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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (3639)	2/3/1999 8:08:00 AM
From: Mohan Marette	Respond to of 12475

General Motors buys out C.K.Birla's stake to take full control of GM(India). (Source:The Hindu) GM opts for 100% arm by buying out C.K. Birla Date: 03-02-1999 :: Pg: 01 :: Col: c Our Bureau NEW DELHI, Feb. 2 GENERAL Motors of the US, the world's largest corporation, is taking total control of its Indian venture, General Motors India Ltd, by buying out the 50 per cent stake held by its equal partner, the C.K. Birla group. The two companies today announced that they would seek Government approval for restructuring the joint venture, under which General Motors would become sole owner. Either of the companies would have to approach the Foreign Investment Promotion Board (FIPB) with a revised application detailing the scheme, since it involves a fresh flow of foreign direct investment and an amendment to the foreign collaboration agreement. General Motors India's equity share capital currently stands at Rs. 130 crores, which is equally shared by the partners. It, however, could not be ascertained if General Motors has any plan to increase the equity share capital of its Indian arm, following the buy-out. Incidentally, the decision to acquire the C.K. Birla group's equity holding comes close on the heels of a move by General Motors - the parent company - to increase its royalty earnings from the Indian outfit. A proposal to this effect was considered and cleared by the FIPB only on January 23. Company officials declined to comment on the consideration for the buy-out. Sources, however, added that differences emerged when the Birlas opted not to pump fresh investments to suffice the working capital needs of the Corsa project, expected to take shape this year. The company currently manufactures Opel Astra, a mid-size salon, and has lined up its small car, Corsa, for a late-1999 launch. In a joint official statement, General Motors and the C.K. Birla group said: ''This understanding is part of a long- term vision by both partners to strengthen their operations to meet both companies' goals and strategies and address future challenges.'' Mr. C.K. Birla said that ''the Birla group has a long history of association with GM in various fields. This relationship continues to thrive in a most friendly manner. Our decision in respect to GM India is based upon our mutual assessment of the best option in the long-term interest of the joint venture and both partners. From our point of view, this is a step in our drive for consolidation and would allow us to focus our attention on the group's investment and growth programmes.'' General Motors, on the other hand, would bring in additional foreign direct investment into the venture, which would amount to at least the same amount the company has already pumped in since its foray in 1995-1996. ''The increased investment by GM is a clear indication of the company's commitment to India and is designed to further strenthen the company and existing customer relationships,'' Mr. Rudolph A. Schlais, group Executive and Vice-President of General Motors and President of GM Asia- Pacific, said, adding that ''GM is in India for the long-term and is committed to becoming a major player in the Indian market.''