Hindustan Motors (HM), one of India’s oldest car manufacturers and the maker of the 1950s Morris Oxford-based Ambassador car line, is to undertake a major restructuring.
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Under the plan, the company will hive off its component manufacturing business into a new subsidiary, AVTEC (Automotive Vehicle Technologies).
Simultaneously, private equity fund Actis Capital LLP – through its investment vehicle, Actis Powertrain Investments Ltd – will take a 30% stake in AVTEC while a 21% stake will remain with the GP-CK Birla group, with the remaining 49% being held by HM.
The deal is expected to result in a cash flow of INR2.65 billion into HM, boosting its net worth by an estimated INR1.40 billion.
AVTEC is considered to be the most profitable arm of Hindustan Motors. The operation includes the Power Unit Plant (PUP) division located at Indore that manufactures engines, transmissions and their components and the Power Products Division (PPD) located at Hosur, Tamil Nadu, that manufactures automatic transmissions and their components for off-highway heavy-duty vehicles.
This business is expected to have sales of INR 3.75 billion in the current financial year.
The AVTEC division supplies automatic transmissions and components to Caterpillar and Bharat Earth Movers while the PUP division assembles engines for Ford India, GM India and Mahindra & Mahindra.
HM will use the cash inflow from AVTEC’s sale to boost its car manufacturing business. It plans to introduce two new Mitsubishi models in India – the models under consideration are the Montero Sport [aka Shogun Sport and Challenger] and the Carisma currently built only in Mitsubishi’s plant in the Netherlands.
Hindustan’s car manufacturing business has not been doing well, mainly due to aging models.
Deepesh Rathore / Tilak Swarup
