Car major Maruti Udyog, slated to hit the market with a public offer of shares in June, has warned prospective investors of a possible conflict of interest with parent Suzuki Motors over crucial corporate decisions in its draft prospectus.
Under the heading 'Suzuki has ability to exercise significant control over MUL and its interests may clash with your interests as a shareholder', the company said, "Suzuki owns 54.2 per cent of our outstanding equity shares and is our controlling shareholder."
"As a result, Suzuki has the ability to exercise significant control over most matters requiring approval by shareholders," Maruti said listing out the risk factors in the draft prospectus, which market regulator Securities and Exchange Board of India had placed on the net to invite public comments.
Suzuki also exercises control over the election and removal of directors and other significant corporate transactions.
The prospectus also said its parent could delay or defer crucial decisions over changes in capital structure, mergers and consolidation.
Amongst the other grey areas over which conflict could arise include takeovers, discouraging potential acquirers from tender offers and attempting to obtain stakes in the company.
The prospectus, which received clearance from Sebi and two premier bourses -- National Stock Exchange and Bombay Stock Exchange -- this week, also warned that its success would depend on continued ability to integrate Suzuki personnel into its management structure.
Maruti also pointed to the possibility of mis-alignment of Suzuki's relationship with that of its own following the control, which General Motors exercises over the former through its 20 per cent stake.
"Suzuki's global interest and our interest as a company may not always be aligned in the future," it said.
General Motors incidentally has a competing presence in India through a domestic venture in the C segment.
The car giant, which accounts for 50 per cent of the domestic car market, also has in place several agreements with Suzuki putting restrictions on exports, manufacture and sale of products covered under the agreements.
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