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Piaggio's 100% entry hits roadblock - Views on News from Equitymaster
 
 
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  • Jan 12, 2000

    Piaggio's 100% entry hits roadblock

    Piaggio's plan to set up a 100% subsidiary has met with some resistance from the commerce and industry minister Murasoli Maran.

    Earlier the company was involved in a joint venture with LML, India's second largest scooter manufacturer. But the relationship soured and the companies separated.

    According to news reports appearing in a leading financial daily, Piaggio was involved in discussions with Scooters India for a joint venture. The ministry feels that as Piaggio was mulling a stake in Scooters India, the approval process for the fully-owned subsidiary must be put on hold.

    Given the confusion in Piaggio's moves, the government is a little apprehensive and would first like to resolve some issues. First, how does Piaggio plan to handle a stake in Scooters India as well as a 100% subsidiary? Why does Piaggio want to set up a 100% subsidiary and also buy a stake in Scooters India? Will Piaggio's 100% subsidiary compromise its venture with Scooters India?

    Piaggio seems to be following the precedent set by Honda Motors and Pfizer, which has a stake in Hero Honda and Pfizer India respectively, and is also going to set up a 100% subsidiary. The government will find it difficult to counter Piaggio's argument based on the Hero Honda, Pfizer precedents. At the most, it can block Piaggio's investment in Scooters India. In any case, the Hero Honda, Pfizer episodes can be exploited by a lot of companies in future.

     

     

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