The company's sales during the four-month period April-July totalled 3,377 units. It had earlier scaled down its target from 20,000 units to 12,000 units for the 12-year period ending in March 1999. The target was reduced after the budget and the aftermath of the economic sanctions.

City sales totalled 656 units in July and 1,195 units in June.

Speaking to The Financial Express, Honda Siel Cars India Ltd president and CEO Teruo Fujisaki said, "the company will invest around Rs 70 crore this year as part of the first phase of the project, which will go for vendor toolings and jigs."

The company's cost of borrowing has gone up by 14 per cent to 16 per cent due to a increase in the cost of dollar-denominated debt, he said. Of this, Honda Siel has budgeted around 10 per cent per annum.

He pointed out that if the rupee depreciates further, then the cost will go up for the portion of debt which is dollar-denominated. The dollar-denominated payments are about 50 per cent of the total, while the balance are in Japanese yen.

The company has already raised $14.5 million through the external commercial borrowing (ECB) route.

These investments are being done to increase the level of indigenisation in the venture from the existing 60 per cent. The venture started off with a local content of 50 per cent and is expected to go up substantially by the year 2000.

The total project cost is Rs 450 crore, of which the equity component amounts to Rs 180 crore, along with Rs 100 crore worth long-term loans from financial institutions, including ICICI. The banks which have exposure in the company include Punjab National Bank, Citibank, Bank of America, Bank of Tokyo-Mitsubishi.

Honda Siel envisages a total investment of Rs 850 crore over the next five to six years, of which Rs 450 crore has already been invested.

The company signed a memorandum of understanding with the government as per the new automobile policy earlier this year.

At present, Honda Motor holds 90 per cent equity in the joint venture, and the balance is held by Siel, the Siddharth Shriram group. Honda Siel was originally promoted as a 60:40 joint venture between Honda and Siel, with a buy-back option to the latter.