Financial Daily from THE HINDU group of publications
Thursday, Aug 05, 2004
Ashok Leyland plans Rs 150-cr foundry
Chennai , Aug 4
ASHOK Leyland proposes to invest Rs 150 crore in setting up a greenfield 50,000-tonne foundry. It will be located in Tamil Nadu and will take about two years to go on stream, the company's Managing Director, Mr R. Seshasayee, told Business Line.
The foundry is a part of the company's move to get into the auto components business.
Mr Seshasayee said that with the stricter emission norms there will be a demand for intricate castings, to produce which there is not enough capacity in the world today.
(Emission control means better combustion in the engine, which in turn means that the firing pressure in the engine will go up. The walls of the engine will consequently be thicker with lot of room for cooling water jackets. All this calls for intricate castings.)
Hence, castings, though an old industry, is an emerging business opportunity.
Ashok Leyland wants to cash in on this opportunity and be able to produce castings for original equipment manufacturers (OEMs) in India and abroad.
Associate companies Ennore Foundries Ltd and Ductron Castings have capacities of 45,000 tonnes and 25,000 tonnes respectively.
When the new foundry comes up, the group will be the largest producer of castings in India, and perhaps also in the world, Mr Seshasayee said.
Apart from castings, Ashok Leyland intends to get into two other areas in the components business - engine, gearbox and axle aggregates and engineering services.
The company has received some trial orders from international OEMs and tier-I suppliers for engine and gearbox components, Mr Seshasayee said, but added that it was too premature to disclose the buyers' names.
Under the third prong of the `components strategy', viz., engineering services, Ashok Leyland would provide hi-tech products and services. Some of these, such as engine telematics, are under development.
Concerns about road projects
Mr Seshasayee said that he was worried that the current government had not spoken about the Golden Quadrilateral and the North-South-East-West highway projects.
"While work on these projects is on, it would be good if the Government could explicitly affirm its commitment to the projects, if only to buoy sentiment."
There was a danger of sentiment beginning to sag because of the prospect of interest rates going up and uncertainties relating to global oil prices.
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