C.K. Birla (left), chairman of Hindustan Motors, with managing director Ravi Santhanam in Calcutta on Monday. A Telegraph picture

Calcutta, Aug. 27: Hindustan Motors plans to invest Rs 75 crore in its Uttarpara plant to expand and modernise its auto component business though it suffered a setback earlier this year when work was suspended at the factory.

The flagship company of the GP-CK Birla group, which manufactures the Ambassador car, has diversified into forging, casting and stamping.

Money will be deployed over the next two years to build up scale and efficiency to cater to the domestic and international markets for auto components, said chairman C.K. Birla after a stormy annual general meeting in the city today.

Last year, HM got the Bengal government’s approval to sell 314 acres at Uttarpara to Shriram Properties for Rs 294 crore. Part of the proceeds will be used to develop the unit.

At present, auto components do not contribute much to HM’s turnover.

Early this year, when HM was setting up the component business, a closure of nearly two months shook the confidence of the few customers the company had managed to rope in initially.

“It is easy to lose customers but very difficult to win them back. We are trying our best to bring them back. But it will take time,” said Ravi Santhanam, managing director of HM.

The component business is a key building block for HM’s long-awaited turnaround. Birla said, “Wait for four to five months.”

“We are improving every quarter,” Santhanam added. However, shareholders were not in a mood to listen. They disrupted the proceedings today a number of times.

Non-compete fees

HM is expected to reap rich benefits from the land deal with Shriram. The company will also make money from a small stake in a joint venture company that will build IT and auto component parks and residential townships.

HM will gain from a non-compete fee at the rate of 4 per cent of the sale proceeds of a developed property as and when sold by the developer.

In return, HM has agreed not to compete with the developer in a similar project either for five years from the date of the agreement or three years from the date of the completion of the property, whichever is earlier. Work on real estate development will start soon and money may flow in in the next 2-5 years.

New models

The HM management said its core business — manufacturing of the Ambassador and Mitsubishi cars for India — will improve soon.

“We are planning to launch premium models of the Mitsubishi cars while upgrading the existing ones,” Santhanam said. The new models might sport a price tag of close to Rs 25 lakh. Mitsubishi cars are made at the Chennai plant.