Merger Between Maruti & Suzuki

Merger between Maruti and Suzuki Japan's leading mini car maker Suzuki Motor Corp is all set to consolidate its car production in India by having India's top car maker , Maruti Udyog Ltd., its local subsidiary, buy out a joint venture between the unit and the Japanese parent, possibly in September as a move to clear doubts about their operations synergize management. Suzuki and Maruti Udyog set up Maruti Suzuki Automobiles India Ltd. (MSAIL) in April last year, with the Japanese carmaker putting up 30 percent and the subsidiary 70 percent of its capital, in order to build Suzuki's second auto assembly plant in the country.MUL holds 70 per cent stake in MSAIL while Suzuki Motor Corporation (SMC), Japan, holds the remaining 30 per cent. MUL will buy out the entire 30 per cent stake held by SMC in MSAIL. This was decided by MUL’s Board of Directors at a meeting today. Company’s managing Director Jagdish Khattar Without disclosing the financial transactions involved in buying out the 30 per cent stake of its parent in MSAIL said “ merger would be completed by September, ahead of the scheduled commercial production from the new facility “. In the original arrangement finalized in September 2004, MSAIL was set up as a subsidiary to operate the new car plant in Manesar. The new car plant at Manesar is coming up at an investment of Rs. 15,242 million. The capacity of the plant would initially be 100,000 cars per annum, with a plan to scale it up to 250,000 cars per annum by 2008-09. The new car plant would begin commercial production on schedule, by the end of 2006. This merger will add value for shareholders and eliminate all potential issues relating to intercompany transactions. ” It will retain all the benefits of the earlier arrangement and enable the management to focus on critical issues of business operation," MUL Chairman S Nakanishi said after the Board approved the proposal. Following the news, shares in Maruti climbed more than 4 percent to 878.20 rupees in a weak Mumbai market. We view this development very positively as the creation of MSAIL had raised concerns (about) the logic of creating a new subisidary when the ramp up could take place in Maruti itself," said Kalpesh Parekh, a senior analyst at ASK-Raymond James."Also, there were some concerns pertaining to the marketing and distribution tie-up between the two," he said. "Now, the concerns are clearly addressed, adding value to shareholders” This merger will help Suzuki so that it can more flexibly and quickly respond to trends in the expanding Indian market.

View of the sales Performance of the MSIL: Maruti Suzuki India Limited (MSIL, formerly known as Maruti Udyog Limited) is a subsidiary of Suzuki Motor Corporation, Japan. MSIL has been the leader of the Indian car market for over two and a half decades. The company has two manufacturing facilities located at Gurgaon and Manesar, south of New Delhi, India. Both the facilities have a combined capability to produce over a 1.2 million (1,200,000) vehicles annually. The company plans to expand its manufacturing capacity to 1.75 million by 2013. The company offers a wide range of cars across different segments. It offers 15 brands and over 150 variants - Maruti 800, people movers, Omni and Eeco, international brands Alto, Alto-K10, A-star, WagonR, Swift, Ritz and Estilo, off-roader Gypsy, SUV Grand Vitara, sedans SX4, Swift DZire and Kizashi. In an environment friendly initiative, in August 2010 Maruti Suzuki introduced factory fitted CNG option on 5 models across vehicle segments. These include Eeco, Alto, Estilo, Wagon R and Sx4. In fiscal 2009-10 Maruti Suzuki became the only Indian company to manufacture and sell One Million cars in a year. Maruti Suzuki has employee strength over 8,500 (as at end March 2011) In 2010-11; the company sold over 1.27 Mnvehicles including 1, 38,266units of exports. With this, at the end of March 2011, Maruti Suzuki had a market share of 44.9 per cent of the Indian passenger car market. Maruti Suzuki's revenue has grown consistently over the years. (Rs. in Million) Year

Net Sales

Year

Net Sales

2005-06 2007-08 2009-10

1,20,034 1,78,603 3,01,198

2006-07 2008-09 2010-11

1,45,922 2,03,583 3,61,282

The company is listed on Bombay Stock Exchange and National Stock Exchange.

Company’s Network: The company has a sales network of 802 centres in 555 towns and cities, and provides service support to customers at 2,740 workshops in over 1,335 towns and cities (as on March 31, 2010). The company is focused on rapidly expanding the sales and service further across the country.

Customer Delight: India's Most Trusted Brand 2010: The Economic times Maruti Suzuki has been ranked India's most Trusted Brand in Automobile Sector by India's leading Business newspaper The Economic Times. 2000-2010: JD Power Customer Service Index Award - India The biggest draw for the past eleven years has been the award for highest recognition by the customer. In 2009-10 again, for the tenth consecutive time, Maruti Suzuki ranked the highest in J.D. Power Asia Pacific 2010 India Customer Service Index (CSI) study.

Other Accolades During 2009-10, the company, its products and services received reputed awards and accolades instituted by independent expert groups, media houses and research agencies.

These include: Rated as No. 1 in J D Power Sales Satisfaction Index Hatchback of the year - Ritz by Autocar Car of the year - Ritz by Business Motoring Manufacturer of the year by CNBC Overdrive Ranked third amongst global car companies in the World's Most Reputed Company Survey 2009 National Award for Excellence in Corporate Governance by ICSI

National Road Safety Mission Driving its message for road safety, Maruti Suzuki India Limited, unveiled a National Road Safety Mission programme in December 2008. Under the programme, the company will: Train 500,000 people in safe driving in the next 3 years across India While utilizing the existing 4 Institutes of Driving Training and Research (IDTR) in Delhi, Dehradun and Vadodara and 61 Maruti Driving Schools across the country the company will enter into partnerships with state governments for more IDTRs and with its dealers for more Maruti Driving Schools

Of the 500,000 people to be trained, at least 100,000 will be people from underprivileged section of society, who are keen to take driving as a profession. The company will continue to support to government and industry in their efforts for road safety In addition, Maruti Suzuki is currently expanding its network of Maruti Driving Schools across India, in collaboration with its dealers. These state-of-the-art institutes, offering practical, theory and simulator training along international lines, are aimed at making roads safer. Maruti Suzuki True-Value, the company's service business includes sales and purchase of pre-owned cars. These initiatives, besides providing total mobility solutions to customers in a convenient and transparent manner, have helped improve economic viability of the company's dealerships. Board of Directors: Mr. R. C. Bhargava

Mr. Shinzo Nakanishi

Chairman

Managing Director and CEO

Mr. Amal Ganguli

Mr. D. S. Brar

Director

Mr. Osamu Suzuki

Director

Mr. Shuji Oishi

Mr. Manvinder Singh Banga

Director

Mr. Keiichi Asai

Director & MEO (Engineering)

Ms. Pallavi Shroff

Director

Director & MEO (Marketing & Sales)

Mr. Kenichi Ayukawa

Director

Director

Mr. Tsuneo Ohashi

Director and Managing Executive Officer (Production)

Maruti, MSAIL merger to ease product rollouts MUL to have total capacity of 850,000 units Merger reasons The Government in 2004 held an 18 per cent stake in Maruti, of which it sold 8 per cent in the beginning of 2006, thereby, reducing its "influence on decision-making" in the company. Analysts state that Suzuki may have been wary of Government control in the company given the history of spats between the two. New Delhi , April 15 The announcement of the proposed merger of Maruti Suzuki Automobile India (MSAIL) with Maruti Udyog has eased concerns about the roadmap for future product rollouts by the latter. MSAIL's car plant, which is to be operational by the end of the year, would have an initial capacity of 100,000 units and 250,000 units by 2008. This would provide Maruti a total capacity of 850,000 units by 2008, strengthening its position both in meeting market demand and offering a large product portfolio.

Market analysts point out that the earlier announcement of the joint venture in September 2004 was amid much speculation and even protest from the Indian Government.

Reasons Maruti's decision now to buy out Suzuki Motor Corp's 30 per cent stake in MSAIL could be prompted by two reasons. The Government in 2004 held an 18 per cent stake in Maruti, of which it sold 8 per cent in the beginning of 2006, thereby, reducing its "influence on decision-making" in the company. Analysts state that Suzuki may have been wary of Government control in the company given the history of spats between the two. Prior to 2004, Suzuki had differences with the Indian Government over the appointment of the Managing Director at Maruti in 1997. Meanwhile, when Suzuki announced its intention to set up a separate subsidiary in India in 2004, the matter had threatened to snowball into a political controversy.

Burden on Maruti Analysts further point out that with MSAIL being merged into Maruti, the requisite investment of Rs 1,524 crore to set up the car plant will have to be borne entirely by Maruti. MSAIL, which has an equity capital of Rs 40 crore, has already raised some debt for the new car plant project. However, so far Rs 200-300 crore have been spent on land and machinery. Apart from equity capital, the balance has come from internal loans from Maruti, as well as syndicated loans organised by Japan Bank of International Co-operation. Further, post-merger, Maruti's debt-equity ratio would also change as MSAIL's debt will move to Maruti. Maruti intends to use its surplus cash reserves to fund the purchase of Suzuki's stake in MSAIL. Meanwhile, Maruti has formed a five-member committee to decide on the price at which it would purchase Suzuki's stake in the joint venture.

MUL to buy Suzuki's stake in Maruti Suzuki Auto Merger to be completed by Sept 30; panel to evaluate implications

MR S. NAKANISHI, Chairman, MUL, with Mr Jagdish Khattar, Managing Director, at a press conference in the Capital on Thursday. - Ramesh Sharma New Delhi , April 13 Maruti Udyog Ltd (MUL) on Thursday said it would buy Suzuki Motor Corporation's 30 per cent stake in the joint venture Maruti Suzuki Automobile India Ltd (MSAIL). MUL holds 70 per centin the joint venture. The company will value the stake and merge by September 30, Mr Jagdish Khattar, Managing Director, MUL, said. The purchase of the unit will be effective April 1, 2006. "Maruti will use its own reserves to purchase the stake," Mr Khattar said. MSAIL, with a paid-up capital of Rs 40 crore, has so far invested about Rs 300 crore in acquiring land and making initial payments for machinery. In order to arrive at the price of the Suzuki stake in MSAIL, a five-member committee had been set up to evaluate the implications of the merger.

`Profits intact'

Mr Khattar denied that the merger, which would see the debt raised by MSAIL being transferred to the books of Maruti, would hit the profitability of the car major. Meanwhile, MUL indicated that it has no plans to buy additional stake in the diesel plant venture with Suzuki. Maruti has 49 per cent in the company, Suzuki Powertrain India Ltd, while Suzuki has 51 per cent.

Manesar plant MSAIL is setting up a new plant at Manesar, at a cost of Rs 1,524 crore and capacity of 2.5 lakh cars per year by 2009. The initial capacity will be one lakh units and production will begin by the year-end. Buying the stake "will eliminate all potential issues relating to inter-company transactions," Mr Khattar said. Shares of Maruti rose to Rs 881.85 on Thursday. It closed trading at Rs 870.05, 3.4 per cent up over the previous day's price. Meanwhile, Thursday's announcement puts to rest the confusion over which model would be launched from which company and the subsequent financial impact. Analysts had reacted with caution in September 2004 after Suzuki said it would form a joint venture with Maruti instead of allowing MUL to expand on its own. MUL had then taken majority control in the joint venture after the Government, the second-largest shareholder in MUL at the time, objected to equal ownership of the joint venture.

GLOBAL NEWS April 13 2006

Suzuki decided that Maruti Suzuki Automobile India Limited (MSAIL) will merge into Suzuki’s Indian Automobile production and distribution subsidiary Maruti Udyog, Ltd (MUL). MUL will buy out the entire stake held by SMC in MSAIL to make MSAIL 100% subsidiary of MUL, so that MSAL merges into MUL later. The price will be decided through discussions between SMC and MUL. MSAIL was established in 2005 with the investment of 30% of Suzuki and 70% of MUL, to respond to the increasing Indian market with the aim of the start of operation in October 2006. It has been always meant to be only a automobile manufacturing company, with its other

functions like sales and marketing, procurement and R & D entrusted to MUL. For further efficiency drive, MUL will absorb MSAIL for a flexible management by introducing profit center approach. By this merger, MSAIL will be run as a MUL’s Manesar plant. The capacity of the plant will initially be 100,000 cars per annum, with a plan to scale it up to 250,000 cars per annum later than the fiscal year 2008.

The outline of MUL Company Name

Maruti Udyog, Ltd.

Located in

New Delhi

Representative

Mr. Jagdish Khattar, Managing Director

Capital

Rs. 1,444,550,000 (Approx. US$ 32.5million) Suzuki’s share: 54.2%

The outline of MSAIL Company Name: Maruti Suzuki Automobiles India, Ltd. Located in

New Delhi

Representative

Mr. Tsuneo Kobayashi

Capital

Rs. 400,000,000 (Approx. US$9.0million) MUL’s share: 70% SMC’s share: 30%