SUZUKI FAN

Suzuki increases stake in Maruti

Suzuki raised its stake in Maruti by 0.8% through secondary market purchases “very recently”, two persons familiar with the matter told ET. One of them, an investment banker, said Suzuki was set to increase its stake further. Indian rules allow companies to make creeping acquisitions of up to 5% a year and any increase beyond 55% will require Suzuki to make an open offer for another 20%.

This new report came after Suzuki raised its stake in Maruti through secondary market purchases by around 0.8%. The Japanese company Suzuki wanted to increase its stake to more numbers but the Indian laws stopped them from doing so, as there are many things to be followed. If a foreign company wants to increase its stake in any Indian company beyond 55% it needs to make a further offer of another 20%, and this made Suzuki step back from further raising the stake.

“It would be interesting to see what plans Suzuki and VW have for Maruti because their alliance has a significant focus on the Indian market,” noted an analyst at a Mumbai-based brokerage. Despite a flourish of global carmakers gnawing at its market share, India continues to be a lucrative market for Suzuki. Indeed, Maruti sold 96,650 cars in February, the 22% leap from a year ago its best monthly performance yet.

“There’s no reason why Suzuki would want (it) … unless it has a … larger game-plan lined up,” one former Maruti official said. “Suzuki gets nothing by upping its stake unless it has a longer term strategy of which this is a part,” added the analyst.

After Suzuki, FIIs and LIC are the biggest stakeholders in Maruti, owning 22.21% and 11.22%, 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. Maruti is looking to increase its capacity from 1 million units a year by up to 75% in the next five years.

“Depending on how the car market performs, we would like to reach 1.5–1.75 million units a year by 2015.” Maruti Suzuki MD Shinzo Nakanishi told ET in an earlier interview.

source ET

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