The Hindu Business Line : Sumitomo to pick up 15% Swaraj Mazda stake from Punjab Tractors

THE Japan-based Sumitomo Corporation is set to emerge as the single largest shareholder in light commercial vehicles manufacturer Swaraj Mazda Ltd (SML), following a decision by the board of directors of Punjab Tractors Ltd (PTL) to sell 15 per cent of the company's stake in SML to Sumitomo.

Following the completion of the transaction, Sumitomo would have a stake of over 25 per cent in the firm, as the Japanese firm already holds a stake of 10.41 per cent in SML.

PTL, which has a shareholding of 29.04 per cent in SML, will be selling 15 per cent of its holding at a price of Rs 400 per share (aggregating to a consideration of about Rs 63 crore). The transaction would also take the collective stake of Japanese companies in SML to over 40 per cent, as Mazda, which was earlier a technical partner of SML, has a stake of about 15.6 per cent.

Meanwhile, sources said that Swaraj Mazda would soon announce the induction of a new technical partner, which is being brought in by Sumitomo. The technical partner is most likely to be Japanese automobile major Isuzu and either Sumitomo or Isuzu may subsequently pick up Mazda's stake in Swaraj Mazda, they said.

Incidentally, SML's technical assistance agreement with Mazda has already expired and Mazda too has withdrawn from the manufacture of commercial vehicles. The induction of a new technical partner would help SML to roll out new commercial vehicles in the market.

Earlier this year, Sumitomo had approached the Board of Directors of PTL with a request to sell to Sumitomo roughly half of PTL's 29.04-per cent equity holding in SML on the ground that their larger involvement in the company's equity holding is crucial to forging an alliance with the selected commercial vehicle manufacturer from Japan.

The entire process, however, had been a subject of controversy with Sumitomo making clear its intention to increase its equity in SML, even as an open offer of private equity player Actis was on.

Actis currently has roughly 18 per cent stake in SML. Actis had, in a letter to financial institutions, conveyed that it is not in favour of dilution of PTL's equity in SML.

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