HSCI, which was incorporated in December 1995, will now be a 100% Honda subsidiary in India
New Delhi: Ending months of speculation, the Siddharth Shriram Group and Honda Motor have agreed to part ways from their join venture—Honda Siel Cars India (HSCI)—with the Indian partner selling its entire 3.16% stake to the Japanese partner for Rs180 crore, reports PTI.
In separate statements, Shriram-led Usha International and Honda Siel Cars India said UIL (Usha International) and Honda Motor (HMC) have signed an agreement to end the joint venture.
“UIL, which held 3.16% shares in HSCI, had shown an interest in divesting from the joint venture to be able to focus and strategically invest to expand their own core business. Therefore, based on the mutual consent, UIL has sold its shares to the partner Honda Motor Company, Japan,” HSCI said.
Following this, HSCI, which was incorporated in December 1995, will now be a 100% Honda subsidiary in India.
“The process of changing the company name and other formalities will be completed over the next few months,” the car maker said.
In its statement, UIL said Honda Motor has “purchased all of the shares (Rs18 crore) that Usha held in Honda Siel Cars India”.
The Indian entity further said the stake sale has been negotiated at a price of Rs100 per share, inclusive of a non-compete fee.
“According to the agreement with Honda Motor, Siddharth Shriram has ceased to be a director and the chairman in HSCI,” UIL said.
“Usha feels that it was inevitable that some day the parting would come because automobiles are not really Usha’s direct business,” it added.
While expressing ‘appreciation’ for the support of the Indian partner, HSCI president and chief executive officer Hironori Kanayama said, “We have shared a very successful and fruitful relationship with UIL over the past 17 years.”
For Honda, the break up of the joint venture is the second in as many years in the automobile sector after it had ended a 26-year old partnership with the Munjals-promoted Hero group in the erstwhile Hero Honda in December 2010.
UIL has had a relationship with the Japanese auto major since 1985 when Honda Siel Power Products (formerly known as Shriram Honda Power Equipment) was started. It became the partner of Honda, when it was looking to enter the Indian automotive market.
Of late, it was reported that Shriram was trying to exit the joint venture and was understood to have asked for a high price, reported to be around Rs100 per share.
Although it was sensed that Honda had not been willing to give in to the demand of the partner, finally, it bought out the stake from UIL at the said rate.
Siel had bought HSCI shares from Honda in September last year at a price of Rs52.80 a piece to increase its stake to 5% from 2.6% earlier.
In March 2012, Honda had subscribed to a rights issue of HSCI at Rs57.1 per share, in which Siel did not participate. Following this, Siel’s stake in HSCI came down to 3.16%.
Earlier, HSCI was planning to raise Rs3,200 crore to fund its expansion. Of this, Rs1,200 crore was mopped up through the rights issue.
HSCI, which makes models like City, Jazz, Brio, Civic and Accord, had partially inaugurated its second manufacturing facility at Tapukara in Rajasthan in September 2008.
The company had committed an investment of Rs1,000 crore to set up the facility at Tapukara with an installed capacity 60,000 units per annum.
In 2010, it had announced a further investment of Rs250 crore at the plant to expand the power train unit, mainly to cater to its small car Brio.
It currently rolls out engine and transmission components such as cylinder heads and cylinder blocks.
Earlier in 2010, HSCI had stated that it was likely to start car assembly operations at Tapukara from 2012. However, last year it had said the plant is expected to start rolling out vehicles within the next two-three years.
The company’s first facility at Greater Noida, set up for Rs450 crore in 1997, has an installed production capacity of one lakh units per annum and can produce up to 1.2 lakh units by improving the efficiencies of different verticals.