New Delhi: European trucking company Volvo Group has emerged as a front runner to buy a majority stake in Eicher Motors Ltd, according to people familiar with the situation.
These people said Volvo had offered Rs675 a share compared with DaimlerChrysler AG’s offer of Rs500 a share.
Eicher’s shares rose 2.74%, or Rs11.4 on the Bombay Stock Exchange to close at Rs428.1 a share on Wednesday, giving the company a market capitalization of around Rs1,200 crore. The shares are trading below their 52-week low of Rs222.10 of 19 April.
If Volvo does prevail, it would end up acquiring a majority stake in the company either from the promoters or through a fresh issuance of preferential shares, say these people, who did not want to be named.
The existing promoters, headed by Siddhartha Vikram Lal, will continue to own a minority stake, of potentially less than 26%, the same people said. Various promoters currently hold about 58.2% stake in the company while Mitsubishi Motors Corp. owns a 3.56% stake, according to Eicher Motors’ website.
Eicher Motors officials declined to comment on any potential transaction.
“Eicher Motors is focused on becoming a full-range commercial vehicle player,” said one Eicher Motors executive, who did not want to be named. “In our endeavour to continuously strengthen our presence across the Indian commercial vehicle landscape, we are considering strategic alliances. However, due to professional courtesies accorded in any business talks, we will not be able to offer any particular comment at this stage.”
Eicher Motors is an attractive target because global truck makers see India as a significant growth market. Volvo, for instance, already has a production facility near Bangalore for upper-end commercial vehicles. Acquiring the majority stake in Eicher Motors would give Volvo a significant presence in northern India, said people familiar with the matter.
Eicher Motors makes commercial vehicles in the five to 11 tonne range. Its factory in Pithampur has a capacity to produce around 200,000 vehicles annually, according to the company’s website.