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The move to split LAC into `engine components' and `rubber and plastics components' businesses and take them into two separate companies, has been in the offing for some time now.

Chennai , Oct. 7

TVS Motor Company is set to acquire the engine components division of its subsidiary Lakshmi Auto Components Ltd (LAC).

LAC on Monday informed the stock exchanges that the company's board of directors will meet on October 17 where the proposal for merger of engine components division with TVS Motor Company would be considered. Also, under the proposal, the rubber and plastics divisions of LAC are to be transferred to the company's subsidiary, Sundaram Auto Components Ltd.

In 2002-03, LAC achieved a turnover of Rs 135 crore. The engine components division accounted for about 60 per cent (or about Rs 80 crore) of the turnover. However, the entire sales of engine components by LAC are to one customer, namely, TVS Motor Company.

"The board would also decide the modality of transfer of undertaking and the exchange ratio of share consequent to the scheme of amalgamation at the meeting," LAC has said in a notice to the stock exchanges.

The move to split LAC into `engine components' and `rubber and plastics components' businesses and take them into two separate companies, has been in the offing for some time now. Indications to that effect were given, by sources close to the TVS group, back in April, when LAC acquired 2.5 lakh equity shares of Sundaram Auto Components Ltd (SACL). SACL is a shell company, with no manufacturing operations as yet.

LAC itself was set up (16 years ago) because TVS Motor Company was then a joint venture with Suzuki. The two-wheeler manufacturer needed engine components, preferably captively, but in-house production was not feasible in a joint venture set up.

But now, after TVS Motor has become a TVS group company, LAC has no big reason to exist. In fact, the question of merger of LAC with TVS Motor has been popping up from time to time, especially at the annual general meetings of the two companies. The TVS group has always said that the move would be considered at an appropriate time.

LAC's rubber and plastics components businesses came into the company's fold in October 1998, through an acquisition of group companies, Sundaram Plastics Ltd and Harita Rubber Products Ltd.

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