Hindustan Motors seeking demerger, financial partners

Hindustan Motors Ltd, the country's oldest car company and maker of the venerable Ambassador, is going for a name change that would come with a possible induction of financial investors to help re-launch an updated Ambassador.

The C K Birla group company, set up in 1942, is being renamed Hindustan Motors Bengal Ltd after its Chennai plant, which manufactures Mitsubishi vehicles, is demerged into an existing subsidiary, Hindustan Motor Finance Corp (HMFC), the process for which was started in January.

The company today said it is in talks with two different set of investors for equity participation separately in Uttarapa and Chennai plants after the demerger.

''The two units are different in many ways. Naturally, the potential investors for both the Chennai (Tiruvallur) factory and Uttarpara factory would be different. We are open to equity participation in both and in talks for same,'' HM managing director Uttam Bose told newspersons in Kolkata.

When asked about the identity of the potential investors, Bose said, ''For Chennai, it is a foreign car-maker and for Uttarpara it is a financial investor.'' However, he clarified the CK-Birla group would continue as the lead promoter.

He was speaking on the sidelines of the company's official launch of its BS-IV compliant Ambassador Encore.

As per the plan, post demerger HM may get rechristed as Hindustan Motor Bengal, which would run the Uttarpara (West Bengal) and Pitampura (Madhya Pradesh). On the other, HMFCL would run the Chennai plant.

However, the demerger plan as it stands is being opposed by the West Bengal government, which is claiming a compensation of Rs200 crore on the ground that the disputed sale of 314 acres of land at company's Uttarpara plant to Bangalore-based Shriram Properties for the development of an integrated IT township in 2007 was a loss to the state exchequer.

The demerger is opposed by Shriram Properties as well, which wants to settle this matter first. The matter is under the review of Calcutta High Court.

There was some relief for the company on Tuesday, as in a court-convened meeting, the company got shareholders' approval for the demerger.

''Since the court has allowed us to go ahead to secure shareholders' approval, we are confident we will get the final approval soon. Hopefully, in two-three months, we will hopefully complete the demerger process,'' Bose said.

He also reiterated that there were no irregularities on the part of HM in selling the land to Shriram Properties.