NEW DELHI, Aug 20: Mitsubishi Motors Corporation of Japan has decided against acquiring an equity stake in Hindustan Motors Ltd, a CK Birla group company. Top-level sources said that Mitsubishi was not picking up any stake in HM "for the time being".

Hindustan Motors had offered a 10 per cent equity stake to Mitsubishi. HM has already entered into a technological collaboration with the Japanese auto major for producing the Lancer model at a new plant near Chennai.

Sources said that Mitsubishi's decision of not making any equity investment in HM may have been due to an unfavourable year in its home country. In all its other joint ventures in Asia such as Taiwan, Philippines and Thailand, Mitsubishi holds equity stakes.

In another development, Mitsubishi has decided to make India a base for out-sourcing components to other countries where it has a manufacturing base, sources said. Besides, there are plans to export the Lancer to Bangladesh, Sri Lanka, Burma, Nepal and other Asian countries. The Lancer has been introduced worldwide by Mitsubishi in 1996. The Mitsubishi Lancer is expected to be launched in the country by mid-1998. The Mitsubishi Lancer would be launched with a 1500 cc, which will be followed by a 2000 cc diesel version. Work on the production of the Lancer engine and gear box is progressing at the company's Indore plant. The rest of the project would be implemented at Tiruvallur near Chennai. The plant will initially have a capacity of 30,000 units a year. In the first year, 8,000 cars would roll out of the plant. The company has already tied up with leading vendors. It has signed 22 MoUs with 20 vendors.

Hindustan Motors has earmarked an investment of Rs 500 crore for the next three to four years. It has taken term loans of Rs 320 crore from a group of financial institutions including ICICI, to part-finance new projects for the manufacture of the Lancer car and the rural transport vehicle and the expansion and modernisation of the auto division at Uttarpara, earth-moving equipment division at Tiruvallur and Pondicherry and the power products division at Hosur. The company is also planning a rights issue of around Rs 50 crore this year. In the first phase of the Lancer car project, an investment of Rs 25 crore is proposed. In the second phase, around Rs 8 crore to Rs 10 crore will be invested. The Lancer project will kick off with a localisation of around 50 per cent. Some critical components, fuel management systems, car-testing systems are likely to be imported fromMitsubishi.

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