Hindustan Motors had its wheels whizzing in morning trades on Tuesday following the company's decision to offload its entire holding of 1.8 million shares in JV Hindustan Powerplus in the open offer announced by the other partner.

The news came as a pleasant surprise to investors who backed Hindustan Motors upward by 4.3% to Rs 9.70 on BSE on Tuesday. Around 49,500 HML shares were registered as volumes on BSE thus far.

HML has eased off in the last few trading sessions after witnessing a sustained rise from an early October 2002 low. The scrip lost 16.2% to Rs 9.30 on 10 February 2003 from Rs 11.10 on 21 January 2003.

The company yesterday announced that it plans to offload its entire stake in Hindustan Powerplus, a joint venture with Caterpillar Commercial SA of Belgium. Last week, Caterpillar Commercial SA along with its holding company Caterpillar Inc. USA announced an offer to buy the entire remaining 62.25% stake in the company at Rs 32 per share. Caterpillar Commercial SA currently holds 37.75% stake in Hindustan Powerplus.

HML has decided to offer its entire holding of 1.8 million shares (or 5.6% stake in HPL) in the proposed open offer . HML would get Rs 5.76 crore for 1.8 million shares at a price of Rs 32 per share. HML will make a profit of Rs 1.71 crore from the transaction, as the cost of investment in its books is Rs 4.05 crore as of March 2002.

HML is the oldest car manufacturing unit in India, reputed for its Ambassador brand of cars. It is the flagship company of the C K Birla group. The company has four manufacturing units, two in Tamilnadu and one each in West Bengal and Madhya Pradesh. The oldest plant (in Kolkatta) manufactures the Ambassador and Contessa cars, the trekker, trucks and spare parts. The Pithampur unit in Madhya Pradesh produces multi-utility vehicles, engines, gearboxes and transmissions and spare parts. The unit at Punapalli village in Tamilnadu produces on-highway and off-highway transmissions. The Adigathur unit, also in Tamilnadu, manufactures the Lancer car and spare parts.

The Ambassador, manufactured by the company, was the darling of the Indian roads , until the advent of Maruti Udyog. Since then, HML's performance has been deteriorating, and, for the past four years, the company has been incurring losses.

HML is actively taking various steps for improving the capacity utilisation at its Kolkatta and Chennai plants to at least around 80% in the near future. Towards this end, it has drawn up strategies for pushing up sales of its flagship car Ambassador, higher-end cars Lancer and Pajero and rural transport vehicles. Also, the company is keen on tying up with other automobile majors for further increasing capacity utilisation. HML has signed an agreement with Ford India for manufacture of about 20,000 engines and transmissions for Ford Ikon in the first year.

The company has also tied up with General Motors India for supply of engines and transmissions. It is hopeful of commencing production for GM by September 2003.