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Preeti Mehra

New Delhi, Aug. 27 The boardroom battle in Swaraj Mazda Ltd (SML) has taken a twist with the board of directors on Monday approving a rights issue for Rs 120 crore.

The rights issue could play out several scenarios and allow the battle for control to go either way — to the advantage of Japanese major Sumitomo, which currently holds a 41 per cent stake in the company and could increase its stake, or harness its march forward in case the other major stakeholders come together to strengthen their position.

According to sources, there could be the possibility of Punjab Tractors Ltd owners Mahindra and Mahindra (PTL holds 14 per cent stake in SML), and private equity player Actis, which holds 18 per cent, joining hands along with financial institutions to take on the Japanese giant.

On the other hand, if the two players PTL or Actis, or for that matter even one of them, decides to refrain from participating in the rights issue, it would leave the floor open for Sumitomo to establish further control in the company. However, both PTL and Actis were unwilling to comment on their future course of action. SML too, was not available for comment.

Besides boardroom decisions, there is also the possibility of the legal battle that was filed by PTL against SML, currently pending at the Company Law Board, intensifying as a result. PTL had charged the company with mismanagement and suppression of facts in the joint venture.

According to sources, Sumitomo is keen on its partnership with Isuzu for a technical collaboration for SML after the exit of Mazda couple of years ago. However, Isuzu is not slated to invest in the company.

SML, which is owned by Sumitomo (41 per cent), Actis (18 per cent) and PTL (14 per cent), has been in the eye of controversy ever since PTL sold 15 per cent of its stake in SML to Sumitomo in 2005. This move was opposed by other stakeholders, including Actis and Dabur Group’s Burmans who teamed up to oppose the then PTL Managing Director, Mr Yash Mahajan. However, Mr Mahajan continued as the Managing Director of SML with the support of Sumitomo.

More Stories on : HCV/LCV/Tractors | Rights Issue | Corporate Disputes

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