The three-year joint venture between Mumbai-headquartered commercial vehicle giant Tata Motors and Thailand-based Thonburi Automotive may see some changes in the ownership, with the former keeping options open on buying its partner's stake.
The JV company, Tata Motors (Thailand) Ltd was formed between the two in December 2006. Tata Motors holds 70 per cent stake and Thonburi the balance 30 per cent.
Thonburi's stake is split between Thonburi Automotive Assembly Plant Co (20 per cent) and Viryah Insurance, a Thonburi company (10 per cent).
Tata Motors' latest annual report says it may have to consider buying 20 per cent stake from Thonburi if the Thai company is unable to infuse fresh equity into the JV.
"As per proposed arrangement to be entered between the company (Tata Motors), Thonburi and Citibank NA, on occurrence of certain event, the company (Tata Motors) may have to purchase Thonburi's stake of 20 per cent in TMTL," states the annual report.
Tata Motors has already given a letter of comfort to Citibank NA against the short-term and long-term loans aggregating THB 850 million (Rs 121.7 crore or Rs 1.21 billion, as on March 31) given by the bank to TMTL. The letter of comfort is restricted to 70 per cent of the total amount lent by Citibank to TMTL.
The annual report further explains that if there is an increase in the Tata Motors stake in the JV company there will be a consequent increase in the share of the letter of comfort, which will appropriately reflect the increased stake.
A Tata Motors spokesperson stated in reply to a Business Standard questionnaire that, "In any joint venture, funds infusion is done by the partners involved proportionate to their equities in the joint venture."
"The expression, 'occurrence of certain event', only means that should an eventuality arise when the joint venture requires infusion of funds and Thonburi itself does not infuse funds proportionate to its 20 per cent stake in the joint venture, then Tata Motors may require to acquire Thonburi's 20 per cent stake from Thonburi," he added.
Tata Motors commenced production of pick-ups in Thailand, also the world's second biggest pick-up truck market after the US, in the first half of last year. The company currently produces only one model from that plant, Xenon, which has three variants, including a four-door Xenon 2.2L (diesel), Xenon Super CNG and Xenon Single Cab Giant (diesel).
As adverse economic conditions impacted vehicle buying across the world, including Thailand, TMTL posted a loss of Rs 89.2 crore (Rs 892 million) during the last financial year, according to disclosures the Tata Motors annual report.
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