Eicher to de-merge auto business by Sept

The Eicher group hopes to complete the planned de-merger of Eicher Ltd's automobile businesses comprising tractors, motorcycles, engines, and gears into Eicher Motors Ltd by September. The restructuring is aimed at reducing costs and improving efficiency, S Sandilya, group chairman, said.

"The Delhi and Indore High Courts have passed orders approving the scheme. We should be receiving the written orders any time. I expect the entire process to be completed by September," Sandilya said.

He said the restructuring would help the group cash-in on the financial strengths of a combined entity.

A bigger automobile company would be able to negotiate better with vendors, Sandilya said. "Interest, marketing, and distribution costs will also come down."

The entire process will be implemented with effect from Apr. 1, 2003. In 2003-04, Eicher had reported net sales of Rs 594 crore, while that of Eicher Motors stood at Rs 792 crore.

In April-June, Eicher had cut its net loss to Rs 18.9 million from Rs 65.1 million a year earlier. Eicher Motors had reported a 17.3% rise in net profit during April-June.

Sandilya attributed the reduction in Eicher's net loss in the first quarter to higher tractor sales and improvement in its gears' business. "I see marginal increase in tractor sales even if the monsoon is deficient this year," he said.

As part of the restructuring, additional shares would be issued in Eicher Motors for the de-merged company in the ratio of two shares of Eicher Motors for every five shares of Eicher Ltd.

Eicher Motors shares ended at Rs 208.3 on the National Stock Exchange, down 0.41 per cent from Thursday. Eicher ended at Rs 94, up 0.2 per cent over its previous close.