Hindustan Motors
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HM’s roaring success keeps everyone guessing
  The Economic Times (Edition – Kolkata) | January 16, 2008  

Never-Say-Die Ambassador Going Places, Company’s Stock Soars In Markets
Anuradha Himatsingka KOLKATA

IT’S suddenly small cars everywhere! Ratan Tata’s drive on to the stage in a white Nano at the Auto Expo has been momentous in more than one sense. Not only has it launched India’s cheapest car so far, it has also drawn attention from almost every other segment to the magic world of small cars as every other manufacturer is vying with each other to launch a viable alternative.

But amid this frenzy, a very different car is going places. The age-old never-say-die Ambassador or the Amby of Hindustan Motors (HM). In today’s day and age, when nearly everybody has written the staid old Amby off, the company’s Rs 10 paid-up has stepped on the gas in the stock market and hit top speeds that have left most others far behind.

Very aptly again, only a few on the stock market actually knew about this or kept tabs because the market too has its ever-expanding set of newer stars who hog the limelight these days and the HM counter is definitely not one that many people are interested in keeping a watch on.

But between November 26, 2007 and January 7, 2008, the rickety old Amby has zoomed a spectacular 137% as the Rs 10 paid-up began climbing from around Rs 37.50 to Rs 88.95 over the period. It kind of took a breather twice along the way, once at Rs 53 on December 11, 2007 and then again at Rs 60.90 on December 31 even as the New Year bells were chiming, before going flat out to touch Rs 88.95 on January 7, 2008.

Old as it is, a little tiredness wasn’t unbecoming of the Amby as it paused to book profits and get its breath back, which was why it closed at Rs 77.10 on Tuesday. However, the 52-week high for the scrip is Rs 95 and the handful of players in the counter that are there, have no doubt that in the next phase of its run, the Amby would go beyond the previous high.

What was fascinating all this while had been the volumes at play. The Amby rarely ever attracts volumes, either on the road or on the marketplace. But during this run, volumes just soared. Between December 27 and January 1, nearly 100 to 170 lakh shares of HM changed hands. On January 2, 4 and 7, the volumes at the counter were a mind-boggling 300, 433 and 392 lakh shares respectively.

Although profits are being booked now, the volume pressure is still considerable and turnover is hovering between 118-200 lakh shares a day to the usual counter turnover of 20-25 lakh per trading session.

Chandra Kant Birla is generally out of the media glare, but what’s it he has done to make the Hindustan Motors scrip do a star turn on the market of late?
A predominant section of the stock market grapevine says he is going to sell off the Thiruvallur unit of the company in Chennai, for which negotiations are currently on between the Birlas and Mitsubishi Motors, its technical partner. The grapevine says the Birlas may be hiving off the unit into a separate subsidiary and it may subsequently offer a stake in the subsidiary to prospective partners.

The two-stage transaction, sources said, will be simultaneously implemented. First, the transfer of Chennai plant will be done from HM to the new subsidiary, while in the second stage, shares of the subsidiary would be sold to prospective partners and the CK Birla group. The deal is expected to result in cash flow to HM.
In fact, proponents of the view recalled that the Birlas had done something very similar with their component business in 2004.

“They had hived off the component business from Pithampur and Hosur into a new subsidiary, AVTEC and the new subsidiary then offered a stake to Actis Capital LLP, Hindustan Motors and the Birlas,” sources said.
Some others wondered if HM was more interested in a straight sell-off to its technical partners instead. The company, however, said nothing.

“Hindustan Motors and Mitsubishi Motors are working on a number of new products. A joint announcement to this effect was made in a press conference held in New Delhi on January 9,” Hindustan Motors said in response to a mail sent by ET on Tuesday.

That isn’t saying much at all, except for confessing that some sort of negotiations are going on for sure. The company version had its backers. Another section of the stock market felt that ‘some were trying to spread rumours that hardly have any basis,’ referring to those who think that the Chennai unit of the company might be sold off. However, these pundits could not offer any suggestions as to why otherwise would the company’s scrip dance around on the stock market all so suddenly.

Whatever the reasons for the price hike might be, the jump in the scrip price would do investors in HM a good turn. The scrip had been languishing at Rs 33 levels for a long time and a spurt now can only turn out to be good. Its Thiruvallur unit began manufacturing Mitsubishi Lancer since 1998.

The plant with a capacity to produce 12,000 vehicles per annum rolls out economy, standard, luxury and sports version of the Lancer. It also produces the top end Pajero 3.2 litre, the Pajero Q car (2.8 litre), Cedia and Montero. This division is also engaged in the manufacture and sale of spare parts used in the Lancer cars, the company’s states in its official website.

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