Hindustan Motors to invest Rs 1.6 billion to increase its stake

Hindustan Motors, one of the oldest auto makers in India, has planned to spend rupees 1.6 billion to purchase shares of the HM Export Ltd. The Hindustan Motors Export Ltd., is a subsidiary company and will see an investment of more than a billion rupees which is sure to increase its stake high in market.

Hindustan Motors is planning to fund the HM Exports by selling the shares of its another subsidiary, Avtec Ltd. Hindustan Motors confirmed the statement to the NSE (National Stock Exchange). No further details could be gathered from the company. The Indian auto makers of the widely used Ambassador, hived off the component business in 2005 into Avtec. In a company release, the board said that Hindustan Motors has given the approval of selling partial holding of Avtec shares to the group company. They also added that the transaction is being done at fair value. The move will generate profit which will improve the net worth of Hindustan Motors. The company's steps of cash infusion of around 40 crore will improve the companies operational and financial stake in the market.

The Hindustan Motors shares were on a high as the company is in talking for the contract manufacturing with the foreign companies at the plant in Chennai. The shares were trading high at 4.32 per cent at Rs. 25.35.

As per the company officials the plant's 25 per cent space is being utilized which means that 75 per cent is empty. Talks with foreign manufactures is a strategical move as it will generate cash in flows. The company is not in a good condition but the plan to give the space at the plant in Chennai, to the other manufacturers will prove to be positive for Hindustan Motors in the coming 18 months.

Hindustan Motors is a renowned auto manufacturer in the Indian auto market and its most popular passenger car Ambassador has ruled the Indian auto market last five decades. Besides the Ambassador, HM deals with mid sized and premium segment cars like Mitsubishi Lancer, Mitsubishi Cedia, Mitsubishi Montero, Mitsubishi Pajero in collaboration with Mitsubishi Motors, Japan.

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