Volvo divests 4.7% stake in Eicher Motors
04 Mar 2015
Swedish commercial vehicle major AB Volvo has sold 1,270,000 shares or around 4.7-per cent stake in Eicher Motors Ltd to raise more than Rs1,920 crore ($310 million).
Volvo, which owns 8.4-per cent of Eicher Motors, is looking to sell $250 million worth of shares in Eicher Motors, with an option to increase the sale to up to $300 million, Reuters reported citing a term sheet.
The share sale has been carried out at an indicative range of between Rs14,636 and Rs15,907 per share, according to the document.
''The Volvo Group has sold 1,270,000 shares in the listed Indian automotive manufacturer, Eicher Motors Limited, for an amount totaling approximately SEK 2.5 billion,'' an Eicher Motors spokesperson said in a statement.
''The divestment of shares has no effect on ownership or the development of the longstanding joint venture, Volvo Eicher Commercial Vehicles.
The sale will have a positive impact on the Volvo Group's cash flow after net investments and net financial debt in a corresponding amount in the first quarter of 2015.
The sale will also generate a capital gain of approximately SEK 2.4 billion, which will impact operating income in the trucks segment in the first quarter of 2015,'' Volvo said in its brief website statement.
AB Volvo and Eicher Motors had entered into a joint venture agreement in May 2008 to create Volvo Eicher Commercial Vehicles to manufacture state-of-the-art commercial vehicles, in which the Swedish company owned 45.6 per cent stake with Eicher owning the remaining majority stake (See: Cabinet approves Volvo - Eicher joint venture proposal).
As a part of the terms of the joint venture deal, AB Volvo had also acquired 2.28 million shares of Eicher Motors, amounting to 8.4 per cent of equity of the Indian company.
The shareholding pattern and governance framework of VECV remains unchanged, it added.
VECV's business includes the complete range of Eicher trucks and buses, VE Powertrain, Eicher's components and engineering design services businesses as well as the sales and distribution business of Volvo trucks within India.