AB Volvo, a Swedish auto manufacturing company, has sold 4.7 per cent or over half of its holding in Eicher Motors Ltd for around Rs 1,920 crore ($310 million or €277 million), according to a stock market disclosure. Part of the stake was picked by a portfolio investment entity under Citigroup.
Volvo continues to hold 3.7 per cent stake in the Indian commercial vehicles maker.
This divestment does not affect the separate joint venture between Volvo and Eicher Motors – VE Commercial Vehicles Ltd (VEVC) .
“Both the joint venture partners are committed to nurture this further in the exciting period that lies ahead, as the commercial vehicle industry looks to revive after a long period of downturn,” Eicher said.
In 2008, Volvo and Eicher entered into a JV agreement to form VEVC. The joint venture comprises Eicher Motors' entire truck and bus operations and Volvo's Indian truck sales and service operations. Besides commercial vehicles, the joint venture encompasses the components and engineering design services businesses of Eicher.
However, Royal Enfield Motorcycles remains outside the purview of the joint venture and continues to operate under the aegis of EML.
Volvo brought in its Indian truck distribution and service network to the JV and also contributed Rs 1,082.1 crore in cash in the venture in lieu of 45.6 per cent equity stake in VEVC. It also bought 8.1 per cent of Eicher, which gave it an economic interest of 50 per cent in VEVC.
It had bought the stake from Eicher Motors’ promoters for Rs 157 crore (€24 million or $34 million). With share buybacks, its holding percentage rose to 8.4 per cent.
With the latest divestment, the firm has sold a part of it booking huge profits. Meanwhile, the deal also means its economic interest in VECV stands decreased to 47.45 per cent.
Eicher Motors' scrip closed at Rs 16,050.15 each, up 1 per cent on BSE in a weak Mumbai market on Wednesday.
(Edited by Joby Puthuparampil Johnson)