Proxy Advisory firms – Institutional Investor Advisory Services India Limited (IiAs) and Stakeholders Empowerment Services (SES) have recommended shareholders of Motherson Sumi Systems (MSSL) to vote in favor of the proposed related party transaction by Motherson Sumi Wiring India (MSWIL) along with Motherson Sumi Systems (MSSL), Sumitomo Wiring Systems Limited (SWS) and other related parties. Motherson Sumi Systems is seeking the consent of shareholders for related party transactions to the proposed companies and e-Voting has been scheduled for April 26th and 28th April 2021.
Motherson Sumi Systems proposed a two-part planning process, which is a scheme of arrangement to be implemented. Part 1 will involve the reduction of MSSL’s Domestic Wiring Harness (DWH) into a MSWIL with a shareholding of MSWIL, which will be listed, thereafter. In part 2, SAMIL will be merged with MSSL (after the demerger of Domestic Wiring Harness Business) and shareholders of Samvardhana Motherson International (SAMIL) will be allocated equity shares of MSSL and SAMIL will no longer exist.
The division of Domestic Wiring Harness’s (DWH’s) business into MSWIL will lead to the creation of two listed businesses operating in the private sector, which will enable them to take advantage of the extraordinary growth opportunities to come.
According to Institutional Investor Advisory Services India Limited (IiAS), the proposed transaction will be at arm’s length and in the normal course of business, while the number of proposed operations is reasonable and consistent with the existing transactions in FY21 with appropriate headroom.
“We believe that in view of the current Motherson Sumi Systems (MSSL) structure, once the planning process has been implemented, the proposed related party transactions are necessary due to the inter-dependence of DWH Business, and the rest of the business”, said the Institutional Investor Advisory Services India Limited (IiAS) in the report. On the other hand, Stakeholders Empowerment Services also said that no concerns were received regarding the proposed transactions.
“Although the recruitment of all the arrangements is proposed to be for 10 years, which is considered to be Stakeholders Empowerment Services (SES) for a long time, but, given the nature of the business, the integrated services available and the decision to go with the bright business model Motherson Sumi Wiring India (MSWIL), Stakeholders Empowerment Services (SES) does not recommend or what are the concerns regarding the timing of the reign”, stakeholders Empowerment Services (SES) said in a report.
According to Stakeholders Empowerment Services (SES), most of the transactions are listed companies, where existing public shareholders will be allotted shares after restructuring and a very small proportion will have companies where promoters have a higher holding in % terms.
Several analysts raised concerns last year, when the Motherson Sumi Systems (MSSL) announced a restructuring proposal that outlines the exchange rate for a lender that favors promoters and may not be profitable for minority shareholders.
