Volvo exit from Eicher not to impact joint venture VECV

Volvo exit from Eicher not to impact joint venture VECV and the Swedish bus maker owes to strengthen its joint venture with Eicher.

Sweden-based commercial vehicle major selling its remaining stake in the Indian automotive major Eicher Motors Ltd will not have any impact on their Indian joint venture entity, VE Commercial Vehicles Ltd (VECV).

VECV has multiple business activities in India. The joint venture is spearheading the Indian business under five business units including Eicher Trucks and Buses,VE Powertrain and Volvo Trucks India as well as Eicher’s engineering components. All these business divisions are well established in the Indian automobile market.

The Swedish bus giant has sold its remaining stake in Eicher Motors Ltd (EML), which is listed on Bombay Stock Exchange, on Thursday. The stake sale comprises 1,005,610 shares valued approximately at SEK 2.2 billion or Rs 1,695 crore.

Volvo, which is a major player in the luxury bus and mining truck segment in India, said that divestment will not have any impact on ownership or long-standing development interms of its joint venture with Eicher – VECV.

In a statement, Volvo Group said the stake sale will have a positive impact in its cash flow in the second quarter of the current fiscal 2015. The divestment will lead the company to have a capital gain of around SEK 2.1 billion.

Volvo reiterated that it will remain as owner in the joint venture VECV and the share divestment in EML will not have any impact on the ownership or control of the JV.

Also Read : Eicher Motors net up 38.5% in Q1

Both Volvo and Eicher Motors Limited (EML) joined hands in 2008 to create the Indian joint venture company VECV with an intention of driving modernisation in the Indian commercial vehicle sector.

Currently VECV is the third largest commercial vehicle manufacturer in India. Volvo sees India as its key market and it will continue to focus on strengthening VECV as part of the Group’s aim to expand in Asia and other emerging automotive markets, the bus giant noted in the statement.

AB Volvo has taken 45.6 of minority stake in VECV during the formation of the joint venture, while acquiring 22.75 lakh of shares or 8.4 percent of equity capital in EML.

Recently in March 2015, the Volvo Group sold 1,270,000 shares valued at SEK 2.5 billion or Rs 1,920 crore in Eicher Motors Limited (EML).