Suzuki gives notice to TVS group, seeks control

28 Aug 1999

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Suzuki Motor Company of Japan seems to have taken a cue from compatriot Honda Motor Company. Close on the heels of Honda securing approval from the Foreign Investments Promotion Board to set up a wholly-owned subsidiary to manufacture two-wheelers in India, Suzuki is understood to have given notice to its partner, the TVS group.

The Japanese company wants to have a majority stake in TVS-Suzuki, the joint venture two-wheeler manufacturer of Chennai. If this is not possible, the TVS group should not raise objection to it setting up a wholly-owned subsidiary, it is understood to have told its Indian partner.

Honda   had two joint ventures in India -- one with the Firodias of the Kinetic group and the other with the Munjals of the Hero group. Honda exited from the Kinetic joint venture, and persuaded the Munjals to give a no-objection certificate to the government so that the approval for the wholly-owned subsidiary could be expedited.

TVS-Suzuki is one of the high performers in the two-wheeler industry, whose products are in good demand, especially in south India. Suzuki holds 25.9 per cent of its equity, and the TVS group has 32 per cent. Non-resident Indians and foreign institutional investors hold about 17 per cent and the public about 25 per cent.

In fact, this is Suzuki's second attempt to wrest control of the company. A few years ago it had made a similar proposal but had to drop it in the face of opposition from the TVS group.

Industry watchers see the move as part of a trend among Japanese companies to set up shop on their own, in the bargain ditching the joint ventures in which they are partners. Industry associations have represented to the government that, besides leaving joint ventures in the lurch, this trend could have adverse repercussions on the investment climate.

TVS-Suzuki was incorporated in 1982. The company recorded sales of Rs 1,313.18 crore for the year ended 31 March 1999 and profit of Rs 81.39 crore. These reflect an increase of 28.9 per cent and 18.36 per cent compared with the previous year. The company has branched off from its traditional motorcycle domain to scooters with the introduction early this year of the four-stroke Spectra.

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