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TVS, Suzuki set to part ways

The TVS group and Suzuki Motor Corporation of Japan are parting ways in their two-wheeler joint venture TVS-Suzuki Ltd. The company's board has been scheduled for Thursday to decide on the exit of Suzuki from the company.

TVS-Suzuki has a licensing agreement with Suzuki to manufacture motorcycles in India. Suzuki holds a 26 per cent stake in TVS-Suzuki, while the TVS group holds a 32.5 per cent stake through group company Sundaram Clayton.

Shares of Indian motorcycle maker TVS Suzuki tumbled the maximum permissible 20 per cent on Wednesday on news that its board would meet on Thursday to decide on a possible exit by Japan's Suzuki Motor Corp.

The share ended at Rs 72.80, more than 22 per cent off its intra-day high of Rs 93.50 and just 4 per cent shy of the year's low of 70 rupees hit on September 12, the day after attacks in the United States sent markets worldwide lower.

The benchmark Bombay index closed up 1.91 per cent.

"A pullout by Suzuki is not going to affect the company in business terms because it no longer significantly depends on them for technology, but short term there will be pressure on the stock," said S. Krishnakumar, vice-president of research at Anush Shares and Securities.

TVS Suzuki earlier informed the Bombay Stock Exchange that its board would meet to "consider the developments regarding the possible amicable settlements of the differences between Suzuki Motor Corporation and the company".

The company said these could include "the possibility of SMC's disengagement from the company both as a shareholder and a licensor".

Suzuki has a 25.9 per cent stake in the 231 million rupee equity capital of the Indian company, a joint venture with India's TVS group.

Limited impact

Krishnakumar said news of Suzuki's exit was only likely to affect sentiment in the near term.

"The impact will be purely on sentiment associated with news of the pullout of an international collaborator, and I see people beginning to buy into the stock if it falls below the 60 rupees level," he said.

Suzuki, which was one of the earliest foreign automobile firms to invest in India, also has an equal joint venture with the Indian government, Maruti Udyog Ltd, for making passenger cars.

Krishnakumar said TVS Suzuki had in recent years become almost completely self-reliant in technology, with most of the existing technology licenses from Suzuki for two-stroke motorcycles due to expire in two years.

"Except for the four-stroke Fiero, which was licensed about two years back, all the other licenses are for aging two-stroke products, which are anyway declining in market share terms, so it does not really make a difference to TVS," he added.

TVS Suzuki, traditionally seen as a strong two-stroke machine maker, is now trying to shake off that image and recently launched a new 110 cc four-stroke cycle, Victor. The company's chief hopes this will help bolster its sagging market share.

Over 80 per cent of all motorcycles sold in India are currently four-stroke cycles, preferred for their greater fuel efficiency and lower emissions.

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