Auto components major Motherson Sumi Systems Ltd. on Thursday announced a group restructuring under which it will demerge its domestic wiring harness business into a new company that will eventually be listed.
The reorganisation has been approved by the respective boards of MSSL and group firm Samvardhana Motherson International Ltd.
As part of the restructuring, after the demerger of wiring harness unit, SAMIL will be merged into MSSL to consolidate 100% shareholding in Samvardhana Motherson Automotive Systems Group BV as well as to bring all auto component and allied businesses in SAMIL under MSSL, the company said in a statement.
The group reorganisation plan realigns interests of all its stakeholders and creates a simplified corporate structure for growth of businesses across product portfolios within the auto components space and allied operations, it added.
The proposed reorganisation aims to simplify group structure and enable MSSL shareholders to benefit through 100% in SMRP BV; create a separate independent entity for wiring harness unit business with focused approach on this business; and align interest of all stakeholders by bringing all auto component and allied businesses in SAMIL under a listed entity, it said.
MSSL said the demerger of its wiring harness business into a new company, which will eventually be listed, will mirror the shareholding of the company. For every one share held in MSSL, one share of the new company would be allotted.
This transaction “accomplishes the long-standing request from the company’s joint venture partner, Sumitomo Wiring Systems, to keep its participation focused to DWH business in India which is its core area of interest”, the company added.
The board also approved the merger of SAMIL, the principal holding company of Motherson Group and promoter of MSSL, into MSSL.
It further said that for every 10 shares of face value Rs 10 each held in SAMIL, 51 shares of MSSL of face value Re 1 each would be allotted.
MSSL will be renamed as Samvardhana Motherson International Ltd.
MSSL Chairman Vivek Chaand Sehgal said, “The simplification of group structure has been a long-standing request from our shareholders and the proposed reorganisation is a step in that direction. The transaction helps create strong business platforms under the Motherson umbrella which will enhance stakeholder value for the long term.”
The transaction also enables pursuance of independent strategic priorities for the listed entities, while at the same time entities continue to enjoy the benefit of the parentage of the Motherson Group as well as its strategic partner SWS, the statement said.
The transaction provides greater flexibility to raise capital (debt and equity) at respective entities basis their requirement, the company said, adding “the merger of SAMIL into MSSL is expected to be earnings per share accretive in FY22, the first year of merger.”
MSSL said the demerger will create the largest listed automotive wiring harness player in India with diversified and pan-India industrial footprint and a company with product profile that benefits from favourable industry trends of premiumisation leading to increase in electrification in automobiles and supports existing and future automotive themes.
“The new company will also enter into supply, sourcing and shared services agreements with MSSL, MSSL’s subsidiaries and joint ventures, and SWS. The proposed arrangements will provide continuity of scale and cost benefits for all entities and minimize transaction costs,” it added.