Mumbai: The Abhay Firodia-promoted Force Motors (formerly Bajaj Tempo) has announced plans of cutting its stake in its heavy commercial vehicle joint venture (JV) with German truck maker MAN Nutzfahrzeuge to 50 per cent from the current 70 per cent. Force will sell its stake with German truckmaker MAN for Rs 300 crore.

MAN would increase its stake in the joint venture to 50 per cent.

The joint venture produces trucks in the 16-49-tonne range with varying applications, from 40-tonne tractor trailers to 25-tonne tipper and rigid vehicles.

The company will begin designing and making trucks and bus chassis over the next few months and expand its presence in the Indian market.

The proposed change in the equity structure of the JV will take place in two steps. First, Force will sell 14.2 per cent stake to MAN for Rs 300 crore.

Next, MAN will acquire additional equity in MAN Force Trucks to reach a level of 50 per cent share participation by putting in Euro 40 million (around Rs 2.5 billion) in the JV through subscription of a rights issue. Force will refrain from subscribing to the issue and hence MAN`s stake will rise to 50 per cent from the current 30 per cent. 

The transaction pegs the enterprise value of the JV at Rs2,000 crore. Both the parties signed the deal on December 2, in Munich.

Shares of Force Motors gained Rs4.15, or 7.17 per cent, to end at Rs62. The total volume of shares traded was 1,173 at the BSE (Tuesday).

The company is located at Pithampur, near Indore, in Madhya Pradesh.

The JV, MAN Force Trucks Pvt Ltd was set up in 2005 by upgrading a two-year-old technical collaboration. The two companies agreed to manufacture HCVs in the 20-40 tonne range.

The company, however, failed to meet its export obligations in the Russian and erstwhile CIS markets.

The Rs700-crore plant of the JV has the capacity to manufacture 24,000 trucks.

In April 2006, MAN and Force Motors signed an MoU to set up a bus venture with the same equity participation - 70 per cent with Force Motors and 30 per cent with MAN's bus division. This took MAN's investments in India in the two JVs to close to €300 million.

The fast growing commercial vehicles market of India also the possibility to source locally and cut costs is attracting nearly all global truck and bus maker to the country.