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Hindustan Motors Ltd (HML) has said that the demerger scheme, through which it was planning to transfer its Chennai Car Plant to a fully owned subsidiary Hindustan Motor Finance Corporation, could not proceed as the company expected. HML further said, the task of raising resources is becoming difficult now.
While an email sent to the company did not elicit any response, in his speech at the company's Annual General Meeting recently at Kolkata, C K Birla, chairman of Hindustan Motors Ltd said the company faced several operational challenges.
During the 18-month period ended September 30, 2013, the company incurred a loss of Rs 71.20 crore as against a loss of Rs 29.96 crore in the 12-month period ended March 31, 2012.
"...thus had created severe cash flow challenges, which had so far been met through several measures to bring more cash into the operations," said Birla.
He added on January 10, 2013 the company decided to demerge and transfer its Chennai Car Plant to its fully owned subsidiary Hindustan Motor Finance Corporation Ltd through a scheme filed with the High Court of Calcutta.
"The demerger was aimed at helping the two entities to pursue their respective growth plans, as appropriate. However, the scheme could not proceed as expected by the company due to several factors beyond its control," said Birla.
He further stated several other initiatives were taken to strengthen the operations and imporve the cash-flows, met only partial success and around Rs 80 crore were arranged from various sources to keep the operations going.
"The task of raising further resources was becoming increasingly difficult with the dealy in implementation of the restructuring proposals," siad Birla.
The company was planning to raise Rs 150 crore by divesting stake in its Tiruvallur plant, near Chennai, after the proposed demerger.
In June 2013, the company entered into an agreement with Isuzu Motors India for contract manufacturing to produce Isuzu's SUVs and pickup trucks from the Chennai Car Plant. The first SUV was rolled out from the plant on December 10, 2013 and this is expected to increase the capacity utilisation of the plant.
The company also finalised an agreement with its long-time technical collaborator Mitsubishi Motors Corporation, Japan to launch an automatic version of the SUV Pajero Sport, manual version of which was launched in March 2012.
According to Birla, it was also decided to launch another model from the Mitsubishi Stable and both the launches are slated for the next fiscal.
While seeking further support from the West Bengal Government's to revive the company, Birla said, the company is exploring all possible options and taking whatever steps were feasible under the circumstances to find a solution to improve operations and operating results.
