India’s largest auto ancillary company and exporter, Motherson Sumi, has approved a massive restructuring of the group. The domestic wiring harness or DWH business will be demerged from MSSL and become a wholly owned subsidiary of MSSL. Samvardhana Motherson or SAMIL will merge into MSSL to consolidate 100% stake in Samvardhana BV.

This plan will bring all auto component businesses of SAMIL under the MSSL banner. It will certainly simplify the ownership structure and add value to shareholders in the long run. On account of the restructuring, fresh shares in the new entity will be allotted in the ratio of 1:1 to all existing shareholders of MSSL.

They also get 51 shares of MSSL for every 10 shares of SAMIL. Overall, the deal appears to be positive for the stock as the restructuring will simplify the structure and also unclog the growth impediments for the company. Of course, a lot more will depend on how Motherson plans to come out of debt and prepare for the post fossil fuel scenario.