The Hindu Business Line : Honda Siel to invest Rs 135 cr to refurbish existing models

In top gear
Has lined up investment of about Rs 1,660 crore between 2006-07 and 2010-11 in plant expansion and new models.
Contemplating a new plant to be ready in time for its proposed launch of a hatchback, some time in 2009-10.

A FILE picture of the enhanced production facility of Honda Siel Cars India Ltd during its inauguration at Greater Noida Plant in Uttar Pradesh. — Kamal Narang

Chennai , Sept. 2

Honda Siel Cars India Ltd plans to invest about Rs 135 crore during 2006-07 on refurbishing its existing models.

This investment will also cover the launch of the Civic, its premium sedan, which hit the market recently.

It is expected that the new Honda Accord, a luxury sedan, which has been launched globally, will be introduced in the Indian market.

With the Civic doing much better than anticipated, Honda Siel Cars is confident that it will be able to produce 60,000 cars at its plant in Greater Noida, Uttar Pradesh, this financial year.

The plant has a capacity of 50,000 units and the increased production will come from efficiency improvement, according to Honda officials.

Honda Siel Cars has announced that it will expand capacity to one lakh units by 2007, at least three years ahead of its original plan for reaching this capacity at the plant.

In August 2006, the company sold 5,247 units against 3,661 units in the same month last year, a 43 per cent jump. The Civic sold 1,845 units during the month.

According to company officials, Honda Siel Cars has lined up an investment of about Rs 1,660 crore between 2006-07 and 2010-11 in plant expansion and new models.

Investment plans

Apart from expanding capacity at its existing plant, the company has said it is contemplating a new plant to be ready in time for its proposed launch of a hatchback, some time in 2009-10.

Since its inception in 1997, the company has invested Rs 780 crore and the investment in 2005-06 in plant expansion was Rs 95 crore.

For the year ending March 31, 2006, Honda Siel Cars posted a net profit of Rs 153 crore on an income of Rs 2,542 crore compared to a net profit of Rs 132 crore on an income of Rs 2,162 crore in the previous year.

Boosting stake

The company's issued, subscribed and paid-up share capital is Rs 360 crore against an authorised capital of Rs 1,000 crore. Honda Motor Company has a 99 per cent stake and Shriram Industrial Enterprises Ltd (SIEL) of Mr Siddharth Shriram the balance 1 per cent. SIEL now proposes to increase its stake to 5 per cent, a move that Mr Masahiro Takedagawa, President & CEO, Honda Siel Cars, described as a reflection of the excellent relationship between the two partners.

In 2005-06, Honda Siel Cars paid Rs 64 crore as model fee to Honda Motor Company, Japan, against no payment under this head in the previous year. However, the company paid Rs 26 crore as lumpsum fee instalment to Honda Motor Company in 2004-05 against no payment under this head in the year under review. For 2005-06, it paid a royalty of Rs 85.8 crore to Honda Motor Company against Rs 44.2 crore in the previous year.