ET reported that India’s largest marker of commercial vehicles TATA Motors is negotiating to acquire Japanese conglomerate Sumitomo’s 53.5% stake in Swaraj Mazda as it attempts to strengthen its position in the light commercial vehicle or LCV market which is all set to see the entry of new players such as GM and its Chinese partner SAIC and a joint venture between Ashok Leyland and Nissan.

An announcement may happen early next year, a person close to the development said that requesting anonymity. If the deal is consummated, TATA Motors will have to make an offer to the minority shareholders of Swaraj Mazda at the same price paid to Sumitomo, as required by rules governing company acquisitions in India.

The person said that the deal size, including the open offer, may be around INR 250 crore. TATA Motors’ stake will go up to 73.5% if the open offer, which has to be at least 20% of the target company’s equity capital is fully subscribed.

An industry analyst said that two private equity investors, CDC and Actis which own 9.3% and 7.7%, respectively in the Punjab based company, are likely to participate in the open offer, if the TATAs buy Sumitomo’s stake, as they are interested in selling their stake in the company and making a profit on their initial investments.

TATA Motors has a market share of around 65% in the Indian commercial vehicle segment. Its share of the LCV market is higher, at around 68%. Swaraj Mazda on the other hand, is a small player with a minuscule 3% share in the INR 9000 crore LCV market, with a presence mainly in North India.

The LCV market is growing at 40% a year, faster than the commercial vehicle market as a whole. The Indian CV market is around INR 22000 crore.

(Sourced from ET)