Volvo divests 8.4pc equity holding in Eicher Motors

AB Volvo which had acquired 22.75 lakh shares of EML representing 8.4pc of equity capital of Eicher Motors Ltd (EML) has divested this share. In May 2008 AB Volvo and Eicher Motors had entered into a Joint Venture agreement to create VE Commercial Vehicles Limited (VECV) with the intent to drive modernisation in the commercial vehicle industry in India and the developing world.

According to a press release, as a part of the transaction, in addition to acquiring 45.6pc of the shareholding of VECV, AB Volvo had also acquired 22.75 lakh shares of EML representing 8.4pc of equity capital of the company. This divestment will have no bearing whatsoever on VECV, which will continue to be governed as an equal partnership venture. The shareholding pattern and governance framework of VECV remains unchanged. Both partners - EML and AB Volvo are equally committed to grow the business together, the release added.

As far as Volvo’s commitment and their focus on the development and strengthening of the Joint Venture is concerned, it continues to remain same. It is part of their overall group strategy to become strong in Asia as well as emerging markets. For example, they have made available to VECV their entire group technology for development of new line of products. Similarly they have made VECV as the global hub for supply of medium duty engines for their entire automotive needs.

While Volvo continues to focus on VECV, on the other hand the investment in EML which they had not considered as strategic has been divested.

Since its formation, VECV has been growing from strength to strength, outpacing the industry across various segments and gaining market share with breakthrough products and unique go to market processes.

VECV has made many strategic investments. These investments along with other strategic initiatives have shaped VECV into a highly differentiated company. It has an extremely unique business model that ensured that it was the only commercial vehicle player in India to have remained profitable throughout the prolonged downturn. Both the Joint Venture partners are committed to nurture this further in the exciting period that lies ahead, as the commercial vehicle industry looks to revive after a long period of downturn.

Source: Eicher Motors Ltd