Swedish commercial vehicle major Volvo on Thursday exited Eicher Motors by selling its residual 3.7 per cent stake in the Indian firm for about Rs 1,695 crore.
“The Volvo Group has sold its remaining holding in the listed Indian automotive manufacturer, Eicher Motors Limited. The sale corresponds to 10,05,610 shares with a total value of approximately SEK 2.2 billion (about Rs 1,695 crore),” Volvo said in a statement.
The divestment of shares has no effect on ownership or development of the long-standing joint venture, VE Commercial Vehicles (VECV), it clarified.
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 company said.
Volvo said the sale will also “generate a capital gain of approximately SEK 2.1 billion, which will impact operating income in the trucks segment in the second quarter of 2015”.
Eicher Motors was trading at Rs 17,200 in the afternoon trade, down 5.55 per cent.
Earlier in March, Volvo sold around 4.7 per cent stake in Eicher Motors for over Rs 1,920 crore by selling 12.7 lakh shares.
In May 2008, Volvo and Eicher Motors Limited (EML) had got into a joint venture agreement to create VECV with an intent to drive modernisation in the commercial vehicle space in India and the developing world.
As part of the transaction, in addition to acquiring 45.6 per cent of the shareholding of VECV, AB Volvo had also taken 22.75 lakh shares of EML representing 8.4 per cent of equity capital of the company.
Volvo had insisted that its selling of stake in Eicher Motors would not change the shareholding pattern and governance framework of VECV.
“Both the joint venture partners are committed to nurture this further in the exciting period that lies ahead, as the commercial vehicle industry looks to revive after a long period of downturn,” it had said.
VECV’s business includes the complete range of Eicher trucks and buses, VE Powertrain, Eicher’s components and engineering design services as well as the sales and distribution business of Volvo trucks within India.