The board of directors of Hindustan Motors (HML), on Thursday, approved of a scheme of arrangement between HML and Hindustan Motor Finance Corporation Limited (HMFCL) and their respective shareholders providing for demerger of the Chennai car plant of HML to HMFCL from April 1, 2012.

HMFCL is a wholly owned subsidiary of HML. The remaining business and interests of HML will continue to belong to and be managed by HML, the company said in a notification to the stock exchanges.

In consideration of the demerger, HMFCL will issue and allot to the shareholders of HML one equity share of Rs. 5 each in HMFCL credited as fully paid up for every 13(thirteen) equity shares of Rs. 5 each held by them in the capital of HML.

No fractional shares will be issued by HMFCL in respect of the fractional entitlements. The scheme is subject to approvals of shareholders and other formalities.

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