IB ASSIGNMENT

Case Study
on
Mergers & Acquisitions
In
Automobile industy

INTRODUCTION-

In 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Premier Padmini were both around 25 years out of date at that point.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 LTD-

In 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 CORPORATION-

Suzuki Motor Corporation is a Japanese multinational corporation headquartered in Hamamatsu,

Japan that specializes in manufacturing compact automobiles, a full range of motorcycles, all-
terrain 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.

MARUTI SUZUKI LTD

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 offered-
Maruti 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 non-
government 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 win-
win 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 world-
class 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