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Case Study on Mergers & Acquisitions
In Automobile industy
INTRODUCTIONIn India there have been many industries like pharmaceuticals, telecommunications, metals, automobilesetc. Who have expanded globally thourgh who have expanded globally through mergers, acquisitions, joint ventures, turnkey projects and many other forms. The automobile industry in India is the ninth largest in the world with an annual production of over 2.3 million
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units in 2008. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and / expanded their domestic and international operations What is joint venture- A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking is called a joint venture. All parties agree to share in the profits and losses of the enterprise.
MARUTI SUZUKI INDIA LTD Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an initial public offering of 25% of the company in June 2003. As of 10 May 2007, Govt. of India sold its complete share to Indian financial institutions. With this, Govt. of India no longer has stake in Maruti Udyog and on 17 September 2007, Maruti Udyog Limited was renamed Maruti Suzuki India Limited. The company's headquarters are located in Delhi. Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983 with the Maruti 800, based on the Suzuki Alto kei car which at the time was the only modern car available in India, its' only competitors- the Hindustan Ambassador and Premier Padmini were both around 25 years out of date at that point. Through 2004, Maruti Suzuki has produced over 5 Million vehicles.The company annually exports more than 50,000 cars and has an extremely large domestic market in India selling over 730,000 cars annually. Maruti 800, till 2004, was the India's largest selling compact car ever since it was launched in 1983.
History MARUTI LTDIn 1970 A private limited company named 'Maruti technical services private limited' (MTSPL) launched on November 16, 1970. The stated purpose of this company was to provide technical know-how for the design, manufacture and assembly of "a wholly indigenous motor car". In june, 1971, A company called 'Maruti limited' was incorporated under the Companies Act and Sanjay Gandhi became its first managing director.
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SUZUKI MOTOR CORPORATIONSuzuki Motor Corporation is a Japanese multinational corporation headquartered in Hamamatsu, Japan that specializes in manufacturing compact automobiles, a full range of motorcycles, allterrain vehicles (ATVs), outboard marine engines, wheelchairs and a variety of other small internal combustion engines. Suzuki Motor Corporation is the 9th largest automobile manufacturer in the world by production volume, employs over 45,000 people, has 35 main production facilities in 23 countries and 133 distributors in 192 countries.
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After the death of Sanjay Gandhi, Indira Gandhi decided that the project should not be allowed to die. Maruti entered into this collaboration with Suzuki Motors, The collaboration heralded a revolution in the Indian car industry by producing the Maruti 800. The car went on sale on December 14, 1983.
Joint Venture Issues Relationship between the Government of India, under the United Front (India) coalition and Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian media till Suzuki Motor Corporation gained the controlling stake. This highly profitable joint venture that had a near monopolistic trade in the Indian automobile market and the nature of the partnership built up till then was the underlying reason for most issues. Initially R.C.Bhargava, was the managing director of the company since the inception of the joint venture. Till today he is regarded as instrumental for the success of Maruti Suzuki. Joining in 1982 he held several key positions in the company before heading the company as Managing Director.
Products offeredMaruti 800, Maruti Omni, Maruti Alto, maruti Suzuki Swift, Maruti Suzuki Estilo, Maruti Gypsy, Suzuki SX4, Maruti Suzuki A-star, Maruti Zen, Maruti Esteem, Baleno, maruti Ritz and many others.
IMPACT The success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987, and further to 50% in 1992. As a result, Maruti changed from being a government company to a nongovernment company. The gross revenue (net of excise) of the Company for the year 2007-2008 was Rs.188,238 million as against Rs. 1,52,523 million in the previous year 2006-2007 showing an impressive growth of 23.4%. Earnings before depreciation, interest, tax and amortization (EBDITA) stood at Rs. 31,308 million against Rs. 25,888 million in the previous year, recording a jump of 20.9%.
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The sales of the Maruti Suzuki has increased from 11128.1 cr Rs in march,2004 to 23396.8 cr Rs in march,2009.
MAHINDRA RENAULT Mahindra & Mahindra and Renault had a joint venture in February,2005. this joint venture is 51:49 partnership between Mahindra & Mahindra respectively. This partnership presents a winwin situation for both companies and for Indian customers. The project amount is 125 million euros. The project provides for the production of Logan from the first half of 2007 in a worldclass Mahindra & Mahindra facility. The capacity of the factory for Logan is 50,000 cars per year. The state-of-the-art factory offers a stamping shop, a paint shop with a top quality pretreatment and an assembly line specific for Logan.
History Mahindra & Mahindra Group Mahindra & Mahindra Limited is part of the Mahindra Group, an automotive, farm equipment, financial services, trade and logistics, automotive components, after-market, IT and infrastructure conglomerate.The birth of Mahindra & Mahindra began when K.C. Mahindra visited the United States of America as Chairman of the India Supply Mission. He met Barney Roos, inventor of the rugged 'general purpose vehicle' or Jeep and had a flash of inspiration: wouldn't a vehicle that had proved its invincibility on the battlefields of World War II be ideal for India's rugged terrain and its kutcha rural roads. Swift action followed this thought. The Mahindra brothers joined hands with a distinguished gentleman called Ghulam Mohammed & on October 2nd, 1945, Mahindra & Mohammed was set up as a franchise for assembling Jeeps from Willys, USA. Two years later, India became an independent nation and Mahindra & Mohammed changed its name to Mahindra & Mahindra. Ghulam Mohammed migrated to Pakistan post-partition and became the first Finance Minister of Pakistan. Since then, Mahindra & Mahindra has grown steadily in size and stature. The Group's history is studded with milestones. Each one taking the Group forward. In fact, today, its total turnover is about 6.3 billion dollars.
RENAULT Renault S.A is a French automaker producing cars, vans, buses, tractors, and trucks. Due to its alliance with Nissan, it is currently the world's fourth largest automaker Headquartered in Boulogne-Billancourt. Renault owns the Romanian automaker Automobile Dacia and the Korean automaker Renault Samsung Motors. The Lebanese-Brazilian Carlos Ghosn is the current CEO. The company's most successful car to date is the Renault Clio, and its core market is France.The
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company is known for numerous revolutionary designs, security technologies and motor racing. Producing cars since late 1897, the Renault corporation was founded in 1899 as Société Renault Frères by Louis Renault, his brothers Marcel and Fernand, and his friends Thomas Evert and Julian Wyer. Louis was a bright, aspiring young engineer who had already designed and built several models before teaming up with his brothers, who had honed their business skills working for their father's textiles firm. While Louis handled design and production, Marcel and Fernand handled company management.The first Renault car, the Renault Voiturette 1CV was sold to a. friend of Louis' father after giving him a test ride on 24 December 1898.
Product Logan was launched in India in 2007 with the concept to challenge the “price Value” equation existing in the midsize car category. Soon it became one of the most successful car in the midsize category and now is synonymous to comfort and performance. The Logan drives in loads of refinement in comfort, style and technology. Built around the Renault’s famous Space Optimization Design, it redefines space and luxury.
IMPACT The joint venture was targeting sales of 50,000 cars a year, or 2,500 a month. Actual sales have been one-fifth of that, at just under 500 cars a month. In October this year, that number fell to 401, a 68 per cent drop from the figure a year ago.M&M has already said it does not see volumes of the car going beyond 500 units per month. The result of the joint venture posted a loss of Rs 490 crore in the year ending March 31, 2009 on sales of Rs 740 crore. But if we look upon the overall sales of Mahindra & Mahindra before joint venture then it was 7654.77 cr Rs till march,2005 which increased to 13014.77 Rs crore till march,2008 and have still increased to 14448.13 cr Rs till march,2009.
READING NOTE
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1. The joint ventures by the automobile industies have not only increased the profits of the respective companies but have also incresed the economic condition of the country. These joint ventures has given a global exposure to the indian companies. 2.. The past few years have witnessed a rapid change in all the segments of the Indian automotive industry. International competition, increase in the number of participants, and the need to counter the pressure on margins have made it a buyer's rather than a seller's market.
Bibliography •
www.maruti.com
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www.moneycontrol.com • www.mahindra.com • www.renault.com • www.hindubusinessline.com • Prowess(client) • www.msnbusinessnews.com • www.wikipedia.com •
