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Corporate - Restructuring


Hindustan Motors to hive off 2 units; Actis to pick up stake

Neha Kaushik

New Delhi , Feb. 18

HINDUSTAN Motors is believed to be considering a move to hive off its Pithampur and Hosur plants into a separate company and rope in private equity investor Actis to pick up stake.

According to industry sources, the auto major would retain the sizeable stake in the new company, while Actis is likely to pick upwards of 25 per cent. It is learnt that Hindustan Motors Chairman, Mr C.K. Birla, too would have a stake of around 20 to 22 per cent in the new entity. There has been considerable speculation in the market over the past couple of months on the proposed restructuring exercise to be undertaken by Hindustan Motors. Market sources point out that the company had been in talks with at least two private equity firms for the new venture. The Hindustan Motors board meeting, scheduled for Saturday, is likely to take a decision on the hiving off issue.

The company in a communication to the Bombay Stock Exchange today said that it will "consider a proposal to restructure the company's business on the terms and conditions to be decided by the board" at its meeting. However, when contacted, a company official declined to comment on the issue.

Analysts point out that the restructuring would help the company to better "manage" the increased demand for its engines and other components.

Hindustan Motors' Pithampur plant (near Indore) manufactures engines and transmissions, which it supplies to General Motors and Ford among other companies. The company, in fact, is in talks with other auto majors to supply engines from the same plant. Its Hosur plant produces automatic transmissions for heavy-duty vehicles.

Market analysts said that there has been hectic activity on the Hindustan Motors scrip over the past few days with large volumes of the stock being traded. The scrip closed at Rs 33.40 on the BSE on Friday, up 2.93 per cent over Thursday's closing.

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