Honda’s India car business to become fully-owned subsidiary

Almost five months after Usha International’s discord with Honda in the domestic car manufacturing joint venture became public, the company has announced the sale of its entire 3.16 per cent stake in the company.

Usha International is expected to get Rs 180 crore on the sale of 18 million shares at Rs 100 per share in Honda Siel Cars India (HSCI) to Honda Motor Company, Japan. The deal includes a non-compete fee paid to Usha by Honda.

After the deal, Mr Siddharth Shriram will cease to be a Director and the Chairman of the HSCI board. The proceeds from the stake sale will be used by Usha for “the normal development of Usha’s business”.

The agreement, which ends the 16-year-old joint venture, will now make Honda’s India car operations a fully-owned subsidiary of the Japanese parent. The move comes about 17 months after Honda ended its 27-year-old two-wheeler joint venture with the Hero Group in order to focus on its own two-wheeler subsidiary — Honda Motorcycle and Scooter India.

“Usha provided some of its best people to the joint ventures. Usha feels that it was inevitable that some day the parting would come because automobiles are not really Usha’s direct business. Usha is pleased to have helped one of the great companies of the world to settle into India and to offer the best products in the world to Indian customers,” an official statement said.

Incidentally, the fate of the second 27-year-old Usha and Honda Motor joint venture for power products, Honda Siel Power Product India, is still unclear.

“Shriram/USHA has had a relationship with Honda Motor Company since 1985 when Honda Siel Power Products (formerly known as Shriram Honda Power Equipment Ltd) was started. As Honda Motor Company was considering manufacturing cars in India, they found the characteristics of Shriram/USHA management and ownership to be highly suitable for the partnership in automotive business even though USHA had no experience or background or direct interest in the automobile business,” the statement said.

roudra.b@thehindu.co.in

(This article was published on August 10, 2012)
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