Hit hard by the mounting losses coupled with lack of growth in sales, the CK Birla-owned Hindustan Motors (HM) has decided to put its Tiruvallur plant (near Chennai) on the block. The company has decided to divest either fully or partially to offset the mounting losses and to revive the fortunes of the company.
The company, which earlier had decided to hive it off and demerge the Tiruvallur plant with its subsidiary, Hindustan Motor Finance (HMFCL), has withdrawn the proposal now and decided to go for divestment. The delay in getting the approval for the demerger proposal by the court has also led to this decision, company sources said.
The company has now decided to have a working arrangement with HMFCL, whereby the latter will be entitled to use and operate the Chennai plant as well its facilities.
When contacted, a senior official of the company confirmed the developments but did not disclose any more details. However, sources said the company has already begun initiatives to look out for strategic partners or buyer for the Chennai plant.
According to sources, Mitsubishi could be the potential strategic buyer given its long-term relationship with HM, though nothing has been decided. The Japanese auto major is also looking to increase its growth momentum with a slew of new launches
Set up way back in late 90s with an annual capacity of 24,000 units per annum capacity, the Tiruvallur plant now manufactures Cedia, Pajero, Pajero Sport, Montero and Outlander brands as well spare parts of them in technical collaboration with Mitsubishi of Japan. The plant manufacturers around 200 to 250 cars a month.
?All aspects will be taken into consideration, including its tie-up with Isuzu, before divesting Chennai plant. Moreover, we need to wait for shareholders, stakeholders? approval too,? company sources pointed out.
During the 18-month period under review, April 2012 to September 2013, HM incurred a loss of R71.20 crore, against a loss of R29.96 crore in 2011-12. The company?s accumulated losses have exceeded its net worth at the completion of the fiscal ended September 2013.