New Delhi, July 11: The Centre will not favour a preference share issue route for financing the Rs 1,500-crore expansion plan of Maruti Udyog Ltd (MUL), a 50:50 joint venture between the government and Suzuki Motor Corporation.

"As on today neither the government nor the MUL board has any plans for coming out with a preference share issue for financing expansion plans," industry ministry sources said.

They said the first phase of expansion plan would be financed entirely through debt and internal accruals and stated that the company was on a strong financial position and that internal generation could be more than the estimates when the project is implemented by 1999.

Sources denied that Osamu Suzuki, chairman of the Japanese partner, had floated the idea of preference shares when he met industry minister Murasoli Maran and other senior officials.

However, Maruti sources say Suzuki favours the expansion plan to be financed equally by debt, equity and internal accruals. Recent newspaper reports had suggested Maruti was toying with the idea of allowing Suzuki to make investments in preference share in the company instead of equity investments.

The Rs 8,000-crore leader in the domestic automobile market is planning to raise its production capacity to over four lakh by early 1999 through the expansion plan.

Ministry sources and senior Maruti officials said the exact proportion of debt and internal accruals, however, has not been decided by the board yet.Last week's board meeting had decided on investing up to Rs 600 crore this year on paint shop and press shop at the company's manufacturing site in Gurgaon, near here.

Suzuki favours a change in the equity structure of the company, which has 83 per cent market share of the car market to compete better in the changing small car market.

Suzuki is keen on raising their share to nearly 75 per cent and was even reported to have threatened the government of walking out of the joint venture in order to set up a separate company on its own. However, the government does not favour any dilution of its stake in the company.

The industry minister had categorically ruled out any change in the present structure.