The Maharashtra Government has given the green light for Fiat and Tata Motors to restructure the existing 51:49 shareholding respectively to an equal stake in Fiat India Automobiles Pvt Ltd. Photo: Assembly line at Ranjangaon.

The Maharashtra Government has given the green signal for joint venture partners Fiat Group Automobiles S.p.A and Tata Motors Ltd to restructure the existing 51:49 shareholding respectively to an equal partnership with both companies holding an equal stake in the Ranjangaon based Fiat India Automobiles Pvt Ltd (FIAPL).

The nod, which came in early February, is subject to the joint venture entity fulfilling some procedural requirements of the approval.

According to sources in Fiat, the company proposes to complete these formalities at the earliest and expects to have the equal equity partnership in place before the end of the fiscal. Four new members are also expected to join the board, which currently has three nominees each of the two partners.

As per the original agreement, drawn up in October 2007, the Government had introduced a condition that Fiat should hold more than 50 per cent of the equity. “Even a single share more to Fiat would have served this requirement,” the source said, adding that though a 51:49 partnership was inked, the intent was always to be equal partners. “We always wanted to be a 50:50 partnership, and now the government has lifted this condition,” the source said.

Both the partners have committed to invest an equal amount in the project that envisages manufacture of cars for both companies and also production of Fiat engines and power trains for the domestic market initially and for global market as well in time. As per current estimates, the total investment is being pegged at Rs 4,000 crore, to be made in phases as per the requirements. However, the investment a few years down the line could exceed present estimates and be as high as Rs 6,000 crore, the source added.

Report courtesy of The Hindu Business Daily