Hindustan Motors plots a comeback; talks on for JV with European co for EVs

MoU signed, due diligence expected to start soon and conclude in 2-3 months; project will start two-wheelers and then add four-wheelers

The country’s first ever carmaker, Hindustan Motors, is looking at a second coming.

Talks are on for a joint venture with a European auto company focused on the electric vehicle (EV) space. A memorandum of understanding (MoU) has been signed and due diligence is expected to start shortly and will take 2-3 months to conclude.

“Initially, the project will launch two-wheelers and subsequently four -wheelers,” said Uttam Bose, director, Hindustan Motors.

While discussions are on for a joint venture, Bose did not rule out the possibility of the company picking up a stake in the C K Birla-owned Hindustan Motors (HM).

Bose, however said, currently discussions were focused around a 51:49 joint venture where HM would have 51 per cent. But he clarified that the equity pattern could be discussed. “We will evaluate,” he said.

The vehicles would roll out of HM’s Uttarpara plant in West Bengal, which declared “suspension of work” in 2014. Since then there have been no operations.

The company’s notes to annual results for FY22 mentioned that the management declared “suspension of work” at the Uttarpara plant with effect from May 24, 2014 due to low productivity, growing indiscipline, shortage of funds and lack of demand for products; the Pithampur plant declared layoff with effect from December 4, 2014.

The Uttarpara plant, which used to roll out the Ambassador, went downhill with the decline of the iconic brand. Modeled on the Morris Oxford, it was a protracted slide for brand Ambassador.

HM, established in 1942 by C K Birla’s grandfather, B M Birla, was the first indigenous carmaker. Ubiquitous in official use, by the 1970s it enjoyed a 75 per cent market share.

The slide started when Maruti Suzuki launched the Maruti 800 in 1983. Between 1984 and 1991, reports suggested that the Ambassador’s market share tumbled to 20 per cent. Then global automakers descended and hastened the decline. In 2017, the Ambassador brand was sold to Peugeot SA for Rs 80 crore.

The new HM joint venture will utilise the 295 acres at Uttarpara for the project that’s left with the company. Originally, HM had about 700 acres at Uttarpara. But in 2007, it entered into a deal with Shriram Properties for 314 acres, which was surplus. Last year, the Hiranandani Group signed an MoU with HM to acquire 100 acres for a logistics and hyperscale data centre park.

The capital infusion with the deal on land transfer with Hiranandani will be sufficient to take care of the debt, said Bose. Spare funds could be used to plough into the upcoming EV and components project.

The company’s notes to results mentioned that it was “practically” debt free barring few liabilities which stand mainly on account of employee account, trade payables and other liabilities.

When the “suspension of work” was declared there were about 2,300 employees. About 2,000 were separated in 2017 and 2018 with a VRS after the first round failed in 2015. Now, there are about 300 employees on the rolls.

“Their liability is with us and we will take care of them,” said Bose.

The company realized that the accumulated loss as on March 31, 2022 stands at Rs 148.55 crore against share capital of Rs 104.41 crore and its current liabilities also exceeded its current assets indicating the existence of material uncertainty about the company’s ability to continue as going concern, it was mentioned in the notes.

But based on the additional revenues expected from the handing over of surplus land at Uttarpara and the upcoming EV project, HM prepared its accounts on a going concern basis.

“We have the facility and the infrastructure and we want to sweat it out,” Bose said.

According to Bose, the initial investment would be Rs 300-400 crore. A greenfield project – that would have included land and infrastructure – would have cost Rs 1,000-1,200 crore, he pointed out.