Diesel powertrain supplier Suzuki Powertrain India (SPIL) will merge with Maruti Suzuki India (MSIL) but no jobs are to be cut. Maruti currently holds 30 percent stake in SPIL while the remaining is held by Suzuki Motor Corporation (SMC) of Japan.
"With the merger, Maruti will be able to bring its entire diesel engine capacity under a single management control. The proposed merger also promises benefits for the combined entity through synergies in areas like finance, capital structuring and administration and consequent reduction of transaction costs," Maruti said in a statement.
Analysts said the merger implies better margins for Maruti. The merger, proposed through a share swap, does not entail a cash outflow from Maruti. The swap ratio has been fixed at 1:70. SMC will receive one share of Maruti (of Rs 5 each) for every 70 shares (of Rs 10 each) it holds in Suzuki Powertrain.
Maruti proposes to make a fresh issue of 1.32 crore shares to SMC in lieu of SMC's 70 percent holding in Suzuki Powertrain. Consequent to the merger, SMC's holding in MSIL will go up from 54.2 percent to 56.2 percent.
The merger is expected to be completed by December 2012. "There are no plans to reduce jobs following this merger," the company said.