Maruti, Suzuki Powertrain Plan To Merge
Tuesday, June 12, 2012
Diesel engine supplier Suzuki Powertrain India (SPIL) will join hands with the country's largest car manufacturer Maruti Suzuki India (MSIL).
Maruti possesses 30% equity stake in the company, whilst the remaining equity holding is possessed by Suzuki Motor Corporation (SMC), Japan.
Analysts were optimistic on the amalgamation as it implies enhanced margins for Maruti, whose earnings per share might be promoted by 3-4% after the contract.
Suzuki Power registered a higher ebitda of 12.1% as compared to Maruti's 7.2% during FY12.
It registered a net profit of Rs 115 crore on sales of Rs 4,500 crore during FY12.
In a declaration, the company stated, "With the merger, Maruti will be able to bring its entire diesel engine capacity under a single management control. The proposed merger also promises benefits for the combined entity through synergies in areas like finance, capital structuring and administration and consequent reduction of transaction costs."
The amalgamation, proposed through a share swap, doesn't involve a cash outflow from Maruti.
The swap proportion has been determined at 1:70.
SMC will obtain one Maruti share (of Rs 5 each) for 70 shares (of Rs 10 each) it possesses in Suzuki Powertrain.
Maruti plans to make a fresh issue of 1.32 crore shares to SMC in place of SMC's 70% holding in Suzuki Powertrain.
The merger is likely to be finished by December this year.