Promoters of TVS-Suzuki to part ways

By K. T. Jagannathan

CHENNAI, SEPT. 27. The disengagement is finally confirmed. Japanese auto maker Suzuki Motor Corporation (SMC) and Sundaram- Clayton of the Chennai-based TVS group - the promoters of two- wheeler company TVS-Suzuki - have decided to go their separate ways, ending years of uneasy relationship.

A decision to this effect was taken at a board meeting held in Delhi today.

Mr. Venu Srinivasan, Managing Director of the company, told this correspondent that Sundaram-Clayton would buy out the SMC stake in the joint venture at Rs. 15 per share. Quizzed on the basis of arriving at the price, he merely said, ``it is a negotiated price''. Asked why they had chosen to part, he said, ``both of us desired to pursue our own business interests, markets and brands.'' Mr. Srinivasan said the decision would have to await the approval of the regulatory authority. Until then, the current arrangement would continue, he pointed out. Questioned if Sundaram-Clayton would seek out a new partner, Mr. Srinvasan said the company would be a TVS outfit. A release from the company said SMC ``over the next few months will cease to be a shareholder in TVS-Suzuki by selling its shares to Sundaram- Clayton or its subsidiaries.'' However, under the agreement, the present licensing arrangement would continue for another 30 months. By implication, SMC was expected to provide support to the existing licensed products through supply of CKDs and servicing them.

Observers are, however, stumped by the `dirt cheap' price at which SMC was selling its stake to hurry out of the venture. TVS- Suzuki share prices today were quoted around Rs. 87 on the Bombay Stock Exchange.

Why did SMC settle for such a low price? One theory is that rather than indulging in a protracted negotiations stretching for an indefinite period, SMC has opted for a fast settlement sans any hiccup so that it can pursue quickly its own independent gameplan in the sub-continent.

SMC knows that the opportunity cost of any delay in disengagement from the joint venture can hurt its long-term interest in India now that the markets have opened up substantially.

If sources are to be believed, the Japanese company has been keen on a different venture in India. But a strident TVS group has reportedly thrown a spanner into its gameplan by refusing to give its NOC (no objection certificate).

Perhaps, this may have forced the Japanese company to quickly rework its calculations and opt for a quick exit from the joint venture. That SMC has been yearning to chalk out an independent course in India was evident when it chose to bid for the public sector Scooters India. The TVS-Suzuki, too, had bid for Scooters India.

If its association with a private sector partner has not brought it the expected satisfaction, its relationship with public sector Maruti Udyog. has not been any warm either. Seeing that it has run into trouble with joint venture partners in India, SMC, perhaps, is trying to adopt a different route to stay successfully in the Indian market place. Given the fact the owner of Bajaj Auto, Mr. Rahul Bajaj, is a staunch supporter of Swadeshi cause in India, one has to see how SMC, which has announced an alliance with Kawasaki, moves to woo him if speculation is to go by.

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