Hindustan Motors Ltd today informed BSE that the company handed over the possession of the Chennai Car Plant in Tamil Nadu to Hindustan Motor Finance Corporation Limited. The demerger comes at a time the company said is planning to raise around Rs 150 crore by divesting stake in the plant.
Earlier, the company said that it has been under stain and it has been exploring various possibilities for cutting it losses and improving its performance. One of the ways in which this has been sought to be achieved is by demerger of the Chennai Car plant to a separate company, namely Hindustan Motor Finance Corporation Ltd.
In an an announcement to BSE today the company said that in supersession of the Working Arrangement Agreement dated January 5, 2014 the Company have on March 30, 2014 handed over the possession of the Chennai Car Plant at Adigathur, Kadambathur, Tiruvallur in the State of Tamil Nadu to Hindustan Motor Finance Corporation Limited.
The necessary approvals of the lenders and the Tamil Nadu Government with respect to the transfer and other necessary approvals as may be required are under process.
Earlier HML's Board of Directors gave their nod to sell, lease or dispose of the whole or substantially the whole or part of the Chennai car plant for a consideration of not less than Rs 150 crore.
"In the present day and circumstance, it is imperative to induct a suitable investor/ global leader in the respective businesses for viability in the long term and therefore, the company has been looking at suitable proposals for the Chennai plant," said the company.
"...in view of the aforesaid and urgent need to cut losses, it is considered expedient to divest the Chennai car plant and the divestment in the Plant will not affect other operations of the company," said the company.
The Chennai plant is engaged in the business of manufacture and trading of passenger vehicles like Pajero Sport, Cedia, Outlander and Montero brands of Cars and spare parts of the same. These brands are owned by Mitsubishi Motors Corporation of Japan. HML signed a technical collaboration with Mitsubishi. The plant is also engaged in contract manufacturing of vehicles for Isuzu Motors India Pvt Ltd.
The business of the company has been under stain and it has been exploring various possibilities for cutting it losses and improving its performance. One of the ways in which this has been sought to be achieved is by demerger of the Chennai Car plant of the company to a separate company, namely Hindustan Motor Finance Corporation Ltd.
Earlier the company said that its Chennai plant was adversely affected due to lower volumes caused mainly by higher petrol prices and increased interest rates. The company also said exchange rates and power shortage in Tamil Nadu are the added reasons, which affected company's margins on the products produced at its Chennai plant.
While no specific numbers were available as far as Chennai plant concerned, during the 18-month period under review, beginning April 2012 and ending September 2013, HM incurred a loss of Rs 71.20 crore as compared to a loss of Rs 29.96 crore in 2011-12.
The company's accumulated losses have exceeded its net worth at the completion of the financial year ended September 30, 2013.