Premier Ltd will begin the process of selling its land near Mumbai in a few months and plans to use the proceeds to cut debt and fund acquisition of machine tool firms abroad.
Premier Ltd will begin the process of selling its land near Mumbai in a few months and plans to use the proceeds to cut debt and fund acquisition of machine tool firms abroad.
MUMBAI: Premier, known as the maker of the Fiat 1100-derived Premier Padmini cars that are the mainstay of Mumbai’s taxi fleet, has about 215 acres in Kalyan.
Maitreya Doshi, vice-chairman, said the company is waiting for bids to be opened for the court-administered auction of an adjacent plot belonging to PAL-Peugeot Ltd, in which Premier owns 32%.
“Once the PAL-Peugeot land price discovery happens, we will start the process to sell our land,” Doshi said. “We are waiting as the two tracts are adjacent.”
The Bombay High Court has called for bids by April and the sale of PAL-Peugeot’s 181 acres is likely to be ratified in June, he said.
The news sent Premier’s shares up by the maximum daily limit of 10%. They later eased to Rs88.50, still up 5.8% on the day in a firm Mumbai market.
Doshi declined to put a value on the land, but property consultants expect an acre to fetch about Rs2.5 crore, based on current prices in the area.
Premier has already moved the land to stock-in-trade for Rs60.72 crore.
PAL-Peugeot, currently under liquidation, was a joint venture between Premier and French car maker Peugeot. It sold the Peugeot 309 car in the mid-90s before Peugeot pulled out of the JV in 1997.
“We prefer to outright sell the land. Our core competence is auto and engineering. It is in our DNA. We will stick to our knitting,” Doshi said, effectively ruling out entering real estate development like other old corporate houses in Mumbai.
Premier plans to use the money from the land sale to buy a machine tool maker in the U.S. or Europe to expand its mainstay business. Machine Tools contributes nearly three-fourths of the firm’s annual revenue.
It reported revenue of Rs92.2 crore in the nine months to December 2007.
“We will look seriously to buy a niche, high-end machine tool brand, an American or an European company,” Doshi said.
“I am not interested in buying several small firms. Instead, I prefer one medium-to-large target, a deal that allows us to relocate the back-end to India,” he said referring to moving a good part of manufacturing to India to save on cost.
Premier has shut its old car assembly line and sold the plant in Mumbai. It has centralised manufacturing of machine tools, engineering components and an assembly line to make light pick-up trucks and vans at a plant in Pune.
“The money would also be used to repay debt,” Doshi said.
The company’s secured and unsecured loans stood at 587 million rupees as on March 2007, according to its last published annual report.
Real estate prices have more than doubled over the last three years making it attractive for firms to shut manufacturing in suburban Mumbai and build homes, offices, malls and hotels.
Bombay Dyeing Manufacturing Co Ltd, a clutch of state-run textile mills, Phoenix Mills Ltd, Century Textiles & Industries Ltd and the Piramal group are among the corporates
developing factory land in Mumbai.
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