The Hindu Business Line : Selling stake in Swaraj Mazda — Punjab Tractors to `respond favourably' to Sumitomo move

PUNJAB Tractors Ltd (PTL) on Thursday said that it has decided to "respond favourably" to a proposal to sell around half of its 29.04-per cent stake in Swaraj Mazda Ltd to the Japan-based Sumitomo Corporation.

For the purpose, the PTL Board has decided to constitute a Committee of Directors to discuss the matter with Sumitomo Corporation, Japan keeping in view all relevant aspects.

If the sell-off proposal goes through, Sumitomo would emerge as the largest shareholder in Swaraj Mazda (SML) with a shareholding of about 25.4 per cent, as it already has a shareholding of 10.41 per cent in SML.

The announcement, which comes at a time when private equity firm Actis' open offer for buying an additional 25 per cent in SML is underway, has sparked speculation in the market of a tussle between the Japanese conglomerate and Actis for control of SML. Actis, which currently holds about 12 per cent stake in SML, had recently revised the offer price to Rs 400 per share from Rs 315 a share earlier.

The developments also come at a time when the technical agreement between SML and Mazda Corporation (Japan) has expired. Mazda controls 15.62 per cent in SML and sources add that it would in all likelihood support Sumitomo's efforts to increase stake in the company.

Industry sources close to the development add that the current management of PTL too is likely to support Sumitomo's efforts to gain majority shareholding in SML. Further, the sources said that the crux of the entire imbroglio could possibly be based on "succession related issues" within SML.

PTL pointed out that the decision on the stake sale was taken by its Board of Directors at the board meeting held on January 12, after considering the letter addressed to them by Sumitomo Corporation.

The shares of Punjab Tractors jumped by 8.32 per cent to Rs 205 on the Bombay Stock Exchange today.

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