"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," S Nakanishi, chairman, MUL said in a statement, after the company's board gave a go-ahead to the proposal.

Maruti holds 70 per cent stake in MSAIL while its parent company Suzuki holds the remaining. "This merger will add value for shareholders and eliminate all potential issues relating to inter-company transactions," the company statement said.

MSAIL was set up as a subsidiary in September, 2004, to operate the company's new car plant at Manesar which will have an annual capacity of 1,00,000 cars and with potential to scale-up to 2,50,000 units by 2008-09.

The new plant involves an investment of Rs 1,524.2 crore (Rs 15.24 billion) and will begin commercial production by the end of this calendar year.

"The purpose of setting up a separate company was to start operations with a fresh approach in the new plant," the company said.

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