Hindustan Motors

 

We have been holding quite a positive view on the company mainly because of the assets held by it. When I read this news couple of months back that the company has been referred to BIFR (Board for Industrial & Financial Reconstruction), I said that this company has rich assets, but bad management.

If you recall in the past, some couple of years back, they have sold 315 acres of land, realized Rs 300 crore, but since the money came in four installments over two years, the entire money has been in use for financing the losses. Now, same thing is happening here, they have the Chennai car plant where they make the Mitsubishi, Pajero and Lancer cars, that is a most modern plant and in fact there have been suitors for this plant last year also or maybe couple of years back also because this could act as a hub for exporting to South East Asia. And now since the company has been referred to BIFR, there is no significant debt, so you cannot expect any debt waiver or any interest reduction. You need to come out of BIFR by working your own package. That can only happen, if company contemplates for selling any of these assets which could be in the form of this Chennai car plant and or 49% stake, which they are holding in AVTECH Ltd, again a company which is making engines with automobiles with 1500 CC and above. In fact both these assets are having value of about Rs 400-500 crore each.

So, this time it has been forced upon the company that if you want to come out of BIFR, you will have to sell either of these assets. I won't be surprised to see if both the assets are sold by the company and can mobilise about Rs 1,000 crore to pump in that money to expand their core operations, which could be car and making the castings, forgings etc.