Cummin India Ltd is in the process of converting itself into a marketing extension of the foreign parent, a leading proxy firm has said. “Even as the Maruti management was completing its victory lap, having got shareholder approval for buying assembled cars from a 100 per cent Suzuki to be set up in Gujarat, and in the process converting itself into a marketing extension of its Japanese parent, Cummins India has embraced this business model,” Institutional Investor Advisory Services India Limited (IiAS) has said in a report.
“.. IiAS in its open letter to Maruti shareholders had said that implications that extend beyond commercial arrangements and ‘equally important are the implications of such transactions on other family-run and MNCs in India – they too may begin manufacturing in unlisted companies and allow the listed company to merely trade,” IiAs said.
“Our worst fears are now being realised,” it said. While Maruti was upfront about what it was planning to, Cummins India appears to be doing so by stealth, presented this idea as a rationalization of the various facilities owned directly by it and those owned by its parent. .,” it said.
In a conference call with investors, Anant Talaulicar, VP & CMD, Cummins India, said, “the rationale is simple, you know, the line at Kothrud is now an — fairly old line, it does not have any more capacity. So you’d have to really substantially make an investment into Kothrud,
which we don’t believe is as cost effective as making an investment in Phaltan, right. So I think we even have to look at should we even consider moving the line out of Kothrud into Phaltan. …”