The long and strong friendship between the Honda Motor Company and Sriram Industrial Enterprises Limited is in jeopardy over the valuation of SIEL’s 5% stake. This relationship established in 1995 for manufacturing passenger cars gave birth to Honda SIEL’s Cars India (HSCI).
It got into troubled waters over the new equity capital that Honda wanted to raise in order to manufacture new small cars and diesel variants of some of its existing as well as new cars. The fight became unavoidable when SIEL wanted to sell its shares i.e. its 5% holding in the joint venture because Honda wanted SIEL to invest a proportionate amount of cash in the new equity funds so as to maintain its holding in the joint venture. SInce SIEL wanted to sell off its stake instead, the rift between the two companies widened.
A spokesperson for HSCI denied any knowledge of the current status of this situation.
This is one of the many instances where this japanese auto giant is choosing to fly solo and thus, ending its joint ventures with Indian firms so this particular episode isn’t the first and by looking at the way things are, it won’t be the last one.