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Hindustan Motors hives off Chennai plant to its fully-owned arm

Demerges Chennai car unit to pursue growth plans as appropriate

Probal Basak  |  Kolkata 

The beleaguered automaker (HM), owned by the CK Birla group, today decided to demerge and transfer its Chennai Car Plant (CCP) to its fully-owned subsidiary organisation (HMFCL).

"The Scheme of Arrangement for this purpose was passed by the board of at its meeting in Delhi today. HM’s board gave its nod to the Scheme of Arrangement providing for segregation and realignment of CCP business unit and other business units in two different entities so as to pursue their respective growth plans as appropriate," the company said in a statement.

HM and its nominees hold all the existing equity shares issued by HMFCL.

According to company's filing, in consideration of the demerger, HMFCL will issue and allot to the shareholders of HML, one equity share of Rs 5 each in HMFCL credited as fully paid-up for every 13 equity shares of Rs 5 each fully paid-up held by them in the capital of HML.

Analysts pointed out, the Kolkata-based automaker had a long-pending plan to hive off its Chennai plants into a separate entity. "I think the plan was to rope in private investors for the new company. The company finally seems to be moving into that direction," one of the analyst said. However, a HM spokesperson refused to comment on this.

The Chennai plant, in which HM manufactures Cedia, Outlander, Pajero and Montero in technical collaboration with Japanese automaker Mitsubishi, has an installed capacity of 24,000 units per year. However, only 60% of the capacity is being used currently. Earlier, Uttam Bose, managing director of said, the company was exploring possibility of to utilise the idle capacity at its

The scheme is, however, subject to requisite approvals being received, including approval of shareholders and sanction of the Calcutta High Court pursuant to sections 391 and 394 of the Act, 1956. Accordingly, the scheme although operative from April 1, 2012 shall come into effect on the effective date, being the date or last of the dates on which certified copies of the orders sanctioning the scheme are filed by HML and HMFCL with the Registrar of

However, the Uttarapara plant that manufactures iconic ambassador and the other manufacturing facility at Pithampur near Indore in Madhya, will continue to be owned and run by HM.

First Published: Thu, January 10 2013. 20:18 IST