Volvo divests itself of Eicher Motors holding
Swedish group relinquishes shares but retains ownership of Indian joint venture
The Volvo Group has sold its last remaining holding in Indian automotive manufacturer Eicher Motors Limited (EML), divesting itself of some 1,005,610 shares worth $266m (SEK 2.2bn).
The divestment effects neither Volvo's ownership or development of its long-standing joint venture with Eicher, Volvo-Eicher Commercial Vehicles (VECV), but will generate a capital gain of $254m (SEK 2.1bn) and positively impact the cashflow of Volvo’s trucks segment in Q2 2015.
"Previously we consolidated ownership in VECV to an amount of 50%, but after a change in reporting policies this holding was no longer necessary for achieving the influence and decision-making power that we originally wanted – now the money can be put to better use in other areas of the group," Kina Wileke, SVP for communications at Volvo, told PMV Middle East over the phone.
"But we remain deeply committed to both the Indian markets and VECV, as part of the Group’s broader strategy to expand in Asia and other emerging markets."
VECV was established by EML and the Volvo Group in 2008, and has made major investment in plants for medium-duty engines, buses and paint, culminating in the launch of its Pro Series range of five- to 49-tonne trucks and buses in early 2014.
Volvo retains a 45.6% stake in VECV, which is now the third largest manufacturer of commercial vehicles in the Indian market.
In parallel with its joint venture, EML also owns the Royal Enfield motorbike brand.
In March, Volvo conducted a similar transaction, selling 1,270,000 shares in Eicher and generating $303m (SEK 2.5bn).