Michelin has offloaded 3.3% in Delhi-based Apollo Tyres for around Rs 50 crore through open market sales. The French tyre giant who had earlier sold small portions of its investments in the Indian firm has made a reasonable profit in this transaction given the original cost of purchase, as per VCCircle’s calculations.

In total, Michelin is estimated to have cashed out Rs 18 crore in the second half of 2008 through open market sales. Combined with the latest selloff it has pocketed around Rs 68 crore. It continues to hold around 8% in Apollo Tyres which at last traded price is valued at Rs 118 crore. Michelin is estimated to have generated returns of around 44% over a five year period.

It had picked 14.9% of Apollo Tyres through a preferential allotment at a cost of Rs 129 crore in early 2004 (after announcing the deal in November 2003) which works out to around Rs 226/share. After the stock split this has now become Rs 22.6 as against the ruling price of Apollo Tyres at Rs 29.

The strategic acquisition of stake, which was just short of the 15% mark which triggers an open offer, was done along with announcement of a separate venture between Michelin and Onkar Kanwar-led Apollo Tyres. As per the agreement the duo were to form a separate 51:49 JV to produce bus and truck radial tyres. This venture was to absorb investments of Rs 322 crore over a period of 4 years and was announced soon after Apollo withdrew a proposed technical alliance with Germany’s Continental AG.

Investments were to be made in a greenfield facility with production slated to begin in September 2005. The JV was to produce truck and bus radials of both Apollo and Michelin brands without any co-branding arrangements.

But the venture was a non starter and in September 2005 Michelin announced that it is picking the stake owned by Apollo Tyres in the JV and will proceed with the delayed project on its own. However, Michelin said it will continue to own stake in Apollo Tyres.

Overtime Michelin’s stakeholding dropped(from 14.9% to 11%) as the company’s shares at issue increased through a qualified institutional placement and conversion of warrants allotted to the promoters.

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