The Tata Group

A Legacy of Trust Tata is Indias largest and most diversified business conglomerate with more than 100 operating companies spread across 85 countries in six different continents, employing 350,000 people and generating revenue of US$ 70.8 billion as of FY 2009. The group's global business operations are spread over seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Tata companies share five core values integrity, understanding, excellence, unity and responsibility. Each Tata company agrees to the Tata Code of Conduct by signing the TATA Brand Equity and Business Promotion Agreement with Tata Sons Ltd. This ensures adherence to the Tata ethos and value system. Adherence to ethics and excellence and the commitment towards serving communities have been at the core of Tatas unblemished growth and sustenance for over 140 years. This heritage evokes trust and goodwill among

consumers, employees, shareholders and the larger community. Today, the Tata name is a unique asset representing Leadership with Trust. This legacy has earned the admiration of the groups stakeholders in a manner few business houses can even hope to match. Tata Group is one of India's largest and most respected business groups. Tata Group's name is synonymous with India's industrialisation. The Group gave India her first steel plant, hydro-electric plant, inorganic chemistry plant and created a reservoir of scientific and technological manpower for the country. Its Trusts have instituted the Tata Institute of Social Sciences in 1936; India's first cancer hospital, the Tata Memorial in 1941, and in 1945, the Tata Institute of Fundamental Research, which became the cradle of India's Atomic energy program. Today, Tata Group comprises 96 operating companies in
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seven business sectors: information systems and communications; engineering; materials; services; energy; consumer products; and chemicals. The Group has operations in more than 54 countries across six continents, and its companies export products and services to 120 nations. Jamsetji Nusserwanji Tata laid the foundations of Tata Group when he started a private trading firm in 1868. In 1874, he set up the Central India Spinning Weaving and Manufacturing Company Limited and thus marked the Group's entry into textiles. In 1887, Jamsetji Tata formed a partnership firm, Tata & Sons, with his elder son Sir Dorabji Tata and his cousin Ratanji Dadabhoy Tata. His younger son Sir Ratan Tata joined the firm in 1896. In 1902, the Indian Hotels Company was incorporated to set up the Taj Mahal Palace and Tower, India's first luxury hotel, which opened in 1903. The Tata Iron and Steel Company (now known as Tata Steel) was established to set up India's first iron and steel plant in Jamshedpur. The plant started production in 1912. In 1910, Tata Hydro-Electric Power Supply Company, (now Tata Power) was set up. In 1917, Tata Oil Mills Company was established to make soaps, detergents and cooking oils. In 1932, Tatas entered aviation sector with the establishment of Tata Airlines. In 1939, Tata Chemicals, presently, the largest producer of soda ash in India, was established. In 1945, Tata Engineering and Locomotive Company (renamed Tata Motors in 2003) was established to manufacture locomotive and engineering products. In 1954, India's major marketing, engineering and manufacturing organisation, Voltas, was established. In 1962, Tata Finlay (now Tata Tea), one of the largest tea producers, was established. In 1968, Tata Consultancy Services (TCS), India's first software services company, was established as a division of Tata Sons. In 1970, Tata McGrawHill Publishing Company was created to publish educational and technical books. In 1984, Titan Industries, a joint venture between the Tata Group
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and the Tamil Nadu Industrial Development Corporation (TIDCO), was set up to manufacture watches. In 1996, Tata Teleservices (TTSL) was established to lead the Group's foray into the telecom sector. In 1998, Tata Indica, India's first indigenously designed and manufactured car, was launched by Tata Motors. In 2000, Tata Tea acquired the Tetley Group, UK. This was the first major acquisition of an international brand by an Indian business group. In 2001, Tata entered into insurance business in joint venture with Tata AIG. In 2007, Tata Steel acquired Corus the fifth largest steel company in the world. Tata Group Companies

The two Promoter companies of Tata Group are: Tata Sons and Tata Industries. Tata Sons is the promoter of all key companies of the Tata Group and holds the bulk of shareholding in these companies. Tata Sons is the owner of the Tata name and the Tata trademark, which are registered in India and several other countries. Tata Industries was set up by Tata Sons in 1945 as a managing agency for businesses it promoted. Tata Industries' mandate was recast, in the early 1980s, to promote the Group's entry into new and high-tech areas. The rest of the Tata companies spread over seven sectors in which Tata Group operates are:

1. Engineering

(a) Automotive:

Tata AutoComp Systems Subsidiaries / associates / joint ventures: Automotive Composite Systems International, Automotive Stampings and Assemblies, Knorr Bremse Systems for Commercial Vehicles, TACO Engineering, TACO Faurecia Design Centre, TACO Hendrickson Suspension Systems, TACO Interiors and Plastics Division, TacoKunststofftechnik, TACO MobiApps Telematics, TACO Supply Chain Management, TACO Tooling, TACO Visteon Engineering Center, Tata Ficosa Automotive Systems, Tata Johnson Controls Automotive, Tata Toyo Radiator, Tata Yazaki AutoComp, TC Springs, Technical Stampings Automotive
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Tata Motors Subsidiaries / associates / joint ventures: Concorde Motors, HV Axels, HV Transmissions, Nita Company, TAL Manufacturing Solutions, Tata Cummins, Tata Daewoo Commercial Vehicles Company, Tata Engineering Services, Tata Precision Industries, Tata Technologies, Telco Construction Equipment Company

(b) Engineering Services

Tata Projects TCE Consulting Engineers Voltas

(c) Engineering Products

TAL Manufacturing Solutions Telco Construction Equipment Company TRF

2.Materials: (a) Composites

Tata Advanced Materials

(b) Metals

Tata_steel Subsidiaries / associates / joint ventures: Hooghly Met Coke and Power Company, Jamshedpur Injection Powder (Jamipol), Lanka Special Steel, mjunction services, NatSteel, Sila Eastern Company, Tata Metaliks, Tata Pigments, Tata Ryerson, Tata Sponge Iron, Tata Refractories, Tayo Rolls, The Indian Steel and Wire Products, The Tinplate Company of India, TM International Logistics, Wires Division.

3.Energy (a) Power

Tata BP Solar India Tata PowerSubsidiaries / associates / joint ventures: Tata Ceramics, Tata Power Trading, North Delhi Power Limited

(b) Oil & Gas

Tata Petrodyne

4. Chemicals

Rallis India Tata Chemicals Tata Pigments

5.Services

(a) Hotels and Realty

Indian Hotels (Taj group) Subsidiaries / associates / joint ventures: Taj Air , Roots Corporation (Ginger Hotels)

THDC

(b) Financial Services

Tata AIG General Insurance Tata AIG Life Insurance Tata Asset Management Tata Financial Services Tata Investment Corporation

(c) Other Services

Tata Quality Management Services Tata Services Tata Strategic Management Group

6. Consumer Products

Infiniti Retail Tata Tea Subsidiaries / associates / joint ventures: Tetley Group, Tata Coffee, Tata Tetley, Tata Tea Inc

Tata Ceramics Tata McGraw Hill Publishing Company Titan Industries Trent

7.Information systems and communication (a) Information Systems

Nelito Systems Tata Consultancy Services: Subsidiaries / associates / joint ventures:

APONLINE, Airline Financial Support Services, Aviation Software Development Consultancy, CMC, CMC Americas Inc, Conscripti, HOTV, Tata America International Corporation, WTI Advanced Technology

Tata Elxsi SerWizSol Tata Interactive Systems Tata Technologies

(b) Communications

Tata Sky Tata Teleservices

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Subsidiaries / associates / joint ventures: Tata Teleservices (Maharashtra), Tata Internet Services

VSNL Tatanet

(c) Industrial Automation

Nelco Subsidiaries / associates / joint ventures: Tatanet

Case 1: TATA Corus Deal

Summary Background to the Acquisition Tata Steel- A Background: Tata Steel Limited the flagship company of Tata Group is the largest manufacturer of steel in India with 25.6 million tonnes of steel capacity. The company produces HR and CR coils and sheets, galvanized sheets, tubes, wire rods, construction reban, rings and bearings. Corus Plc Ltd- A Background: Corus (as of 2007) was Europe's second largest steel producer with annual revenues of Rs. 82,674 crores (59.7 billion) and crude steel production of 18.3 million tonnes in 2006. Corps had a presence in nearly 50 countries, including its global network of offices and service centers. Corus was formed on October 6, 1999. Corus' main steelmaking operations were located in the UK and the Netherlands with other plants located in Germany, Norway and Belgium. Deal origination: Tata Steel (part of the Tata Group) acquired the Anglo-Dutch steel firm Corus after a four month bidding war with Brazil's CSN (Companhia Sidcrurgica Nacional) for US $13.75 billion (Rs. 52.(0) crores) - this was the biggest acquisition by an Indian firm. Tata's acquisition of Corus made it the fifth largest global steel producer with an annual capacity to produce 25 million tons of steel. The acquisition was intended to give Tata Steel access to European markets and to achieve potential synergies in the areas of manufacturing, procurement. R&D, logistics and back-office operations. Analysts claimed that the acquisition price at 608 pence per share was substantially higher than an earlier offer of 455 pence per share. Additionally, analysts felt that it would take several years for potential production and operational synergies to materialize that would yield significant cost savings. Following the acquisition Tata Steels stock suffered a significant decline in

price causing Standard & Poor's to place it on a credit watch list with negative implications. Tata acquired Corus on the 2nd of April 2007 for a price of $12.1 billion making the Indian company the world's fifth largest steel producer. This acquisition process has started long back in the year 2005. This process started in the year 2000 and with Tata it came to an end. In 2005, when the deal was started the price per share was 455 pence. But during the time of acquisition held in 2007, the price per share was 608 pence, which is 33.6% higher than the first offer. Tata maintained a low profile compared to CSN aggressive stance which was part of the overall tactical plan. It was started that when bidding began. Arun Gandhi, the M&A whiz of the group was stationed at the office of the groups lawyer on Primrose Street, London EC2A2HS, all night-with a motorcycle stationed kerbside, revved up and ready to go in case networks failed and email bids could not be sent. Each bidder had to email his bid during each round from his own solicitors office. The bidding was to go on for nine rounds, during which a minimum of 5 pence enhancement per share was allowed over the offer made by each party. In the ninth round, the parties had to put in their final bids, besides indicating the maximum amount they were willing to pay in case theirs was the lower bid. When Tata Steel bid 608 pence per share, their bid was higher than the last bid put in by CSN by 5 pence. Valuation Perspective: As per statistics of the IISI, in 2005, Corus annual production was 18 million tons (mt), while that of Tata Steel was at 5 mt. Corus turnover worked out to $18 billion as compared to Tata Steels $4.64 billion in FY 2006. The enterprise value was placed at $10 billion, including its outstanding debt. Brokerage house, First Global, estimates that a $50 fall in global steel prices could lead to a $414 million loss from the acquisition in the FY 2008. People often argued that Tata had paid a higher price than what was paid for Arcelor. The price earnings ratio (the number of times the price is paid over the current years earnings), at 14.8 times was also high. In case of Arcelor Mittal deal, the acquisition price
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per ton worked out to $840 as against $750 paid by Tata for Corus assets, even though EV/EBITDA in the case of Tata Corus is higher at 7.6 as against 5.4 in Mittals case. According to Chokseys estimates, the realization per ton in case of Corus is higher that Tata Steel, at $866 per ton, which was four, times that of Corus. At 608 pence per share (which worked out to a price of 5.2 billion pound) the enterprise value is seven times Corus EBITDA, as against a 5.4 times payment of Mittal Steel for acquiring Arcelor, Tata Steel paid nearly 7.6 times. The premium was for consolidated capacities.

Logic for Valuation: According to Muthuraman, Tata Steel MD, the strategic objective of the deal is that it brings to Tata Steel 19 million tone capacities at once, at a cost which is roughly a little more than half the cost of Greenfield sites. It also gives the company access to mature and developed markets of Europe. Moreover, Corus also has highly developed R&D capabilities. Corus, which has multi-location plants, is not a fully integrated steel

company. Unlike the Tata, who have their own coal mines and captive source of iron ore. Corus has to source its raw materials from the global markets. The higher the value added, wider the speciality product range that Corus can add to the Tatas product range. The Tata Group, which had embarked upon a major expansion spree by setting up Greenfield projects, is looking at exporting a part of the semi-finished products from these capacities to Corus, which would bring down costs considerably. Riding the steel cycle boom, beginning in 2003, its cash flow from operations crossed Rs. 6000 crore in both FY 2005 and FY 2006. With profits of over $840 million, Tata Steel was the groups most profitable, company, even ahead of its high profile TCS, in FY 2005.

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Q: 1 what are the strategic reasons for the TATA Corus deal? A key objective for Tata Steel in this acquisition was gaining finishing expertise in European markets, where it could export semi-finished steel from its plants in India. It could also shift part of the steel-making capacities to India, where it was already planning a massive expansion. Tata Steel had a number of things to consider in negotiating a deal for Corus. First of all, Tata Steel could not make an all cash offer and assume the assets and liabilities of Corus on its balance sheet because of the sheer size. Second, both companies had to convince their shareholders about the strategic and financial benefits to the companies. Shareholders would be concerned about the size of the premium and the potential dilution in earnings per share. Tata Steel goes for Acquisition for the following strategic reasons: The cash cost of Tata Steel is around $160 per tonne. I believe that the cost at Port Talbot (where Corus has a plant) is perhaps roughly twice of that. Between the two teams, we see potential for significant synergies in the area of manufacturing, in shared services, in logistics, in the marketplace, sharing best practices. We do see significant synergies and a possibility of cost reduction. In this world of consolidation and growing in size, both in geography and in size, Tata Steel has been planning its long-term strategy.

4 Million tone to 30+ Million tone:

Tata Steels strategy, in terms of what it wanted to do over a period of time of 10 years, between 2002-03 and 2015, was to grow from four million tonnes per annum, which were at that time, to about 30 million tonnes plus, beyond the shores of India, multinational, and continuing to be in a low-cost position and continuing to be EVA positive. That strategy had six elements. One of them was that TATA would build a strong base in India, that is why they are expanding Jamshedpur from five to 10 million, and were building three greenfield projects.

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De-integration:

The second part of the strategy was that they adopt a de-integrated strategy where they believed that the world steel industry, over the last 150 years or so, had adopted a certain model of making from iron to finished steel in one location, irrespective of where the raw materials were. TATA always believed that this model will change, because steel has to compete with other materials and, for the sustainable competitiveness of steel, it is necessary that this business model will undergo a change. TATA wanted to be at the forefront of that change in business model, so they would look for private steelmaking in countries which are rich in iron ore and coal or gas. So TATA thought of plants in India, Bangladesh, and Iran. Material security:

The third part of the strategy was raw material security. Its important that TATA have raw material security to be competitive and sustainable in this world. We have raw material security on a 100per cent basis for their existing operations in Jamshedpur. TATA have a large extent of self-sufficiency for coal. Each of their three greenfield projects in India will carry with it raw material iron ore security. TATA have some strategic types and some strategic positions in terms of coal and limestone beyond the shores of India. They said: we should continue to look for raw material security, both in India and overseas. Going downstream:

The next part of strategy was getting more out of steel, which is by branding, by going downstream, by positioning the products, getting into construction solutions and so on. It is with that aim they people formed the joint venture with BlueScope. It is with that strategy that they started having a joint venture with Ryerson of the US, for going downstream into processed materials. Logistics control:

The next part of the strategy was control over logistics. No large company no large steel company can be sustainable competitive over a period of time without some
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control on the efficiency and costs of logistics, so we decided to build a port in Orissa to connect Indian operations with our overseas operations. TATA decided to start a shipping company with NYK of Japan, and these are all in progress. Acquisition of Corus and our partner in Corus to form a joint entity is part of this strategy. Indeed there was very little shared territory in the markets the companies served. Tata Steel had a strong position in India, Singapore, Thailand and other parts of Asia whereas Corus had a strong presence in Europe.

Q: 2 discuss the Valuation aspects involved in the deal. Financing India's largest leveraged buyout comprised of a $3.88 billion equity contribution from Tata Steel, a fully underwritten non-recourse debt package of $5.63 billion, and a revolving credit facility of $669 million. Date October 20, 2006 November 17, 2006 December 11, 2006 January 31, 2007 TATA Bid 455 pence (4.3 billion pound) 4.7 billion pound CNS Bid 475 pence 515 pence

Higher than 608 pence (5.2 billion pound)

Tata Steel UK would offer a price of 455 pence per Corus share valuing Corus at 4.3b ($8.04b). This price represented a multiple of 7.9 times the EBITDA of Corus from continuing operations for the twelve months to July 1, 2006. The acquisition was to be structured as a 100 percent leveraged buyout funded through cash resources and loans raised by Tata Steel and the SPV. Under the plan Tata Steel UK would arrange a loan of 1.6 b ($3056m), a revolving credit facility and a bridge loan and the rest would come from Tata Steel (to the SPV).

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Valuation Perspective: Particular Annual production Turnover P/E Ratio Realization Paid/tone Overall Valuation 7 Times of EBIDTA Tata paid nearly 7.6 times Corus 18 million tons (mt) $18 billion 14.8 times TATA 5 mt $4.64 billion $866 per tone Interpretation More than 3.5 times More than 3.5 times Higher than Industry 4 times that of Corus.

Sources of Fund: Tata Steel appointed Credit Suisse, ABN Amro and Deutsche Bank to arrange financing. Of the 3.3 billion of financing being raised at the SPV level, Credit Suisse would provide 45per cent and ABN AMRO and Deutsche 27.5per cent each. The $1.8 billion bridge debt being raised at the Tata Steel level in India would be shared between Standard Chartered and ABN AMRO.

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Sources of Funds:

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Stock Price history of TATA steel

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Case 2: The Growth Starategy of TATA group through Mergers and Acqusitions
The growth strategy of TATA Group through Mergers and Acquisitions Tata group is one of Indias largest and most respected business conglomerates. The group comprises 93 operating companies in seven business sectors. Tata group was focusing on the strategy of extending its presence in the international markets. Its overall acquisitions during the seven years, 2000-2006, have crossed the $2.5 billion mark. Tatas strategy was to rationalise the groups business portfolio and deliver returns on investment that exceeded the cost of the capital. It aimed to have a symbolically unified brand and grab new opportunities.

Period

Acquire

Target

February 2000

Tata Tea

Tetley UK

Value Motive (Rs. In crore) 1870 To be global beverage giant

November2001

Tata Sons

February 2002

Tata group

Computer Maintenance Corporation Ltd VSNL

157

To consolidate leadership in services

its IT

1439

June 2002

Tata teleservices

Hughes Telecom India

May 2003

TCS

Airline Financial Support Services

Acquire from Government of their disinvestment programme. Was plan to have a comprehensive presence across the country Global market positioning and joint strategic business development, quality excellence and superior product delivery

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July 2003

VSNL

Gemplex

March 2004

Tata Motors

March 2004 March 2004

VSNL TCS

Daewoo 459 Commercial vehicles Dish net DSLs 270 ISP Division Aviation 4.02 Software Development Consultancy

To use existing network capability and ready platform in high traffic region Chinese market & small truck segment entry To strengthen its internet based services To be competence and developing the transaction processing system in businesses like credit card processing and railway reservation system. Cross selling in aviation industry as well as in banking, financial services and insurance industry To strengthen its offering for the insurance sector To have equal presence in long and flat products of steel To become advanced and extensive submarine cable provider in the world Was able to supply world class buses in Europe. Was plan to expand in the new market and to become a leading global player in whole sell voice and bandwidth and enterprise data services To consolidate its position in the speciality tea segment as global consumption of

May 2004

TCS

Phoenix Global solution NatSteel 1313

August 2004

Tata steel

November 2004

VSNL

Tyco Global 13 Network

February 2005

Tata Motors

Hispano Carrocera Teleglobe

70

July 2005

VSNL

1076

October 2005

Tata tea

Good earth

144

18

December 2005

Tata steel

Millennium Steel

1818

December 2005

Tata chemicals Tata coffee

Brunner Mond Eight O Clock

789

June 2006

1015

April 2007

Tata steel

Corus

1210

speciality (value added) tea is growing at faster clip compare to the traditional black tea. To enhance its market position in south east Asia with globalisation initiative To become largest producer of soda ash in Europe. Entry into worlds largest coffee market US Scale, range, access to global automakers

MERGERS-

Tata finance ltd was merged into TATA MOTORS. The merger was under the scheme of amalgamation, all equity shareholders of TATA FINANCE LTD were entitled to receive eight ordinary scheme of TML of Rs. 10 each for every 100 equity share of Tata Finance of Rs. 10 each. This merger was expected to enable the vehicle financing business of TFL to grow stronger by leveraging its synergies of direct business model with the dealer driven business of Bureau of Hire purchase and credits (BHPC). The merger allowed TFL share holders to participate in the growth of Tata motors.

Merger was between Tata chemicals and Hindustan Lever chemicals Ltd. propose scheme was, HLCL share holders were issued TCL shares in the ratio of 2.5:1. The business of HLCL and TCL had natural synergies that contributed to superior excellence model. TCLs inorganic chemical business was a natural fit with HLCLs bulk chemical business. TCL was the largest manufacturer of soda ash, the key raw material for production of detergent where as HLCL was Indias
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largest manufacture of STTP, used as builders in detergents. TCLs fertilizers were highly complementary to HLCLs operations. Post merger, the company was able to offer wide range of complementary products and support services to current base of customers.

ConclusionTata group has used merger and acquisition as a tool for growth by acquiring and merging entities to grow and become top companies In that particular sector. Following are the benefits Tata group got through merger and acquisition. 1. Tata steels acquisition to Corus steel, made Tata steel the fifth largest steel maker in the world. In fact 30 % of its revenue (Rs. 96,723/- cr.) revenue from overseas business had focused on finding on a strategic fit for its acquisitions. 2. Tata tea acquisition of Tetley Tea, made Tata tea to the no. 2 spot among worlds tea makers and gave it an international beverage brand. 3. Deal with Daewoo Motors heralded Tata motors big ticket entry into the medium and heavy commercial markets of china and South East Asia and also rejuvenated its own truck making division through production of bigger vehicles. 4. Post HLCL and TCL merger, company was able to offer wide range of complementary products and services to the current base of customers. 5. Tata chemicals acquisition of Brunner Mond Group, made Tata chemicals the worlds largest producer of Soda ash. Tata power acquired 30% stake in Indonesian thermal coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia. 6. The National Iron and Steel Mills Ltd (NISM) enjoyed good brand recognition in Singapore and in the other South East Asian region. After acquisition of NatSteel gave Tata steel not only footprint in the seven new countries in Asia-Singapore, China, Malaysia, Thailand. Australia, Vietnam and Philippines, also gave geographic access to Asian region. Tata steels acquisition was a strategic initiative to enter the high growth geographies of China and South East Region. Main advantage of this acquisition was lowering of input steel costs. There were
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able to offer a more comprehensive basket of products to their customers and provide more complete steel solutions. 7. Acquisition of Eight O Clock bought strategic and operational gains for Tata coffee as its grand entry into the worlds largest coffee market. 8. Hispano carrocera is one of the largest bus and coach bodybuilders in Europe and North America. It exports 50% of its production to countries worldwide. Tata motors acquired 21% stake, after tying up with Tata motors, Company was able to supply world class buses in Europe and outside, and gained access to new markets in North America and Middle East. 9. Acquisition of Tyco Global Network, was the deal of worlds largest most advanced and extensive submarine cable systems, gave control over a network that spans 60,000 km and three continents. 10. TFL was merged into Tata Motors, enable the vehicle financing business of TFL to grow stronger by leveraging its synergies of the direct business model with dealer driven business of BHPC. 11. Tatas VSNL acquired Chennai based Dishnet DSLs internet service provider, consolidated VSNLs position in dial up space, giving it control over 600 owned and franchised Dishnet cyber caf as well as broadband assets servicing more than 50,0000 customers in key cities. 12. To strengthen its offering for the insurance sector, Tata Consultancy Services (TCS) acquired Phoenix Global Solution (PGS). 13. TATA acquired UK based Land Rover and Jaguar units from Ford company of US. Land rovers benefits are upmarket SUV brand, Access to latest technology in four wheel and readymade R & D. Jaguars benefits are Upmarket brand, Access to new technologies, premium customer profile competing with Mercedes, BMW and Audi and considered the best British brand.

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Case 3: Joint Venture of Maruti Suzuki

Joint Venture: A joint venture (JV) is a business agreement in which parties agrees to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares. Joint venture in India: A JV may be defined as any arrangement whereby two or more parties co-operate in order to run a business or to achieve a commercial objective: This co-operation may take various forms, such as equity-based or contractual JVs. It may be on a long-term basis involving the running of a business in perpetuity or on a limited basis involving the realization of a particular project. It may involve an entirely new business, or an existing business that is expected to significantly benefit from the introduction of the new participant. A JV is, therefore, a highly flexible concept. The nature of any particular JV will depend to a great extent on its own underlying facts and characteristics and on the resources and wishes of the involved parties. It is an effective business strategy for enhancing marketing, positioning and client acquisition which has stood the test of time. The alliance can be a formal contractual agreement or an informal understanding between the parties. Global proliferation of business and commerce has given an international dimension to JVs. Corporate entities across the globe seek cross-border alliances to share the resources, opportunities and potential to deliver cutting edge performance. Such alliances are designed to suit the commercial requirements of parties and vary from a mere transitory arrangement for one partner to establish its presence in a new market to a calculated step towards a full merger of the technologies and capabilities of the partners. JVs are envisaged as alliances that yield benefits for the JV partners by offering a platform to attain their business goals which would be difficult or uneconomical to attain independently. Establishing a JV with an ideal partner provides a fast way to leverage complementary resources available with
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the other partner, share each others capabilities, access new markets, strengthen position in the current markets, or diversify into new businesses. India Inc. has come of age and is not just an investment destination but also an aggressive investor. Indian companies have exhibited, in the recent past, their ambition to venture into the quest for overseas expansion. The main stumbling blocks for Indian companies in achieving expected levels of global presence are deficiencies in terms of product quality, technology, infrastructure and even management processes. These deficiencies can be negated by way of an alliance with a foreign counterpart who is a strategic fit.

Benefits of Joint Venture: A) Leveraging Resources: With the globalization, access to labor, capital and technological resources have become driving forces for modern businesses to aim to achieve economies of scale. Today, business commitments are far too large to be executed by a single company. From a wider perspective, the conduct of business mandates a huge pool of resources extending from massive financial backup to plenty of skilled manpower. Cross-border business projects are all the more demanding and the best solution is to either outright acquire or share them by entering into a JV. Co-operation is a great way of reducing research and manufacturing costs while limiting exposure. B) Exploiting Capabilities and Expertise: Parties to a JV may have complementary skills or capabilities to contribute to the JV; or parties may have experience in different industries which it is hoped will produce synergistic benefits. The basic tenet of a JV is the sharing of capabilities and expertise of both the partners on mutually agreed terms. Such sharing grants a competitive advantage to the JV partners over other players in the market.

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C) Sharing Liabilities: A JV also offers parties an opportunity to jointly manage the risks associated with new ventures. Through a JV they can limit their individual exposure by sharing the liabilities. When the liabilities and risks are shared the pressure on each individual partner is correspondingly reduced. It reduces the risks in a number of ways as the business activities of the JV can be expanded with smaller investment outlays than if financed independently. D) Market Access: JVs are the most efficient mode of gaining better market access. Companies utilize JV agreements to expand their business into other geographies, consumer segments and product markets. In the case of a cross-border JV, the involvement of a locally-based party may be necessary or desirable in countries where it is difficult for a foreign company to penetrate the market or where the local law limits the ownership structure by foreigners. For instance, in India, certain market sectors remain restricted for foreign investment and a local partner with a certain shareholding in the company is a regulatory necessity for commencing business and making investments. These restrictions are discussed in further detail in a later section. E) Flexible Business Diversification: JVs offer many flexible business diversification opportunities to the partners. A JV may be set up, as a prelude to a full merger or only for part of the business. It offers a creative way for companies to enter into non-core businesses while maintaining an easy exit option. Companies can also resort to JVs as a method to gradually separate a business from the rest of the organization and eventually, sell it off. In certain circumstances, JVs may be set up with strategic investors in the process of entering into a new market so as to initially provide the foreign participant local infrastructure and guidance but with a view to integrate the operations of the JV into the main company in the future. In this situation, the foreign participant may choose to acquire the local participants interest once the venture is up and running. Thi s can be highly beneficial to

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both parties as the foreign party is able to establish itself in the local market while the local party gets a liquid exit.

COMPANY HISTORY AND BACKGROUND A) Maruti Udyog Limited (MUL): Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. It was established with the objectives of - modernizing the Indian automobile industry, producing fuel efficient vehicles to conserve scarce resources and producing indigenous utility cars for the growing needs of the Indian population. A license and a Joint Venture agreement were signed with the Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed to provide the latest technology as well as Japanese management practices. Suzuki was preferred for the joint venture because of its track record in manufacturing and selling small cars all over the world. There was an option in the agreement to raise Suzukis equity to 40%, which it exercised in 1987. Five years later, in 1992, Suzuki further increased its equity to 50% turning Maruti into a non-government organization managed on the lines of Japanese management practices. Maruti created history by going into production in a record 13 months. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 5 million vehicles by May 2005. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till 2000-01. In 2000-01, although Maruti generated operating profits on an income of Rs 92.5 billion, high depreciation on new model launches resulted in a book loss. The Evolution Marutis history of evolution can be examined in four phases: two phases during pre liberalization period (1983-86, 1986-1992) and two phases during post-liberalization period (1992-97, 1997-2002), followed by the full privatization of Maruti in June 2003
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with the launch of an initial public offering (IPO).The first phase started when Maruti rolled out its first car in December 1983. During the initial years Maruti had 883 employees, a capital of Rs. 607 mn and profit of Rs. 17 mn without any tax obligation. From such a modest start the company in just about a decade (beginning of second phase in 1992) had turned itself into an automobile giant capturing about 80% of the market share in India. Employees grew to 2000 (end of first phase 1986), 3900 (end of second phase 1992) and 5700 in 1999. The profit after tax increased from Rs 18.67 mn in 1984 to Rs. 6854.54 mn in 1998 but started declining during 1997-2001. During the pre-liberalization period (1983-1992) a major source of Marutis strength was the wholehearted willingness of the Government of India to subscribe to Suzukis technology and the principles and practices of Japanese management. Large number of Indian managers, supervisors and workers were regularly sent to the Suzuki plants in Japan for training. Batches of Japanese personnel came over to Maruti to train, supervise and manage. Marutis style of management was essentially to follow Japanese management practices. The Path to Success for Maruti was as follows: (a) Teamwork and recognition that each employees future growth and prosperity is totally dependent on the companys growth and prosperity (b) Strict work discipline for individuals and the organization (c) Constant efforts to increase the productivity of labor and capital (d) Steady improvements in quality and reduction in costs (e) Customer orientation (f) Long-term objectives and policies with the confidence to realize the goals (g) Respect of law, ethics and human beings. The path to success translated into practices that Marutis culture approximated from the Japanese management practices.

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Maruti adopted the norm of wearing a uniform of the same color and quality of the fabric for all its employees thus giving an identity. All the employees ate in the same canteen. They commuted in the same buses without any discrimination in seating arrangements. Employees reported early in shifts so that there were no time loss in-between shifts. Attendance approximated around 94-95%. The plant had an open office system and practiced on-the-job training, quality circles, kaizen activities, teamwork and jobrotation. Near-total transparency was introduced in the decision making process. There were laid-down norms, principles and procedures for group decision making. These practices were unheard of in other Indian organizations but they worked well in Maruti. During the pre- liberalization period the focus was solely on production. Employees were handsomely rewarded with increasing bonus as Maruti produced more and sold more in a sellers market commanding an almost monopoly situation. B) Suzuki: Suzuki is Japan's 4th largest automobile manufacturer after Toyota, Nissan and Honda, the 9th largest automobile manufacturer in the world by production volume, employs over 45,000, has 35 main production facilities in 23 countries and 133 distributors in 192 countries. According to statistics from the Japan Automobile Manufacturers Association (JAMA), Suzuki is Japan's second-largest manufacturer of small cars and trucks. In 1909, Michio Suzuki (18871982) founded the Suzuki Loom Works in the small seacoast village of Hamamatsu, Japan. Business boomed as Suzuki built weaving looms for Japan's giant silk industry. In 1929, Michio Suzuki invented a new type of weaving machine, which was exported overseas. Suzuki filed as many as 120 patents and utility model rights. The company's first 30 years focused on the development and production of these exceptionally complex machines. Despite the success of his looms, it occurred to Suzuki that his company would benefit from diversification and he began to look at other products. Based on consumer demand, he decided that building a small car would be the most practical new venture. The project began in 1937, and within two years Suzuki had completed several compact prototype cars. These first Suzuki motor vehicles were powered by a then-innovative,
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liquid-cooled, four-stroke, four-cylinder engine. It featured a cast aluminum crankcase and gearbox and generated 13 horsepower (9.7 kW) from a displacement of less than 800cc. With the onset of World War II, production plans for Suzuki's new vehicles were halted when the government declared civilian passenger cars a "non-essential commodity." At the conclusion of the war, Suzuki went back to producing looms. Loom production was given a boost when the U.S. government approved the shipping of cotton to Japan. Suzuki's fortunes brightened as orders began to increase from domestic textile manufacturers. But the joy was short-lived as the cotton market collapsed in 1951. Faced with this colossal challenge, Suzuki's thoughts went back to motor vehicles. After the war, the Japanese had a great need for affordable, reliable personal transportation. A number of firms began offering "clip-on" gas-powered engines that could be attached to the typical bicycle. Suzuki's first two-wheel ingenuity came in the form a bicycle fitted with a motor called, the "Power Free." Designed to be inexpensive and simple to build and maintain, the 1952 Power Free featured a 36 cc, one horsepower, two-stroke engine. An unprecedented feature was the double-sprocket gear system, enabling the rider to either pedal with the engine assisting, pedal without engine assist, or simply disconnect the pedals and run on engine power alone. The system was so ingenious that the patent office of the new democratic government granted Suzuki a financial subsidy to continue research in motorcycle engineering, and so was born Suzuki Motor Corporation. In 1953, Suzuki scored the first of many racing victories when the tiny 60 cc "Diamond Free" won its class in the Mount Fuji Hill Climb. By 1954, Suzuki was producing 6,000 motorcycles per month and had officially changed its name to Suzuki Motor Co., Ltd. Following the success of its first motorcycles, Suzuki created an even more successful automobile: the 1955 Suzuki Suzulight. Suzuki showcased its penchant for innovation from the beginning. The Suzulight included frontwheel drive, four-wheel independent suspension and rack-and-pinion steeringfeatures not common on cars until three decades later.
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Volkswagen AG completed the purchase of 19.9% of Suzuki Motor Corporation's issued shares on 15 January 2010; Volkswagen AG is the biggest shareholder in Suzuki.

History of Maruti Suzuki after joint venture: Founded in the month of February in the year 1981, Maruti Udyog Limited started its manufacturing operations in 1983. After a through market research, the first car rolled out on 14th December 1983. This car was launched under the flagship of Maruti Udyog Limited which was later renamed Maruti Suzuki IndiaLimited. The headquarters of the company is located in New Delhi. The Indian Government initially owned 18.28 per cent of the Maruti Suzuki Company and 54.2 per cent was owned by Suzuki of Japan. In the month of June in year 2003, the BJP led government offered a public issue of 25 per cent of the Maruti Udyog Limited. On 10 May 2007, the government of India sold the complete share of Maruti Udyog Limitedto Financial Corporations. By doing this, the Government of India no longer has a stake in Maruti Udyog Limited. Maruti Suzuki Company in India is a subsidiary of Suzuki Motor Corporation. Being the leader in manufacturing passenger cars and multipurpose vehicles in India, the company is accounted for acquiring nearly 50 per cent of the total industry sales. During the year 2009-2010, the Maruti Suzuki Company in India sold over 1,018,365 vehicles. This comprises of 870,790 vehicles in the domestic market and 147,575 vehicles in the foreign markets. In total, the Maruti Suzuki Company in India produced and sold over eight million cars. In the year 2009-2010, the company had an income of Rs.301, 198 million. The Maruti Suzuki company information states that the company has a financially enriched balance sheet with surplus and reserves of Rs. 116.9 billion and the debt equity ratio of 0.07 as on 31st March, 2010. Maruti Suzuki Company is a limited firm, which is listed on the National Stock Exchange of India Limited and Bombay Stock Exchange Limited.

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Maruti Suzuki company in India has two producing unit based at Gurgaon and Manesar, south of New Delhi, India. The combined production capacity of both the units is somewhere around one million cars per annum. In the year 2009-2010, the company acquired 700 acres of land in Rohtak, Haryana, India for setting up an excellent test course for research and development. The Maruti Suzuki Company Profile ensures complete customer satisfaction with 'one-stop-shop' facility providing different services such as Automobile Finance, Automobile Insurance, Maruti Genuine Parts and Accessories, Extended Warranty and Maruti Certified pre-owned cars. Maruti Suzuki Company in India has established 358 pre-owned car outlets in 210 cities. Present Scenario of Maruti Suzuki: Maruti Suzuki Company in India sold a total of 75,300 vehicles in the month of July in 2011. This total includes a sum of 8796 units of exports. However in July 2010, the Maruti Suzuki company had sold a sum of 1, 00,857 vehicles, which proved to be quite a feat for the company. Due to the following activities of the Maruti Suzuki Company, the total sales of the company suffered. Manufacturing process for Swift Dzire was shifted from Manesar to Gurgaon. Due to these planned changes, the production of the model was temporarily affected. Therefore, the sales units were 5,471, lower than the production in the month of July in 2010. The production of old Swift was discontinued in the month of July in the year 2011. New model of swift was launched on the 17th of August, 2011. While the Maruti Suzuki Company dispatched 11,828 units in July 2010, the delivery in the month of July 2011 was only 348 units. With these two planned activities of the Maruti Suzuki company, the sales in the month of July in the year 2011 dropped by around 17000 units as compared to July 2010. Maruti Suzuki Way Ahead: The Maruti Suzuki Company information reports that it is planning to expand its manufacturing capacity to 1.75 million from 1.2 million by the year 2013. The chairman
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of the Maruti Suzuki Company, RC Bhargava stated that the production in the Gurgaon plant is to be reduced since the plant is very old and congested. Estimated output will be reduced to 6 lac units from 6.5 lac units per annum. Two new upcoming units will be developed in Manesar plant and will have a total manufacturing capacity of 2.5 lac units per annum. The second unit in the Manesar plant will be opened by SeptemberOctober, of this year. However, the third unit will start functioning from 2012-2013. The Maruti Suzuki Company in India will be offering two new models in the Indian Car Market between 2011 and 2013. A new model of Maruti Suzuki Swift was launched in August 2011. On the other hand, Maruti Suzuki Swift Dzire will be launched in the earlier part of 2012. The Maruti Suzuki Swift was initially launched in the European market and the production of this variant has begun in their Hungarian plant. New variant of Swift is somewhat wider and longer than the previous model. Besides, Maruti Suzuki Swift Dzire has the same engine configuration but the length and width of the car has increased.

Stake of Suzuki in Maruti Suzuki: 1) 1981: The Indian Central government at the behest of Indira Gandhi salvages Maruti limited and starts looking for an active collaborator for this company.Maruti Udyog Ltd was incorporated under the provisions of the Indian Companies Act, 1956. 2) 1982: License and Joint Venture Agreement (JVA) signed between Maruti Udyog Ltd.(Indian Government) and Suzuki Motors Corporation of Japan. 3) 1991: 65 percent of the components, for all vehicles produced, are indigenized (produced locally). Liberalization of the Indian economy opens new opportunities but also brings more competition to segment.
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4) 1992: Suzuki increases its stake in Maruti to 50 percent, making the company a 50-50 JV with the Government of India the other stake holder. 5)1997: Government nominated Mr. S.S.L.N. Bhaskarudu as the Managing Director on August 27, as the then current Managing director, R.C.Bhargava, was completing his tenure. Creating a conflict with Suzuki 6) 2002: Suzuki Motor Corporation (SMC) increases its stake in Maruti to 54.2 percent. 7) 2003: Maruti Udyog Ltd is listed on BSE and NSE after a public issue, which is oversubscribed 10 times.

Maruti Suzuki India Ltd (MSIL) was incorporated as a 74:26 joint venture (JV) between the Government of India and Suzuki Motor Corporation (SMC) in 1981 as Maruti Udyog Ltd (MUL). SMC acquired 26 per cent equity in MSIL and increased it to 54.2 per cent in 2002, making MUL a subsidiary of SMC. In June 2003, the government offloaded another 25 per cent of its stake in MSIL through an initial public offer (IPO). MSILs manufacturing facilities are located at Gurgaon and Manesar. In 200607, the company amalgamated with MSAIL, which was incorporated on April 12, 2005 as a JV manufacturing facility (Manesar), in which MSIL and SMC had a 70:30 partnership. Japanese parent Suzuki Motor had controlled 70% of the Suzuki Powertrain JV; the newly formed JV is 54% owned by Suzuki and 46% owned by Maruti. The realignment will strengthen our company by giving us greater flexibility and longer lead time in meeting the changing market demand, Nakanishi says.

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The takeover amounts to a friendly swap of stock. Suzuki Powertrain is valued at Rs21 billion ($367.4 million), and it will receive Maruti Suzuki shares valued at Rs15 billion ($262.4 million).

The merger and fresh investment plans bring Maruti Suzukis entire ann ual dieselengine capacity of 900,000 units under a single management. Analysts believe the merger will increase the auto makers net profits and operating margins. The merger will result in a lot of synergies between the companies that will boost our balance sheet, says Ajay Seth, Maruti Suzukis chief financial officer.

Reasons for Joint Venture: The reason why Suzuki entered the Indian market is clear. Suzuki chose an untapped market while Japans bigger auto makersToyota, Nissan, and Hondaengaged in fierce competition within Japan. Osamu Suzuki, CEO and COO of the company (and a grandson-in-law of its founder), is a creative decision-maker, a maverick who considers himself an old man in a mom-and-pop company that concentrated most of its resources on producing motorcycles and light motor vehicles. Yet when he decided to diversify and focus on India, many criticized him as being reckless, because India was so unfamiliar to Japanese companies. Indeed, while there are currently at least 19,000 Japanese companies in the Chinese market, there are only about 260 in India. Suzukis decision to enter the Indian market turned out to be a resoundingly wise choice. Japans population peaked in 2004 and is now falling, while its younger generations show diminishing interest in automobiles. In the past, young Japanese were proud of their knowledge about cars, and every teenage boy knew which model would attract the most girls. Today, however, Japanese driving schools suffer from a fall-off in students, which cannot be explained solely by declining population.

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Indias population, on the other hand, is increasing dramatically in the absence of a one child policy, such as exists in China. It makes sense, then, that Japanese companies should head to the expanding Indian market. Doing so, moreover, makes geo-strategic sense as well, with successive Japanese governments increasingly regarding India as a vital diplomatic and political partner. For example, in August 2007, then Prime Minister Shinzo Abe headed a big delegation to India, followed by an official visit in December by current Prime Minister Yukio Hatoyama. The Strategic and Global Partnership between Japan and India, established in 2006, rests on the recognition that Japan and India share common values and interests, as they are the two major entrenched democratic countries in Asia. These shared values distinguish the Japan-India relationship from Japans relationship with China. The growing congruence of strategic interests led to the 2008 Japan-India security agreement, a significant milestone in building a stable geopolitical order in Asia. A constellation of Asian democracies linked by strategic cooperation and common interests is becoming critical to ensuring equilibrium at a time when Asias security challenges are mounting due to the shift in global economic and political power from west to east. The emerging Japan-India partnership looks like a necessary foundation for pan-Asian security in the 21st century. The key point today is that the governments in both India and Japan are keen on developing their strategic consensus about Asias future, a fact underscored by the many bilateral discussions between defence and military officials of both countries that are taking place. These discussions include joint initiatives on maritime security, counterterrorism, weapons proliferation, disaster prevention and management, and energy security. More is needed. India and Japan should, for example, jointly develop new defence capacities. Today, India and Japan cooperate on missile defence in partnership with Israel and the US. Bilateral efforts should also be launched to develop other defence

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technologies. Suzukis joint venture in India suggests that cooperation in high-tech manufacturing is eminently possible. Suzukis success is a powerful precedent not only for other Japanese companies that are looking at the Indian market, but also for further deepening cooperation between the two countries. Osamu Suzuki may not be willing to share all of the secrets of his success with his competitors, but they and Japanese diplomats should be studying the Suzuki method. Japans economy and Asian security depend on its replication. Financial information of Maruti Suzuki: Year 2008 2009 2010 2011 2012 Sales (in Cr.) 35,587.09 36,299.74 29,623.01 20,852.52 17,860.28 Operating profit 2,512.89 4,202.15 3,954.29 1,832.06 2,167.37

Above is the sales and operating profit of Maruti Suzuki of last 5 years. Its really huge in number. As a joint venture firm, the Maruti Suzuki is performing really well. Disputes between Suzuki Motor and the Government of India (GoI): The case gives detailed insight into the disputes between Suzuki Motor and the Government of India (GoI), joint venture partners in Maruti Udyog Limited (MUL), an automobile giant in India. Covering the expansion plan, appointment of Bhaskarudu as the managing director and the disinvestment of MUL, it describes in-depth the disputes between the partners. Disinvestment of Maruti, problems in the Joint Venture between Maruti & Suzuki, role of Government of India in J V, passenger car market in India.

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"Maruti is a national company which has grown because of the support of the government. We can't hand it over to Suzuki on a platter." - Murasoli Maran, Industry Minister, India, 1997. "Suzuki feels they can no longer afford the disadvantage of government control over Maruti's decision making. They feel they can do better on their own." - A Government of India Source, 1997. A Bitter Fight: In August 1997, the Government of India (GoI) appointed R.S.S.L.N. Bhaskarudu (Bhaskarudu) as the managing director (MD) of India's passenger car market leader Maruti Udyog Ltd. (MUL). The appointment was strongly opposed by Suzuki Motors Corporation (SMC) of Japan, the GoI's 50% partner in MUL joint venture. In a press release following the appointment, Osamu Suzuki (Osamu), President of SMC, claimed that the appointment was illegal on the grounds five of the directors who comprised the majority of MUL's board strength of nine, had objected to the appointment. Suzuki even alleged that Bhaskarudu was incompetent and unsuitable for the MD post. The GoI argued that as per the 1992 amendment in the GoI-SMC joint venture agreement, both the partners were entitled to nominate the MD for five years in turns, and there was no need for any consultation on it. Industry minister Murasoli Maran (Maran) alleged that SMC was opposing the appointment of Bhaskarudu as it wanted Jagdish Khattar (Khattar), Executive Director (ED), MUL (reportedly a SMC loyalist) to become the MD. Following the disagreement over Bhaskurudu's appointment, a furious exchange of letters took place between SMC and the Industry ministry. SMC asked for Bhaskurudu's resignation claiming that the minutes of the meeting when Bhaskurudu was appointed, did not fully record its objections to the same. However, the GoI refused to remove Bhaskurudu and reportedly even started looking for a prospective partner in the event of SMC's exit. Soon after, in the AGM held on September22, 1997, SMC and the GoI representatives even resorted to verbal violence.1 SMC nominees on the board attempted to prove
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Bhaskarudu's unsuitability of the post by questioning him regarding MUL's functioning. When Bhaskarudu's appointment was put to vote, there was a tie. Prabir Sengupta (Sengupta), Chairman of the MUL board, used his casting vote to ratify the appointment. Following this, SMC nominees passed a no confidence motion against Sengupta and proposed the name of Yoshio Saito2(Saito) for the chairmanship. The GoI strongly backed Sengupta stating that he should be allowed to complete his scheduled term of five years until 2000. SMC then lodged an arbitration petition against Bhaskarudu's appointment in the International Court of Arbitration.3 In June 1998, the new ruling Bharatiya Janata Party (BJP) government intervened into the issue and arranged for an out-of-court settlement between the parties.4 As per the settlement deal, Bhaskarudu was to step down in December 1999, two years ahead of schedule and Khattar was to replace him in January 2000.5 Further, Saito was to replace Sengupta as the chairman. Though the dispute between SMC and GoI seemed to have been put to rest for the time being, the issue did not come as a major surprise to industry watchers. This was because the company's history was marked with frequent conflicts between the two partners over the years. Background Note: Till the early 1980s, the Indian passenger car industry offered limited choice to the customers, with only two popular models in the form of Hindustan Motors' (HM) Ambassador and Premier Automobiles' (PAL) Padmini. The government not only controlled the price mechanism in the industry, but the entry of foreign players was also strictly regulated. However, the scenario changed in 1981, when the GoI itself entered the car business by establishing MUL by acquiring the assets of Maruti Ltd.6 In October 1982, the GoI signed a licensing and joint venture agreement with SMC where in Suzuki acquired the 26% share of the equity.7 Suzuki's history dates back to 1903, when Michio Suzuki founded Suzuki Loom Works in Hamamatsu in Shizuoka, Japan. For the first 30 years, company focused on the development and production of complex machines for Japan's silk industry. In 1937, the company diversified into building cars and in 1939 began
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manufacturing cars for the Japanese market. But due to the Second World War it had to stop the production of cars and concentrated on the manufacture of the looms. The company shifted its focus back to automobiles with the termination of war and collapse of cotton market in 1951. In 1952 it manufactured its first motorized bicycle called 'Power Free'. In 1954, the company changed its name to Suzuki Motor Co. Ltd. and was by then producing around 6,000 cars per month. With 57 production centers all over world, its manufacturing and assembly network expanded to over 26 countries all over the world. Company established 22 automotive manufacturing facilities in 17 countries. Suzuki's vehicles were sold through 134 distributors in 175 countries. By March 2001, Suzuki's net sales were 1,600, 253 billion and it was one of the top 5 automobile manufacturers of the world. MUL manufactured passenger cars at its factory in Gurgaon, Haryana with an installed capacity of 350,000 vehicles. The first product, Maruti 800 was launched in 1984. Consumers hitherto without any choice rushed to buy the vehicle. Maruti 800 earned the tag of being the 'people's car...' The Conflict: SMC had raised its stake in MUL to 40% in 1987 and to 50% subsequently in 1992. As MUL ceased to be a government unit, SMC began managing the company, with MD R.C. Bhargava (Bhargava) taking directions from Japan. As R.C. Bhargava reportedly shared a good rapport with the secretary and other higher officials at the Industry ministry, the relations between SMC and GoI remained cordial. The first signs of dispute surfaced in late 1993, when SMC proposed a Rs 2,200 crore expansion and modernization plan. The plan envisaged increasing the production by 100,000 vehicles to effectively meet the growing competition in the sector. The Heavy Industry secretary Ashok Chandra and the Finance secretary, Montek Singh Ahluwalia suggested SMC, in an informal discussion, to go in for a public issue to raise the finance for the expansion plan. Though initially SMC was reluctant to go for a public issue, Bhargava managed to persuade it in 1995 for the same. However, things changed with K.Karunakaran (Karunakaran) becoming the Union minister for Industries in 1995...
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The MUL Disinvestment Issue: In late 1999, following the recommendations of Disinvestment Commission, the GoI announced its decision to divest its stake in MUL. The GoI decision was a part of its industrial policy to privatize PSUs through gradual disinvestment or strategic sale. The first phase of MUL's disinvestment was to start with a Rs 400 crore rights issue with renunciation option for the government, in December 2001. The second and final phase of MUL disinvestment was to be completed by the end of 2002, wherein GoI would divest its remaining equity holding in MUL through a public offering. The GoI was to sell its interest to the best bidder at a premium. However, subject to a clause in the MUL joint venture agreement, the GoI could not sell its stake without the written consent of SMC. This was expected to complicate the disvestment process of MUL. In January 2002, the GoI announced its willingness to renounce its portion of the rights in favour of SMC during the rights issue. The negotiations between the GoI and SMC to fix the renunciation premium and the control premium were scheduled to begin in January 2002. GoI was reportedly hopeful of getting a substantial 'control premium' for letting SMC get MUL's full control.

BENEFITS OF JOINT VENTURE: For Maruti: Suzuki motor Corporation, the parent company, is a global leader in mini and compact cars for three decades: The Suzuki motors is a global leader in mini and compact car for many years. Its really usefull for the maruti ti tie up with the Suzuki, so that they can have the huge advantage of the brand name of suzuki specially at global level, Suzuki's technical superior: The Suzukis technical superior is one of the main reason of joint venture rom Maruti point of view. The Maruti Udhyog lacking in technology before joint venture compare to
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other players specially at global level. The technical superior of Suzuki helps the Maruti a lot in technological upgradation. lightweight engine that is clean and fuel efficient: The efficient engine of Suzuki helps the Maruti to perform better in Indian market as well as in foreign market too. The upgradation in the technology improve the performance of company. Nearly 75,000 people are employed directly by Maruti Suzuki and its partners: For better tecnology, efficient and the employees who has the knowledge of that technology in important for any firm. As the technology is provided by Suzuki, with that they appointed 75000 people who has good knowledge of working with this kind a technology. To train the new employee about new technology is difficult.

For Suzuki: Large Indian Market: For Suzuki, a major advantage is the large indian market. As suzuki is now in indian market, they has that opportunity to target the huge market of india which can provide huge opportunity to the company. That is something golden chance for the the Suzuki motors to enter directly in Indian market with ready made market of Maruti and at the same time target new market too. Availability of resources: The all major resources like raw material, labour, new technologies etc are available in India. In fact the labour cost is cheaper in Indian market compare to foreign countries which help in cost control. At the same time government of India is also providing many incentives to this industry. So, that is good opportunity for Suzuki to enter in Indian market.

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