Troubled car maker Fiat Auto is writing off accumulated losses of over Rs 1,300-crore from its existing equity capital of Rs 1,367.98 crore. The Italian parent will infuse fresh equity worth Rs 420 crore, and increase its stake to 99.75% from 97.66%, as per the financial recast plan.
Sources said the company has filed a petition in the Bombay High Court to sanction the restructuring. The write-off is one of the largest by an MNC in India , sources said.
The other stakeholder, Premier Automobiles (PAL), has, however, declined to infuse any fresh equity, and has also opposed the financial recast plan. The restructuring will reduce PAL's stake in Fiat India from 2.34% to about 0.25%. PAL, which held 49% in Fiat India , has over time steadily reduced its stake.
The Italian company and the Doshis of PAL had earlier been involved in a legal fight over the board representation of Fiat. "Fiat has invested about Rs 2,000 crore in Indian operations, compared to PAL's Rs 32 crore. Its contention of alienating the Doshis from the board was valid and understandable," the company had said in a statement. If the court gives its nod, the infusion of fresh equity is expected to take place over next 2-3 months. Sources said the company has borrowed working capital from Citibank, and does not have any secured debt.
Once the recast is over, the company is likely to shift its operations phase-wise to Ranjangaon, near Pune, from Kurla in suburban Mumbai. Fiat is setting up a full-fledged assembly unit at Ranjangaon. It plans to launch a stripped-down version of its latest product 'Panda' in India next year.
The mid-segment car, which was launched in Europe last year, has been a roaring success. Sources said the car maker is betting heavily on the diesel version of the Panda, which claims to have a high fuel efficiency of 17-20 km per litre.
Fiat also plans to introduce ' Petra ', on the Siena platform, and then a brand new C-segment model. The list may be expanded to include the luxury brand Alfa Romeo in India .
"For Fiat, India is a huge market that could not be tapped properly for various reasons. Despite launching good products such as Uno and Palio, the company could not sustain growth. Panda could be ideal for the Indian market that is highly conscious of fuel efficiency," said sources.
The company has stopped production of most of its cars, except for the Palio NV and the new diesel version of Palio. Production takes place only on a couple of days, with a maximum production of less than 100 vehicles per day. Sources said the company has stopped production of the Uno and the Siena completely.
Though the company has been able to get rid off most of its old stocks, a lot of cars and car parts - mostly of the Siena - are still lying in the company premises. Sources said unease among its employees has led to many leaving the company over the last few months
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