Cabinet clears $275 mn Volvo investment in joint venture with EicherJuly 24th, 2008 - 5:56 pm ICT by IANS
New Delhi, July 24 (IANS) The Cabinet Committee on Economic Affairs (CCEA) Thursday approved a foreign direct investment (FDI) of $275 million (Rs.10.43 billion) by Swedish auto major AB Volvo in a joint venture with Indian auto maker Eicher Motors Ltd. Volvo will pick up a 45.6 percent stake (4,560,000 equity shares) in the paid-up equity of the joint venture company, Eicher Motors India Ltd (EMIL). Eicher Motors Ltd (EML) will hold the balance 54.4 percent equity and act as an operating-cum-holding company, a government spokesman said.
The $275 million investment will be in cash, he added.
The new joint venture will carry on the Indian company’s commercial vehicle business, along with related components and design service business, which Eicher will transfer to EMIL.
Volvo on its part is demerging the sales and distribution network of Volvo India Pvt. Ltd and will transfer it to the new joint venture EMIL, the spokesman said.
The approval will be subject to compliance with Reserve Bank of India and Securities and Exchange Board of India guidelines, as well as foreign investment norms and the court’s approval of the demerger of Volvo India’s distribution business, he added.
In May this year, the Foreign Investment Promotion Board (FIPB) had referred this investment proposal to the CCEA as it involved FDI of more than Rs.6 billion.
A Volvo spokesperson had then told the media that the proposed joint venture would have exclusive distribution rights in India for all current and future trucks of AB Volvo.
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