Maruti Suzuki India Limited · NSE:MARUTI
Maruti Suzuki India — Merger or Acquisition (October 2023)
18 slides from Maruti Suzuki India's merger presentation, Oct 9, 2023
Slide 1: Cover letter to stock exchanges
MARUTI ��$SUZUKI MSIL: COS: NSE&BSE: 2023/10_06 9th October, 2023 Vice President General Manager National Stock Exchange of India Limited Department of Corporate Services “Exchange Plaza”, Bandra – Kurla Complex BSE Limited Bandra (E) Phiroze Jeejeebhoy Towers Mumbai – 400 051 Dalal Street, Mumbai –
Slide 2: Acquisition of Suzuki Motor Gujarat
Annexure - "A" 1 9th October’2023 Presentation for shareholders, analysts and proxy advisors Acquisition of Suzuki Motor Gujarat Maruti Suzuki India Limited
Slide 3: Disclaimer
2 DISCLAIMER ▪ This presentation does not constitute a solicitation or an offer or advice to buy or sell any securities in or outside of India and was prepared by MSIL solely for the purpose of disclosure of relevant information. ▪ Financial projections (profits, EPS, DPS.) are purely assumed figure
Slide 4: Abbreviations used in the presentation
3 ABBREVIATIONS USED IN THE PRESENTATION Abbreviation Full form MSIL Maruti Suzuki India Limited SMC Suzuki Motor Corporation (parent company of MSIL, head quartered in Japan) SMG Suzuki Motor Gujarat Private Limited (100% subsidiary of SMC in Gujarat, India) CMA Contract Manufacturing Agreement dat
Slide 5: Background
4 BACKGROUND ▪ In 2014, Maruti Suzuki (MSIL) made a proposal to shareholders that Suzuki Motor Corporation, instead of MSIL, would finance and implement the creation of new production capacity in Gujarat. ▪ The main reason was to enable MSIL to use its managerial and financial resources for strength
Slide 6: Background
5 BACKGROUND ▪ SMG entered into a contract manufacturing agreement with MSIL to supply the entire production for sale to MSIL. ▪ SMG was required by contract to work on a ‘no profit-no loss’ basis and not accumulate any surplus of any kind. ▪ This being a related party transaction, was approved by t
Slide 7: Outcome from the CMA
6 OUTCOME FROM THE CMA ▪ A production capacity of 750,000 units a year has been installed in Gujarat, within budget and is operating at full capacity. ▪ MSIL expanded its sales and service infrastructure, especially in the rural areas and smaller towns, and recovered its market share, which reached
Slide 8: Present proposal
7 PRESENT PROPOSAL ▪ To terminate the CMA by mutual consent. ▪ Acquire 100% shares of SMG held by SMC (at net book value in terms of the provisions of the CMA). ▪ Pay for the SMG shares held by SMC by making preferential issue of MSIL equity shares to SMC. The transaction to be done in terms of SEBI
Slide 9: Why CMA is proposed to be terminated
8 WHY CMA IS PROPOSED TO BE TERMINATED ▪ Despite the CMA having achieved all the projected objectives and working smoothly, it is proposed to terminate it so as facilitate the reorganization and restructuring of MSIL, required in the context of the changed environment and perceived challenges of the
Slide 10: Why CMA is proposed to be terminated
9 WHY CMA IS PROPOSED TO BE TERMINATED ▪ The domestic infrastructure for sales, service and spare parts would have to be further strengthened and restructured to handle the larger volume of sale and more models. ▪ The number of models is likely to increase from 17 to 27-28. Of these, 6 are expected
Slide 11: Why CMA is proposed to be terminated
10 WHY CMA IS PROPOSED TO BE TERMINATED ▪ The Company is launching 6 electric vehicle models till 2030-31 for reduction of carbon emissions. These will be produced in the Gujarat plant and the first EV will be launched in FY24-25. Carbon reduction targets cannot be achieved only by EVs, at least in
Slide 12: Why CMA is proposed to be terminated
11 WHY CMA IS PROPOSED TO BE TERMINATED ▪ The reorganization and restructuring of MSIL is intended to create a system that is nimble and has the ability to take and implement decisions quickly. ▪ Such reorganization requires that all facilities be under one ownership. Having SMG as a major productio
Slide 13: Acquiring shares of SMG held by SMC
12 ACQUIRING SHARES OF SMG HELD BY SMC ▪ The value at which SMG would be acquired is defined in the CMA, namely the net book value as per the last audited statements of accounts. It is proposed that the accounts of SMG be audited as on 31st August 2023. ▪ There are following 2 options to buy SMG : •
Slide 14: Swap option comes out to be better option than cash option
13 SWAP OPTION COMES OUT TO BE BETTER OPTION THAN CASH OPTION Under both these simulations, the profit, EPS as well as dividend payout will all be higher in the swap option. The comparison is given as below: (A) Simulation under the assumption that the PAT of MSIL grows by 150% in next 8 years Param
Slide 15: Why swap option is preferred-importance of cash
14 WHY SWAP OPTION IS PREFERRED-IMPORTANCE OF CASH ▪ The data in the previous slide clearly shows that the swap option would be financially of greater benefit to shareholders, and also be financially beneficial to MSIL. ▪ MSIL will need about Rs.45,000 crores to create a capacity of 2 million units.
Slide 16: Why swap option is preferred-importance of cash
15 WHY SWAP OPTION IS PREFERRED-IMPORTANCE OF CASH ▪ The regular capex in the existing plants at Gurgaon, Manesar and Gujarat will continue. The amount in 2022-23 was around Rs. 7,500 crores. Total capex till 2030-31 could be as much as Rs.1.25 lakh crore. ▪ Additional cash flows from the new capaci
Slide 17: Why swap option is preferred-importance of cash
16 WHY SWAP OPTION IS PREFERRED-IMPORTANCE OF CASH ▪ The Company now plans to grow to 4 million units with no debt and a very small paid-up capital of Rs.150 crores that would increase marginally after the share swap. The high valuation of MSIL equity, with a P/E ratio far higher than of all large g
Slide 18: Thank You
17 Thank You
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