have its parent set up a manufacturing plant in Gujarat, it is learnt. Sources told CNBC-TV18 that the company is yet to receive a response from the regulator, which was reportedly looking into whether the transaction flouts corporate-governance and related-party transaction norms. In January, Maruti said a wholly-owned subsidiary of Japans Suzuki Motor would set up a manufacturing unit on a land in Gujarat that Maruti owns and had originally intended to develop. Maruti said that the Gujarat unit would manufacture cars only for the Indian carmaker and as per its requirements. But the move met with opposition from institutional investors who said the deal was against the interest of minority shareholders as the nature of the transaction implied Maruti would end up paying Suzuki a higher cost than it would have had the firm manufactured vehicles itself. Amid reports that said Maruti may reconsider its decision at a board meeting on March 15 which Suzuki chairman Osamu Suzuki is attending, it is now emerging that the discussion about the Gujarat deal may not take place at all and sources say the meeting is primarily being conducted to di scuss the companys annual budget. Maruti has not yet finalized the contract agreement and the deal would be consummated only after approval from the board and the audit committee, it is learnt. Sources said the company reiterates its stand on the project -- that Suzuki would not earn any profits or dividend from the plant and any profits would be routed through Maruti in which Suzuki owns 56 percent stake. The company also talked about the key capex clause -- over which institutional investors have the most disagreement with -- and said that Marutis funds towards capex for the Gujarat plant would be capped. Fund managers have complained against the capex clause which says that Maruti would buy cars from the unit at a cost plus capex price where the latter would go toward funding the plants future expansion. The move of Maruti funding another companys capex plans towards an asset it would have no control over has been termed as value erosive and against the interest of minority shareholders. Sources also said Maruti would transfer the Gujarat plant to its own books if the agreement ends after its current tenure of 15 years after seeking minority shareholder approval but investors have complained that the clause that the plant would be transferred at fair value rather than book value is unfair. Analysts have questioned the complicated deal given the fact that Maruti could have chosen to invest its own Rs 7500 crore cash. Sources said the company also clarified on recent reports that said that while Suzuki would invest in the Indian plant on behalf of Maruti, the Indian company was looking to do the same for Suzuki for its overseas factories and it is learnt that the latter plan was not on the cards. The company had also come under fire for reported plans that it would use its surplus cash to buy real estate and lease it to its dealers. But sources said the program already exists and would only be enhanced after the companys board took a call on the issue. Maruti also spoke about the issue of royalty that it pays to its parents, which has risen 2.2 percent in the past four years, much to the angst of domestic investors. The company, sources said, attributes part of the rise due to forex (1 percent) and the decision to manufacture Suzukis own diesel engines (0.6 percent). Read more at: http://www.moneycontrol.com/news/cnbc-tv18-comments/maruti-replies-to-sebi-clarifiesguj-fiascosources_1053476.html?utm_source=ref_article