Toyota To Ease Out Kirloskars From Auto Jv

Japanese automobile giant Toyota Motor Corporation is increasing its equity holding in Toyota Kirloskar Motor from 88.86 per cent to 99 per cent.

Toyota will increase the shareholding in the venture, which makes and markets the multi-purpose Qualis and is slated to launch the three-box sedan Camry, through the acquisition of the around 10 per cent holding of the Kirloskars. Kirloskars, who hold 11.14 per cent at present, will be left with around 1 per cent at the end of the capital restructuring, sources said.

The raising of its stake by the Japanese partner is akin to another Japanese firm, Honda Motor, gradually buying out its Indian partner, Siddharth Shriram, from Honda SIEL Cars India. From an original holding of 40 per cent, Shriram is now left with 1 per cent in the venture.

 

Sources said Toyota has decided to make a fresh capital infusion in the company soon, following which Kirloskars' stake will be further reduced. It could not be determined if the deal has made a provision for Kirloskars to buy back their shares and raise their holding to a pre-determined limit within a specified period.

Senior company executives today said the board of the companies have already given their approval to the deal. Vikram S. Kirloskar, who is vice-chairman of Toyota Kirlsokar Motor, was not available for comment.

Toyota Kirloskar Motor was started in 1997 as a 51:49 joint venture, with the Japanese partner holding the majority stake. Toyota's shareholding was, thereafter, increased from 51 per cent to 74 per cent through a fresh capital infusion and subsequently to 88.86 per cent in 2000.

When the foreign collaborator's shareholding was increased to around 89 per cent, Kirloskars said that it had entered into an agreement with Toyota to restore its holding to 26 per cent (from the existing 11 per cent) by 2004. The agreement permits Kirloskar to buy back shares, aggregating to around 15 per cent, from Toyota within the stipulated timeframe.

After the original financial tie-up, the Kirloskars have not been able to pump in money into the venture due to shortage of funds. On the other hand, the venture needs fresh investments to gear itself up for new launches in the coming months.

Toyota and Kirloskar have together invested around Rs 700 crore in the venture thus far, all of which came through the equity route. The company has no debt component. The source said Toyota is not in favour of tying up any debt.

The company currently manufactures Qualis at its plant in Bidadi near Bangalore. The Bidadi plant has a peak capitalisation of 50,000 units per year which can be expanded in the future.