The Hindu Business Line : MLR Motors may use Daewoo facility to make cars

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Hyderabad Feb. 16 Hyderabad-based MLR Motors Ltd, which is planning a Rs 1,250-crore greenfield car plant near here, along with Mr B.V.R. Subbu, former president of Hyundai Motor India, is likely to use the Daewoo Surajpur facility partly to roll out cars.

The defunct Daewoo plant was recently acquired by Crosslinks, a company promoted by Mr B.V.R. Subbu and Mr Ajay Singh of Spicejet for Rs 765 crore.

Together, they are planning a 900 cc and a 1500 cc diesel variant and expect to roll them out by 2009.

While in the phase one, the company would invest Rs 1,250 crore, this would be ramped up to Rs 2,500 crore later.

The Managing Director of MLR Motors Ltd, Mr M. Lokeswara Rao, said that the company plans to develop most of the components for the cars, including engine blocks, gear box and other components through the proposed 250-acre automotive ancillary area coming up near Hyderabad.

Speaking to newspersons here, Mr Rao said that they were in the process of acquiring land now and expect to begin work on the car project in April this year. He said other details of the car project would be announced at a later date for competitive reasons.

Of the Rs 1,250 crore to be pumped into the car project, Rs 750 crore would go into the car project directly and the rest would go to Lokesh Machines Ltd, which would become a principal supplier. The project would be developed in a 1:1 debt equity ratio.

Of the equity, Mr Subbu will hold 21 per cent and Mr Rao 30 per cent and the rest will come in from private equity partners. In the case of car projects, unlike other industries, debt is available at lower interest rates and there is the possibility of securing it at about 3 per cent interest, he explained.

Mr Rao said: "There was a point when I wanted to visit car design service providers and the response was poor and the times have changed now. In the last two months, some 37 global design houses visited the company offering to partner the car project."

Asked what these cars would be like? Mr Rao said that "they would conform to what the market demands when we actually launch in 2009". Will they be like Hyundai Santro or Matiz? "No. If we launch something like that who will buy them from us. We will ensure that they are different and provide value proportion."

"It was unfortunate that while the country's automotive industry has significant inputs from companies such as HMT, Praga Tools and Lokesh Machines, all in Hyderabad, there is no automotive manufacturing in Hyderabad. We expect to change this," he said.

The company is looking at a concessionaire and some sops from the State to make it financially bankable.