Date:05/04/2007 URL: http://www.thehindubusinessline.com/2007/04/05/stories/2007040505630300.htm

Back Hind Motors to keep out of realty projects in Bengal

Somasroy Chakraborty

Receives non-compete fee from Shriram Properties

Kolkata April 4 Hindustan Motors Ltd (HM), the flagship company of CK Birla Group, will not take up any real estate development projects in West Bengal thanks to the non-compete fee paid by Shriram Properties, a Bangalore-based real estate developer. To some observers, this suggests that the company is not averse to entering the real estate segment of business at some point of time.

A senior HM official said that the company might diversify its business in future but maintained that currently the company does not have any plans to foray into the realty business. Mr G.N. Pareek, Company Secretary, said, "We are being paid the non-compete fee for the purpose of not taking up any real estate development projects in West Bengal."

When asked why an automobile company was being paid a non-compete fee by a real estate developer, Mr Pareek said, "We can always diversify our business and take up real estate projects outside West Bengal. But currently we do not have any such plans."

HM has entered into an arrangement with Shriram Properties to set up an integrated IT township and auto park over 314 acres in Uttarpara, West Bengal. In a letter to the stock exchange, dated February 27, 2007, the company said, "As consideration, the company expects to receive about Rs 295 crore in five tranches spread over the next 10 quarters as well as a non-compete fee equal to 4 per cent of sale proceeds."

The agreement, however, does not prevent HM from taking up real estate development projects outside West Bengal or from selling its land in West Bengal to any developer subject to the Government's approval. "The agreement prevents us from taking up realty projects in the State. But we can sell our land to anybody since it will be considered as sale of assets. Besides, it does not prevent us from taking up development projects outside West Bengal," Mr Pareek told Business Line.

A similar view was expressed by Mr M. Murali, Managing Director, Shriram Properties. "The non-compete fee is being paid so that HM should not take up real estate development in that region."