INDIA BUSINESS WORLD - FEBRUARY 16th - FEBRUARY 29th - 2008
DAIMLER-HERO JV REFERRED TO CCEA; FIPB REJECTS EICHER OBJECTIONS
The government has brushed aside Eicher’s objections to the Daimler-Hero joint venture for commercial vehicles. The Foreign Investment Promotion Board (FIPB) has cleared the proposal and referred it to the Cabinet Committee on Economic Affairs (CCEA) because the project cost exceeds Rs 600 crore.
The final ruling on the proposal comes close on the heels of an earlier decision by FIPB to look into the technical collaboration agreement between Eicher and Mitsubishi Motors on the basis of which Eicher Motors had attempted to invoke Press Note 1 to stall clearance for the Daimler-Hero JV. Although the matter was then deferred till the next meeting of FIPB, the board had suggested that Eicher has no “locus standi” to stop the new bus and truck JV.
After the proposal was cleared by FIPB, the finance minister has forwarded it to CCEA, sources said. Since the project cost was more than Rs 600 crore, clearance from the Cabinet panel is mandatory.
In the last meeting itself, the board had concluded that “there was no case for Eicher to seek protection under the provisions of PN 1”. The board’s reasoning is that the technical collaboration JV agreement between Eicher and Mitsubishi Motors “expired around 1994” and as such the 3.56% stake in Eicher held by Mitsubishi Motors “and thus the right to acquire by Mitsubishi Fuso Truck & Bus Corp (MFTBC) was only a right, which had not been exercised”.
Last month, Eicher demanded “assurances” from Daimler that it would not introduce the same products in India that are based on Mitsubishi Motors (MMC) technology “already commercialised by Eicher in India”. It also wants the German company to take “steps to transfer back the 3.56% equity holding” in Eicher to its promoters.
According to Eicher, that 3.56% stake — the result of a technical and financial agreement signed with Mitsubishi in 1985 — is in “the same field” as the proposed JV by Daimler-Hero. Mitsubishi transferred its truck and bus business to MFTBC in 2003.
Eicher’s contention is that the Japanese company also transferred all the Eicher shareholding held by it to MFTBC, which in turn is owned 85% by Daimler. FIPB, for its part, noted that “as per the filings of Eicher Motors with Sebi, the 3.56% share is held by Mitsubishi Motors where Daimler has only a minority stake less than 20%”.
Daimler’s right to acquire shares in Eicher occurred in 2003 when MFTBC was spun off. “Though Eicher was advised to arrange the transfer, it did not do so and also did not file any declaration of beneficial ownership,” the board noted. Hence, it does not have any “locus standi” in the matter. Daimler is investing Rs 1,650 crore in a 60:40 JV with Hero Group to design, make and sell commercial vehicles above the 2-tonne gross vehicle weight in India and the overseas markets.
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