Swedish auto maker AB Volvo has exited Indian commercial vehicles company Eicher Motors Ltd by selling its remaining 3.7 per cent holding in the firm for about Rs 1,730 crore (approximately $270 million) via an open market transaction on Thursday. Part of the stake was picked by a portfolio investment entity under Citigroup.
In March this year, Volvo had sold 4.7 per cent or over half of its holding at that time in Eicher Motors for around Rs 1,920 crore ($310 million or €277 million).
This divestment, however, does not affect the separate joint venture between Volvo and Eicher Motors – VE Commercial Vehicles Ltd (VEVC).
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.
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 effective 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). Following the share buybacks by the company, its holding percentage rose to 8.4 per cent.
Eicher separately owns and runs high powered bike maker Royal Enfield Motorcycles.
Eicher Motors' scrip closed at Rs 17,182.35 each, down 5.64 per cent on BSE in a flat Mumbai market on Thursday.