Hindustan Motors chief steps down

The company is on its way to be referred to the BIFR and is on the lookout for strategic investors for revival

C K Birla has decided to step down as chairman and director of his group flagship company, Hindustan Motors, on its way to to the Board for Industrial and Financial Reconstruction (BIFR) and looking for investors to revive it.

Birla is understood to have communicated his decision to relinquish the posts with immediate effect to the board members of the beleaguered automobile company, best known for its iconic Ambassador car.

“The decision reflects Birla’s thinking that his stepping down will pave the way for the entry of strategic investors and allow for greater flexibility during discussions,” a statement issued by the company said.

The board of the company is expected to meet soon to discuss what to do next.

The company is talking with two set of investors for equity participation, separately in its Uttarpara and Chennai plants after demerger. Managing Director Uttam Bose had earlier said for the Chennai plant, they could get a foreign car maker and for Uttarpara, a financial investor.

Earlier, in January, the board of the C K Birla group company had decided to hive off and transfer its Chennai car plant to its fully owned subsidiary, Hindustan Motor Finance Corporation Ltd.

However, the plan hit a roadblock because of opposition from the West Bengal government, which is claiming a compensation of Rs 200 crore on grounds that the disputed sale of 314 acres at the Uttarpara plant to Bangalore-based Shriram Properties for the development of an integrated information technology township in 2007 had caused a loss to the state exchequer. Besides, the hive-off is being opposed by both the government and Shriram Properties as they want to settle this matter, under the review of Calcutta High Court, first.

But in a respite to the Ambassador maker, at a court-convened meeting, the company’s shareholders on September 23 approved the demerger. However, in view of the delay in the demerger scheme awaiting the high court’s sanction, the company recently said it was initiating divestment of the Chennai plant to meet the goal. Meantime, the company plans to have a working arrangement for the Chennai plant.

While the Uttarpara plant makes Ambassador cars, the Chennai plant makes Cedia, Outlander, Pajero and Montero cars in technical collaboration with Japan’s Mitsubishi. Hindustan Motors recently tied up with Isuzu Motors India Pvt Ltd for contract manufacturing of the Japanese company’s sports-utility vehicles (SUVs) and pick-up trucks at the Chennai plant.