HM hives off component business to subsidiary

The Hindustan Motors Ltd, a CK Birla group company, on Saturday approved the proposal to hive off its component business, comprising the Hosur and the Pithampur units, to its subsidiary A VTEC Ltd.

The board also approved the proposal to offer a 30 per cent stake in the company to Actis Capital LLP, through its investment vehicle Actis Powertrain Investments Ltd.

According to the deal, the promoter group of the company has agreed to acquire 21 per cent stake in A VTEC at the same valuation as Actis. Hindustan Motors will ultimately hold 49 per cent stake in the company.

The enterprise valuation of A VTEC works out to Rs 423 crore.

"The transaction involves the simultaneous implementation of two stages. First, the transfer of the component business from Hindustan Motors (HM) to A VTEC and second, the sale of A VTEC shares to Actis and GP-CK Birla group. The consummation of the two stages is expected to result in cash flow amounting to Rs 265 crore to HM. Additionally, Actis and the promoter group would invest Rs 30 crore into A VTEC," a release issued by Hindustan Motors said.

Commenting on the deal, Naresh Chandra, director, HM said, "It is a significant step towards putting the component business on the accelerated growth and unlocking value for Hindusatn Motors."

"We see huge potential for the auto component business both in the domestic and export markets. We are delighted to partner with the GP-CK Birla Group in A VTEC," said Donald Peck, managing partner, Actis India. Kotak Investment Banking acted as the financial advisor to Hindustan Motors for the deal.

The Hindustan Motors stock hit an all-time high of Rs 34.40 on the NSE on Friday on the back of huge volumes of more than 3.3 crore shares. On the BSE, the stock ended with gains of 2.92 per cent to close at Rs 33.40.