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Old 3rd April 2012, 13:58   #1
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Unhappy Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

Honda Siel Cars India Ltd (HSCI) chairman Siddharth Shriram was kept in the dark about the prospect of the joint venture car company having to declare itself a potentially sick unit under the Sick Industrial Companies Act (SICA).

Such a financial condition had impelled the management to expedite a board resolution for fresh infusion of equity capital through a rights issue.

The move is significant in that observers close to the developments do not rule out the possibility of Shriram, who controls Usha International Ltd (UIL) which has five per cent stake in the joint venture, looking at the option of selling his stake to a third party instead of Honda.

If that happens, though unlikely, it would add another dimension to the bitter battle being fought between the two partners, who started the joint venture 17 years ago.

Sources say under the joint venture agreement, UIL has the right to sell its stake to a third party.

More news at:
Honda Siel on brink of turning sick, chairman told via board circular - Rediff.com Business
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Old 3rd April 2012, 14:20   #2
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

Honda recovering in 2012, from 200 units (Jan) to 9000 (Feb) to 11000 units in March. And here we come with another blow.

Isn't this relatioship is over 15+ years & with 5%:95% holding, why do the Shriram group make fuss.

If there was a governance issue - they should be discussed & sorted out on the board room, not on the public domain.

Btw, What will be the fate of Honda ?, if UIL decides to offload - but don't think they can go open-market & with pricing issues, they may or may not willing to go-any-less.

Ambani's, Goenka's listening ?. Will it be interesting for one of those group - get in this ?.
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Old 3rd April 2012, 14:33   #3
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

Many questions, tried googling, and could not find answers.

1. What is the relation ship of Honda Siel Cars India Ltd with Honda?
2. How much equity Honda holds in the joint venture?
3. If Honda Siel Cars India Ltd is sick would Honda think about fully owned business unit in India like they did it with Hero? Is it similar?

This news is worrisome for me, although i must add its mostly because of lack of awareness and knowledge about the relationship and future course of action that might happen.

It would be foolish to think Honda will allow its name to be tarnished and its customers to suffer, but that's just me thinking.

PS: EDIT: Honda Japan owns 67% of the joint venture, should we still worry considering this.

Last edited by mayankjha1806 : 3rd April 2012 at 14:40.
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Old 3rd April 2012, 14:54   #4
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

There isn't a doubt that Honda has been operating under losses for a lot of recent quarters. In fact, I remember an article from 2 years back which stated that the company was incurring one loss making year after another.

The recent price cuts on the City will only erode profitability more. Then, there are the terrible pricing decisions with the Jazz, Civic & CRV. The well-priced Brio will bring in turnover & volume, but it won't be much of a profitable car.

Honda has made one too many strategic blunders in the last 2 years : Link to Related Thread (Honda India : The Way Forward)

This statement from the article sums it up:

Quote:
According to sources in the know, HSCI on March 16 informed Shriram through a resolution by circulation that the company would become sick under SICA if equity shares were not allotted immediately.
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Old 3rd April 2012, 15:11   #5
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

Just when things were looking up after all the flood and earthquake related drama, comes this mess.

I am just wondering why the company would need to go to SICA. I am sure Honda have deep enough pockets to ride out a bad phase, particularly given the way sales have picked up this year. It can only be a question of time before the get back in the black again.

Or is this a means to set up an independent Honda car unit, like they did with the bike unit after breaking up with Hero.
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Old 3rd April 2012, 15:17   #6
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

So should I be worried about owning a Honda?
(I'm sure many would need an idea on that)
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Old 3rd April 2012, 15:20   #7
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

It is really a sad news. However, one must remember most JVs have a limited lifespan and this has probably run its course.
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Old 3rd April 2012, 15:24   #8
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

I think the fuss is because Honda does not mind bringing in equity through the rights issue, but Shriram minority group, may not want to cough up further 5-6% their pro-rata share. If they do not, their stake falls still further.

When many manufacturers are looking to enter India, I do not think Honda may think of exiting. But one never knows. Without diesel, Honda would not have much future in India anyway.

Last edited by sandeep108 : 3rd April 2012 at 15:26.
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Old 3rd April 2012, 15:32   #9
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

They may be thinking of merging the two- and four-wheeler businesses into a single entity, with two divisions.
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Old 3rd April 2012, 16:29   #10
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

Quote:
Originally Posted by GTO View Post
There isn't a doubt that Honda has been operating under losses for a lot of recent quarters. In fact, I remember an article from 2 years back which stated that the company was incurring one loss making year after another.
Yes - bad news for Honda users and fans. But what would be the effect of all this? I guess only time would tell. Will Honda bring in newer models/diesel quickly enough to turn around their fortunes? They have lost so much time. And will they price their future new offerings (if any) well at launch time?
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Old 3rd April 2012, 16:35   #11
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

Quote:
Originally Posted by sgiitk View Post
They may be thinking of merging the two- and four-wheeler businesses into a single entity, with two divisions.


http://www.firstpost.com/business/is...ns-261970.html

Honda now gets a decent royalty from Hero and are the 3rd largest 2-wheeler company in India. In the case of the 4-wheel market, they are definitely making losses from quite sometime now. Looks like they want to go solo in the 4-wheel segment as well and this option is the cheapest way for them to get rid of the minority shareholder.
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Old 3rd April 2012, 16:50   #12
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

@GTO, tried searching for Hondas financial reports which are public and was not able to find if they were making losses. Here is the latest (although this is Honda global, i am not sure if India number are public knowledge).

Net Income (USD, all number in thousands)
2009 - 1,387,000
2010 - 2,873,000
2011 - 6,444,000

Financially globally they are doing much better till March 2011, for the year ending 2012 the results arent out yet (i couldn't find), but should be lower then 2011 because of Thailand floods etc, but should be still better then 2009 and 2010. (Source - HMC Income Statement | Honda Motor Company, Ltd. Commo Stock - Yahoo! Finance) and (http://www.wikinvest.com/stock/Honda...pany_%28HMC%29)

Did i miss something? All the more reason for Honda Global to have complete ownership of the JV in India.

Last edited by mayankjha1806 : 3rd April 2012 at 17:14.
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Old 3rd April 2012, 17:01   #13
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

Isn't it a pity to see this JV on the verge of bankruptcy.

A few good business decisions which focus on ground reality in India (read : VFM tag attached to vehicles, diesel and wide market sweep) would have taken Honda SIEL to great heights. If Hyundai could do it, they certainly can. Even Toyota is spreading its wings.

Hope good sense prevails and we see the resurgence of Honda.

Quote:
Originally Posted by mayankjha1806 View Post
@GTO, tried searching for Hondas financial reports which are public and was not able to find if they were making losses.
I think it is Honda SIEL (the JV) he is talking about that is making losses and not Honda.
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Old 3rd April 2012, 17:02   #14
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

I believe Honda's two wheeler division will be making decent sum of money because most of its offerings are in high demand, be it Honda Activa or Honda Unicorn.

As far as Cars are concerned, Honda badly needs Diesel offerings. No amount of discounts on Honda City will pull consumers to buy it. Even in small cars people are now shelling Rs. 1 lac extra & going for Diesel cars (Ritz, Swift, Polo, etc).

We are once again hearing of one more petrol price hike in coming days (approx Rs. 3 to 5), while no one (political parties) are even thinking of raising Diesel prices thus the choice of people while buying a new car will further shift to Diesel. In this scenario, only option for Honda Motors will be to introduce Diesel Car as soon as possible.

Brio may sell in good numbers, but it cannot be bread winner for the company. The Honda brand had a very good premium in India, but with current product range it would be hard to survive.

Also as we all already know in March 2012 the sales of Diesel passenger cars was at par with petrol passenger cars.

Thanks,
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Old 3rd April 2012, 22:05   #15
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Default re: Honda Siel UPDATE : Usha-Shriram sells stake, Honda now sole owner

I think Honda Siel will have to have a good manufacturing base here instead of depending on Thailand and Japan for supplies and kits.
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