The Hindu Business Line : Continental AG seeks FIPB nod for investment in new jt venture

Corporate - Alliances & Joint Ventures
Industry & Economy - Foreign Direct Investment
Continental AG seeks FIPB nod for investment in new jt venture

Moumita Bakshi Chatterjee

New Delhi, Nov 29 Continental AG, Germany, has sought FIPB approval for infusing foreign equity of Rs 55 crore in a proposed joint venture company ‘Continental Rico Hydraulic Brakes India Pvt Ltd’, and to establish a licence and technical assistance arrangement between Continental Teves AG and Co OHG (100 per cent subsidiary of Continental AG) and the new joint venture.

Continental AG – a leading automotive industry supplier offering comprehensive

know-how in tyre and brake technology, vehicle dynamics control, electronics and sensor systems – has signed a joint venture agreement with Rico Auto Industries Ltd, Gurgaon, to set up a joint venture company for manufacture of hydraulic brake systems for passenger cars and light trucks. These would include actuation brakes and foundation brakes and sub- products (brake calipers, drum brakes, tandem master cylinders, actuation units and brake boosters, and load sensing proportioning valves).

Sources said that the total cost for the proposed venture would be Rs 220 crore. The joint venture company would have a debt-equity ratio of 1:1 and therefore the total equity would be Rs 110 crore. As it is a 50:50 partnership, the foreign equity would be Rs 55 crore.

Continental Teves AG and Co OHG, a 100 per cent subsidiary of Continental AG, has an existing licence and technical assistance agreement with Mando Brake Systems India Ltd, a company incorporated in India, for licensing technical know-how for manufacture of some of the products for passenger cars. The licence, however, is only with regard to specific part numbers for specific automobile manufacturer platforms.

Continental AG had pointed out that the new joint venture would not manufacture those parts with specific numbers as licensed to Mando Brake Systems.

“The joint venture would enter into a licence and technical assistance agreement with Continental Teves AG and Co OHG. The royalty payable on sales – domestic as well as exports, if any – has been pegged at four per cent till December 2011 and three per cent thereafter. The technical collaborator would be granting a non-exclusive, non-transferable licence to use the licensed trademarks to the proposed joint venture,” sources said.