Eicher Motors drops as Volvo cashes in

Eicher Motors is not having a good day today. Opening Rs.708 lower, the stock went down to an intra day low of Rs.17140, down 6% and currently remains around Rs.17150 levels. A look at the volumes will make one’s jaw drop to the knees – up some 90 times! From 2W average of 12,000 shares, today’s morning trade has already seen 11 lakh shares being traded.

This surge in volume and drop in price is all on account of one reason – Volvo selling its remaining 3.7% stake in the company, at a price of Rs.17,190 to Rs.18,190 per share. The value for the entire block is valued at around Rs.1800 crore.

Volvo had bought a 8.4% stake in Eicher in 2008, for which it paid Rs.157 crore. Thus Volvo has literally made a killing – a whopping 2000% appreciation! Volvo, most likely sold stake to cash-in on profits while its income from core activities has been lagging.

This stake sale does not affect its JV with Eicher which is under a different company – VE Commercial Vehicles, where Eicher has 54% stake and Volvo has 46%. This JV remains the third largest CV maker after Tata Motors and Ashok Leyland.