Kirloskar Systems plans to raise around Rs 100 crore from sale of its over 10 per cent stake in Toyota-Kirloskar Motor Company Ltd, which will be used to retire debt.
Sources in the company said Kirloskar will still retain its option to buy back its equity in a four-year timeframe as per the agreement between Kirloskars and Toyota. The Japanese car maker currently has 88.86 per cent stake in the joint venture company.
The money from the sale will be used to retire debt and fund expansion plans of Kirloskar's group companies.
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Sources said the Kirloskars decided to sell off their stake because they could not wait for a longer period for returns from their investment in the joint venture.
Reuters adds: Vikram S Kirloskar, vice-chairman of Toyota Kirloskar Motor, told Reuters on the phone from Bangalore that the Kirloskar group would reduce its stake in the company to one percent and raise a little over 1.05 billion rupees ($22 million) from the sale.
The Pune-headquartered Kirloskar group has interests in several engineering industries. Toyota holds 88.86 percent of the stake in Toyota Kirloskar Motor, which makes just the Qualis utility vehicle.
The money from the stake sale will be used to retire debt and improve cost-efficiencies at some Kirloskar group companies including Kirloskar Oil Engines Ltd and Kirloskar Brothers Ltd, the vice-chairman said.
"There will be no change in the working of the venture (Toyota Kirloskar) and we have the option to buy back our equity over time...over four years," Kirloskar said.
Toyota Kirloskar Motor, which began making the Qualis in December 1999, initially invested nearly Rs 00 crore in setting up a plant near India's technology capital, Bangalore.
It sold 28,022 units of the Qualis in 2001 and has a 23 per cent share, the second largest, in India's six-player utility vehicle industry.
"The investments in the car business are likely to be large and there aren't going to be any returns for some time... They (Toyota) have agreed to accommodate us," Kirloskar said.
Toyota Kirloskar Motor plans to import fully built units of the mid-sized family car, the Camry, for sale in the domestic market later this year and is also developing a smaller sedan for production in India.
The Kirloskar group and its joint venture companies supply several components for the Qualis including axles, plastic parts, air-conditioners and radiators.