Click it and Unblock the Notifications
Honda Increases Stake In SIEL With Rights Issue
The Honda Siel rights issue has also resulted in Honda increasing its stake in the company from 95% to 96.84%. The Siddharth Shriram lead Shriram Industrial Enterprise which previously had a 5% stake will have to make do with just 3.16% stake in a company in which it previously had a 40 % stake in 1998.
Reports say Siel is planning to completely sell its stake to Honda and walk out of the car building business and focus on its core verticals. Honda is also keen to have a complete hold on its Indian car business. But there appears to be a difference of opinion on the value of Siel's stake in Honda Siel after the rights issue.
It has been reported that Siel is trying to get a higher valuation for its share before it can sell them to Honda. It was earlier reported that Honda was looking at an investment of Rs.3,000 crores out of which 5% had to be raised by Siel. Siel was not interested to raise such kind of money after suffering losses for two consecutive years.
Honda's sales in India have declined in 2010 and 2011 after the company failed to match buyer expectations for more diesel cars. Honda does not have a diesel car in its line up in India and is still in the process of developing a suitable diesel engine for its cars. With a possibility of a diesel powered car being launched in late 2013 analysts do not expect Honda to make profits even this year.
This could be the reason behind Siel's reluctance to raise money for investment to maintain its stake in Honda. Honda also needs to quickly boost its production capacity in India. The waiting period for its Jazz hatchback is now more than 6 months and the carmaker is no longer taking new bookings. Further the waiting period for the City sedan and Brio small car is now over 6 weeks, The carmaker is nearing its optimum production capacity and needs to improve it or risk becoming stagnant.
Continue with Google