MSSL is seeking shareholders’ approval for the proposed related party transactions and e-Voting has been scheduled between 26 and 28 of April 2021.
Motherson Sumi Systems has proposed a scheme of arrangement which is being implemented in a two-part process. Part 1 will involve demerger of the Domestic Wiring Harness (DWH) of MSSL into MSWIL with mirror shareholding for MSWIL, which will be listed, subsequently. In Part 2, SAMIL will be merged with MSSL (after demerger of DWH Business) and shareholders of Samvardhana Motherson International (SAMIL) will be granted equity shares in MSSL and SAMIL will cease to exist.
The separation of the DWH Business into MSWIL will result in the creation of two listed entities engaged in the auto-component business, enabling them to be used for future inorganic growth opportunities.
According to IiAS, the proposed transactions will be at an arm’s length basis and in the ordinary course of business while the quantum of transactions proposed is reasonable and in-line with the existing transactions in FY21 with appropriate headroom.
“We believe that given the current structure of MSSL, once the scheme of arrangement is implemented, the proposed related party transactions are required because of the inter-dependencies of DWH Business, with the rest of the business.” IiAS said in a report.
On the other hand, Stakeholders Empowerment Services also said no concern is identified with respect to the proposed transactions.
“Though the tenure of all the arrangements is proposed to be for 10 years, which in opinion of SES is a long duration however, given the nature of business, existing interlinked value chain services and proposed decision to go with an asset light business model for MSWIL, SES is not raising any concern with respect to the tenure.” SES said in a report.
According to SES, most of the transactions in value terms are with listed companies, where existing public shareholders would be allotted shares post restructuring and a very small portion is with companies where promoters have higher holding in % terms.
Several analysts raised concern last year when MSSL announced the restructuring proposal citing the swap ratio in the deal favours promoters and may not be in the interests of minority shareholders.
