Motherson Sumi Systems announced on January 30 that it has sought in-principle approval from its board of directors to demerge the domestic wiring harness business into a separate legal entity. This is mainly because MSSL's joint venture partner, Sumitomo Wiring Systems (SWS), Japan, wants to focus on the domestic wiring harness business. All other remaining businesses including Samvardhana Motherson Automotive Systems Group BV (SMRPBV) would remain under the current legal entity(referred to as MSSL-2).  

Both the entities would have mirror shareholding. This re-organisation will also lead to SMRPBV becoming a 100% subsidiary of MSSL-2. Samvardhana Motherson International's (SAMIL) shareholding of SMRPBV of 49% would be transferred to MSSL-2. 51% of SMRPBV is held by MSSL or Motherson Sumi Systems. SAMIL would gain shareholding in MSSL-2 under a share swap transaction, thus, effectively lowering the shareholding of Sumitomo Wiring Systems and increasing the shareholding of the promoter group in MSSL-2.

As per the management, the reorganisation, if approved by the board, will help in simplification of the group structure and aid MSSL meet the long standing request of Sumitomo Wiring Systems to keep its participation focussed on the domestic wiring harness business in India, its core area of interest.

This re-organisation is subject to final approval from the MSSL board of directors, which is likely to take 90 to 120 days. The transaction is also subject to approval from Samvardhana Motherson International's board of directors and shareholders. Post these approvals, the reorganisation would also require the requisite regulatory and corporate approvals.