Total Capex Till 2030-31 Could Be Around Rs 1.25 Lakh Crore: MSI

During a shareholder presentation, the automobile company announced that it would need around Rs. 45,000 crore to build a capacity of 20 lakh units. The cost estimate considers current expenses, with a slight allowance for potential cost escalation.
Source: Shutterstock
Source: Shutterstock

Maruti Suzuki India's capex till 2030-31 could be around Rs 1.25 lakh crore as it plans to enhance product range to 28 models from 17 currently and expand production capacity, according to a regulatory filing.

The country's largest carmaker is lining up capex to expand its total production capacity to 40 lakh units per annum by 2030-31.

"The regular capex in the existing plants at Gurgaon, Manesar and Gujarat will continue. The amount in 2022-23 was around Rs 7,500 crore. Total capex till 2030-31 could be as much as Rs 1.25 lakh crore," Maruti Suzuki India (MSI) said.

In a presentation for shareholders, analysts and proxy advisors, the auto major stated that it will need about Rs 45,000 crore to create a capacity of 20 lakh units.

This is based on current costs and a small amount for cost escalation, it noted.

Elaborating on the benefits of issuing shares on a preferential basis to Suzuki Motor Corporation (SMC) rather than utilising cash for the acquisition of Suzuki Motor Gujarat (SMG), the company said funds would be needed for creating the sales, service and spare parts infrastructure to almost double domestic sale volumes.

"The infrastructure for exporting the much larger volume of cars will also have to be strengthened. The conversion of production lines to have greater flexibility will need additional capex" it said.

R&D will need additional outlays to enable most of development work relating to internal combustion engine (ICE) cars being done by the company, it added.

Capex will also be needed to develop 10-11 new models with different fuel options in this period, MSI said.

Besides, production of EVs and SUVs will need larger capex, it stated.

"Payout of over Rs 12,500 crore for SMC shares in SMG would, besides reducing profits, EPS and dividend payments, could also create a shortage of cash," MSI said.

In August this year, the MSI board approved the issue of shares on a preferential basis to SMC as consideration for the acquisition of 100 per cent stake in SMG.

Post such acquisition, SMG will become a wholly-owned subsidiary of the company.

The MSI board, in its meeting held on July 31, 2023 had approved termination of the contract manufacturing agreement with SMG and acquiring shares of SMC.

SMG, which was incorporated in 2014, has a production facility in Gujarat with an installed capacity of 7.5 lakh units per annum.

Initially, the Gujarat plant was proposed to be owned by MSI but the plan was changed later with SMC announcing that it would invest USD 488 million to build the plant.

The plan was opposed by the institutional investors forcing the company to seek minority shareholders approval on the matter.

MSI shares were trading 0.49 per cent down at Rs 10,250.35 apiece on the BSE.

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