The Hindu Business Line : Restructuring will result in sizeable savings, says HM

HINDUSTAN Motor's proposed restructuring announced on Saturday would not only help the company to better explore overseas opportunities, but also provide the requisite financial support to expand its product portfolio and reduce its debt.

According to Mr R. Santhanam, Managing Director, Hindustan Motors, "The transaction would help Hindustan Motors to reduce its debt by about Rs 200 crore and bring it to a sub-Rs 100-crore level. Resultantly, there would also be considerable savings in interest costs."

"Hindustan Motors would also utilise the fresh inflow of funds to produce two new vehicles from the Mitsubishi stable at its Chennai plant. We plan to introduce a sedan and a sports utility vehicle during the last three months of the current calendar year. We would be finalising the agreement for introducing the SUV in a couple of months," Mr Santhanam said not revealing the names of the models.

Industry sources, however, add that the two models may include Mitsubishi Carisma, a D segment car, and Montero, a premium SUV.

Further, Hindustan Motors has aggressive plans to develop forgings and castings-based components at its plant in Uttarpara. In addition, the company is keen to take advantage of increasing outsourcing of auto components from India and is exploring those opportunities particularly for its newly hived off business, which include Pithampur and Hosur plants.

"Following the restructuring, we are well-placed to grab those opportunities," Mr Santhanam said. Hindustan Motor's board had on Saturday decided to hive off the components business (comprising the Pithampur and Hosur plants) in to its subsidiary AVTEC Ltd and invite private equity investor Actisto pick up a 30 per cent stake in it. Hindustan Motors, Actis and the GP-CK Birla Group would hold 49 per cent, 30 per cent and 21 per cent respectively in AVTEC.

"The transaction will likely result in an enhancement of net worth of Hindustan Motors by a considerable amount — more than Rs 140 crore as estimated currently," Mr Santhanam said. The restructuring would result in a cash flow of about Rs 265 crore for Hindustan Motors. The company's component business is expected to record sales in the region of Rs 375 crore for the financial year ending March 31, 2005.

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