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Suzuki Motor Corporation (SMC) is said to be considering buying up to 5 per cent of Maruti Suzuki shares from the open market.
The buyout plan, which has reportedly been delayed for many months on various counts, could increase Suzuki Motor's holding in the Indian carmaker to over 59 per cent.
The purchase is expected to take place through the “creeping acquisition” route over a year, sources in the merchant banking industry told Business Line .
‘Good time to buy'
“This is a live deal right now so not many details are out. SMC is planning to buy 5 per cent of shares from the open market without triggering the open offer. Talks had started three months before the disaster in Japan when they had started taking the necessary approvals. But the purchase was delayed. Now the company (SMC) feels is a good time to get back on track with its plans,” a source said.
Other industry sources said that Suzuki Motor, a promoter of Maruti with a 54.2 per cent stake, is likely to go for block deals with financial institutions.
A total of 21.09 per cent stake in Maruti is held by a clutch of institutions such as Life Insurance Corporation, ICICI Prudential Life Insurance and Bajaj Allianz Life.
On the basis of Tuesday's share price of Maruti Suzuki at the BSE, a 5 per cent stake can be valued at a little below $400 million (around Rs 1,658 crore).
The stock closed the day at Rs 1,147.55, losing 1.35 per cent.
Asked about the development, Mr R.C. Bhargava, Chairman, Maruti Suzuki, said, “I am not aware of this. But if SMC picks up stake directly from the market, we may not be informed as well. It will only come to us at the next Board meeting when the shareholding pattern changes.”
The next Board meeting is scheduled for July 26.
According to the Securities and Exchange Board of India regulations (takeover code), a promoter with shareholding in the 55-75 per cent range can only go for a one-time increase in stake of up to 5 per cent (creeping acquisition), after which it would have to go for an open offer.
The strategy to increase shareholding may be a part of a larger one for SMC, sources brokerage firms said.
It could help the parent firm increase the revenue stream from its profitable Indian subsidiary, which sells every second car in the country.
“Such news has been floating around for the past few months. An increase in the stake would help SMC's consolidated balance sheet as a majority of the cash flow comes from this entity. After the announcement of setting up a large car plant in Gujarat, it may also have big plans to make India a global hub for small car exports,” a source in a leading brokerage said.
Another industry expert said that Suzuki Motor could also be planning to de-list the company at a later date.
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