Volvo to sell Eicher stake worth $300 mn

This marks the exit of the foreign company from the Indian motorcycle maker

Swedish auto major, AB Volvo is selling part of its stake in Eicher Motors worth $300 million (Rs 1,857 crore) in the secondary market thus marking the exit of the foreign company from the Indian motorcycle maker.  As a result of Volvo's exit, Eicher Motors's shares fell in the stock markets by 3.78 per cent to Rs 15,891 a share on Tuesday.

Volvo, which holds 8.4 per cent stake in Eicher Motors, is selling half of its stake at zero to eight per cent discount at a price band of Rs 14,636 a share to Rs 15,907 a share, terms of the transaction showed.  Bankers say the books opened and the demand for the share sale were low.

Eicher Motors is one of India’s leading manufacturer of leisure bikes and has a market capitalization of Rs 43,000 crore. At this valuation, Volvo’s 8.4 per cent stake in Eicher is worth Rs 3,618 crore as on Tuesday.  Bankers say Volvo will completely exit Eicher Motors in the coming months but did not commit on a timeline. Volvo and Eicher Motors also have a joint venture called VE Commercial Vehicles to manufacture trucks and buses in India.

Eicher has 54 per cent stake in VECV.  The company is planning to double its capacity by setting a second plant in Bangalore.  

Analysts tracking the sector say with Volvo exiting the company it is likely to use the proceeds to buy out Eicher’s stake in VECV. The JV plans to invest another Rs 1,000 crore to set up its second plant.

In February, VECV reported 25.1% rise in Eicher branded products at 3,262 units in January this year as compared  2,608 units sold in February 2014.