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NT Bureau
Chennai, May 16:
 

        Sundaram Clayton Ltd (SCL), a joint venture between TVS group and leading player in brake and transmis-sion systems WABCO, at its board meeting held on Monday (14 May) has decided to transfer its entire range of brake business to its wholly-owned subsidiary — WABCO TVS India Ltd through a scheme of demerger.

        The two partners of SCL have been discussing on de-merger of the brake enterprise in the venture for some time now. However, non-brake businesses and investments would continue to remain with SCL. As part of the scheme, it was proposed that for every share of Rs 10 paid up currently held in SCL, the shareholders would receive one share of Rs 5 paid up of SCL and one share of Rs 5 paid up of WABCO - TVS.

        Both the TVS group and WABCO have decided to focus on their respective core strengths in order to effectively capture growth opportunities. The brakes business required new technology to maintain the edge in market leadership and also respond to future needs of the commercial vehicles for enhanced braking and advanced safety and performance systems. The market was primarily driven by a significant increase of road and highway infrastructure which entailed regulations for improved safety and environmental complia-nce. WABCO has got the technology as well as experience to pursue growth in the overseas markets for the brakes business.

        On the other hand, the foundry business required attention to expand operations and further develop export markets, which would now be pursued by the TVS group. Set up in 1962 between TVS group and Clayton Dewandre Holdings Ltd, UK, (CDH), SCL has earned a fair name in supplying brakes for commercial vehicles, manufacturing die castings and has high stakes in other business activities.

        One of the partners, CDH was taken over by American Standard Inc and the joint venture went public in 1983. At present, TVS group holds 40.83 per cent of the equity capital in SCL, CDH 39.17 per cent and the public 20 per cent. Also, CDH is part of the WABCO division of the American Standard.

        Primarily in the business of full-air actuation systems for automotive industry and aluminium castings, SCL has investments in TVS Motor Company, TVS Electronics and TVS Finance. Since all the shareholders of SCL would be issued shares in WABCO - TVS on a proportionate basis, there would be no change in the overall holding pattern once the demerger becomes effective.

        Subsequent to the demerger, it is intended that within a period of two years from the date of listing of shares of WABCO - TVS, the majority control and management of SCL would be vested with the TVS group, while the majority control and management of WABCO - TVS would be vested with the US firm. In line with this objective, CDH would transfer shares held by in SCL to TVS group and TVS group would, in turn, transfer its shares in WABCO - TVS to CDH. The demerger scheme was conditional upon securing the approval of the stock exchanges, shareholders, creditors and the Madras High Court.