CK Birla Group-owned financially troubled automaker Hindustan Motors is likely to sell 5-7 per

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cent stake in Avtec within group firms in order to raise funds to stay afloat.

CK Birla Group firms presently hold 70 per cent stake in Avtec – the automotive component business of the $2 billion CK Birla Group. Of this, Hindustan Motors owns 49 per cent and other group firms including Hyderabad Industries Ltd and Orient Paper own 21 per cent. Private equity firm Actis holds the rest of Avtec at 30 per cent.

“As far as we (Avtec) are concerned, Actis will continue to hold 30 per cent stake and 70 per cent will continue to be held by CK Birla and group companies. Within the 70 per cent, looking at the requirements of Hindustan Motors, the combination may change, to the extent that it may dilute 5 per cent or 7 per cent and its picked up by another group company,” chief executive officer, Avtec Ltd, Prabhakar Kadapa told Financial Chronicle in an interview. He chose not to disclose the total valuation of Avtec as it is not a publicly listed company.

Earlier in May, Hindustan Motors had reported to the Board for Industrial & Financial Reconstruction (BIFR), due to substantial erosion of over 50 per cent of its peak net worth recorded at Rs 164.61 crore recorded four financial years ago. The accumulated losses of the company stood at Rs 132.28 crore in 2009-10 end.

The maker of the iconic Ambassador sedan, however, managed to narrow down its net loss to Rs 19.73 crore in the April-June quarter this financial year, from Rs 21.8 crore losses in the same period a year ago.

Hindustan Motors has already sold its corporate office in Chennai for about Rs 25 crore last month to raise funds in this direction.

Besides, Kadapa said Avtec is optimistic of becoming a Rs 1,000 crore company within the next few years with new orders for execution from Daimler, Ashok Leyland-Nissan, Tata Motors and Mahindra & Mahindra. “We have a plan to become a 1,000 crore company by 2013-14 timeframe. By revenue point of view we would also then become a player to reckon within the CK Birla Group. We will invest Rs 225 crore both through internal accruals and debt mostly for capacity expansion by 2013-14,” he said. Avtec clocked Rs 500 crore revenues in 2009-10.