Triggering speculation about the Japanese firm’s intentions for its Indian subsidiary, Suzuki Motor Corp has raised its stake in Maruti Suzuki to 55 per cent. The step may be part of a larger plan to take complete control of the country’s top car manufacturer.
Lately, Suzuki had raised its stake in Maruti by 0.8 per cent through secondary market purchases and is likely to increase its stake further. In Indian companies are allowed to make creeping acquisitions up to 5 per cent a year. Suzuki will have to make an open offer for another 20 per cent for any increase beyond 55 per cent.
Quite a lot of e-mails set to Suzuki have remained unanswered. Any change in the stake holding will only come up before the board at the statutory board meeting scheduled for the third week of April.
Maruti Suzuki selling every second car in India has established itself very well in Suzuki’s global operations and is a rare bright spot for sales across the world. Suzuki owes 80 per cent of its profits to Maruti and in volumes too, Maruti has eclipsed Suzuki’s tally.
The increase in the stake at this juncture could be part of a larger strategy to gain full control of Maruti, especially in the light of Suzuki’s latest alliance with Volkswagen that saw the German group pick up a 20 per cent stake in the Japanese group. Suzuki and VW must be having certain plans for Maruti because their alliance has a significant focus on the Indian market.
In spite of the growth of global car manufacturers gnawing at its market share, India continues to be a profitable market for Suzuki. Maruti sold 96,650 cars in February. The 22 per cent jump from a year ago was Maruti’s best monthly performance till date. Suzuki does not seem to get anything by raising its stake unless it has a longer term strategy of which this is a part.
After Suzuki, FIIs and LIC are the biggest stakeholders in Maruti, owning 22.21 per cent and 11.22 per cent respectively. Maruti’s current market value is around $10 billion, and if Suzuki were to fully delist the company, it would have to shell out nearly $5 billion at current prices. Shares in Maruti ended 0.16 per cent lower at Rs 1,457 on the BSE on Friday.
Maruti is plans to increase its capacity from 1 million units a year by up to 75 per cent by 2015. In five year’s time, depending on how the car market performs, it plans to reach 1.5 - 1.75 million units a year.