Mumbai: Promoters of truck maker Eicher Motors Ltd have purchased Mitsubishi Motor Corp.’s 3.18% stake in the company for an undisclosed sum. Siddhartha Lal, chief executive, Eicher Motors, discusses the reason behind the transaction and his outlook for the sector and the company. Edited excerpts:
Walk us through how you are seeing the pick-up at the moment and do you see that momentum continuing?
Certainly, we see the momentum reasonably good now because there is a lot of spend on infrastructure and the progress in the commercial vehicle (CV) industry is now picking up. So, yes, we see the trend continuing in the next few months.
New direction: Eicher Motors chief executive Siddhartha Lal. Rajkumar / Mint
The deal that’s just done, does this mean that any other relationships that you may have with Mitsubishi now end or is it just business as usual and this is only a financial transaction?
Mitsubishi Motors, till recently, was holding a 3.18% stake in our company and that was mainly a result of what was an erstwhile partnership in Eicher Motors. For more than 10 years, we have not had any relationship with Mitsubishi except that they continued to hold the stake, so they weren’t a part of the board or they had no other technical instrument or anything. So, they were looking at selling the share... Of course, now there is no more relationship with Mitsubishi at all and they will no longer be listed as a promoter in Eicher Motors.
At this moment would you look at perhaps sharing some of this to either a strategic partner or do a QIP or a follow-on offering and perhaps dilute a bit of your stake?
There is absolutely no such plan. We have consolidated our holding at the promoter level to close to 56% and we already have a strategic partner in our CV business, which is Volvo, and they also hold around 8% in Eicher Motors. Eicher Motors has around Rs400 crore of cash, so we do not need any further cash infusion or injection at this point.
One word on the commercial vehicle industry. The last numbers that we got for November were good but the year-on-year numbers are bound to look good because we looked at very pathetic base in 2008. What are the numbers coming to? Have we reached the average production of 2008 in November and December? How are you looking at the industry going forward? Do you think capex plans will be even contemplated any time? What is the capacity utilization for you and for the industry?
Year 2008 was a very tricky year to comment on, only from the perspective that it was extremely good in the first half and then tapered off. So there is no average production as such—it was very high and very low. But this quarter, which is October-November-December, we have seen a good growth rate and it’s now sort of coming to what is a normal level, I would say from maybe 2007 level. So it’s coming back to those sort of levels.
Certainly, the industry is coming back into shape and now I think the capacity utilisation and all are coming up. They were certainly sub-50% at the beginning of the year and now closing in on 70-80% for us, around that level. We certainly expect growth to continue as a result of the entire infrastructure spend and all the improvement in the economy. We expect the growth to continue into the next couple of quarters certainly.
We understand that Eicher Motors is planning a truck financing arm as well. Any details that you can share?
We have not made a decision to enter into the financing business. We are only exploring opportunities, so there is no decision as yet.