PAL plans transfer of assets

PAL will sell its Kurla factory including 50 acres of the land, buildings, and plant and machinery as a running business to this new company at a total asset value of Rs 501 crore. The balance amount of Rs 36 crore, i.e Rs 501 crore of assets less Rs 465 crore of liabilities would be issued as shares to PAL constituting its 49 per cent of equity.

Along with the assets all liabilities including term loans from financial institutions, working capital facilities from banks and current liabilities like the booking amount of Uno model are being transferred to the new company.

The shareholding of PAL in its auto finance divison – PAL Credit & Capital Ltd will also find its place in the new joint venture company as Fiat has shown interest to enter the auto finance business through the infrastructure set up by PAL Credit.

As per the new restructuring proposal, the present employees will be taken over by the new company barring a few who would continue to sell Premier Padmini. Fiat plans to invest in the new company through its subsidiary – Fiat (I) Automobile Pvt Ltd.

Following the re-organisation, PAL’s turnover would be around Rs 400 crore which will mainly come from selling Premier Padminis. The main reasons cited for this transfer of assets is the increasing competition from the multinational car majors and Maruti’s increasing market share, which PAL as a stand alone partner is unable to cope up with.

Though there were some rumours of Fiat picking up stake in the Premier Automobiles, Fiat has decided against acquiring a direct stake in the company due various reasons including it’s new corporate policy under the new chief executive Paolo Canteralla is to set up a new corporate entity.