Swedish automobile company, AB Volvo sold its remaining 10.05 lakh shares in Eicher Motors, representing 3.71% stake via multiple block deals on Thursday. This was the second sale transaction by the Gothenburg-based company in three months and will fetch Rs 1,731 crore, stock exchange data showed .
Citigroup Global Markets Mauritius acquired 2.64 lakh shares at Rs 17,190 per share, raising its stake to 1.94% from 1.04% at the end of March 2015, data showed. Names of other buyers was not immediately known.
While Volvo will cease to hold any shares in the Indian commercial vehicle and two-wheeler company, the divestment will have no effect on ownership or the development of the long-standing joint venture, VE Commercial Vehicles (VEVC) in which the in which the Volvo Group will remain as equal owner, the company said in a press note.
“The sale will have a positive impact on the Volvo Group’s cash flow after net investments and net financial debt in a corresponding amount in the second quarter of 2015. The sale will also generate a capital gain of approximately 2.1 billion Swedish Krona, which will impact operating income in the trucks segment in the second quarter of 2015,” the note added.
On March 4 this year, Volvo first sold 12.7 lakh Eicher Motor’ shares – representing 4.69% stake – of its 22.75 lakh shares it had acquired in May 2008. The first share sale took place around R16,000 apiece, data showed.
Analysts pegged Volvo’s 2008 acquisition of 8.4% stake around Rs 800-850 per share, giving the Swedish company about 18.63 times or 1,863% returns on its investment seven years ago. On Thursday, Eicher Motors’ shares ended at Rs 17,182, down Rs 1,027.40 or 5.64% from the previous close.
“The Eicher Motors stock is much overvalued and Volvo must have thought of booking profit by selling its stake. The stock of the company has risen significantly since Volvo acquired stake in Eicher,” said an automobile analyst with a top financial services firm.
The same year, Volvo and Eicher Motor – the makers of Royal Enfield – entered into a equal partnership with Eicher Motors to manufacture commercial vehicles. VEVC is the third largest commercial vehicle manufacturer in India and the company also exports trucks in the South-east Asia, West Asia and Europe.
VECV launched the Pro series heavy trucks in India and their target is to capture 15% markets share in the next to years.
The company was not able to take advantage of the extensive network that Volvo has in the international markets to sells its products. In FY15, VECV had significant increase in the sales of heavy and medium commercial vehicles. In the two-wheeler business, Royal Enfield managed to perform well when compared to its peers in the premium motorcycles segment.
Volvo exits eicher, jv to continue
* Analysts pegged Volvo’s 2008 acquisition of 8.4% stake around R800-850 per share, giving the Swedish company about 18.63 times or 1,863% returns on its investment
* Sale to positively impact Volvo Group’s cash flow and generate a capital gain of approximately 2.1 billion Swedish Krona
* Divestment will have no effect on ownership or development of the VE Commercial Vehicles (VEVC) joint venture, in which the in which the Volvo Group will remain as equal owner
For Updates Check Stock Market News; follow us on Facebook and Twitter
