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The C.K. Birla-controlled Hindustan Motors Ltd has decided to demerge and transfer the Chennai plant to its wholly-owned subsidiary Hindustan Motor Finance Corporation Ltd.
The HML board approved on Thursday a Scheme of Arrangement between HML and HMFCL and their respective shareholders. The demerger would be effective from April 1, 2012, the appointed date.
Hind Motors said its remaining business and interests in HML would continue to be owned and managed by HML.
In consideration of the demerger, HMFCL will issue HML shareholders one share of Rs 5 each for every 13 shares of Rs 5 each of HML.
The board also approved “realignment” of the Chennai unit and other business units in two different entities “to pursue their respective growth plans as appropriate,” HML said in a note.
Shareholder nod needed
The Scheme is subject to approvals of shareholders and sanction of the Calcutta High Court.
HML manufactures Mitsubishi passenger vehicles from its third plant situated at Tiruvallur, near Chennai. HML had entered into a technical collaboration with Mitsubishi Motors Corporation in 1998. Under a licence agreement, the plant produces Lancer, Pajero SFX, Cedia, Montero, Outlander, Lancer Evolution X and Pajero Sport.
After demerger, HML will be left with passenger cars (Ambassador) and light commercial vehicles (Winner) manufacturing unit at Uttarpara, near here; and operations at Pithampur near Indore in Madhya Pradesh where also it produces Winner.
Strategic investment
Rajesh Agarwal, head of research at Eastern Financiers, said the demerger plan would open up avenues for strategic investment. “This might help in reviving operational levels at the Chennai plant. It would also provide the market with reasonable cues for valuations of HML and HMFCL,” he said. During the first half of the current financial year, HML reported net loss of Rs 65.59 crore. In 2011-12, HML’s loss was Rs 29.96 crore.
The stock of HML, which has been ruling high this week, dropped 4.5 per cent on the BSE to end at Rs 11.79.
>jayanta.mallick@thehindu.co.in
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