The Hindu Business Line : MAN to raise stake in jt venture with Force Motors

Pune, Dec. 3 MAN of Germany will buy a 14.2 per cent stake from its joint venture partner, Force Motors Ltd of Pune, for about Rs 300 crore (€49 million), taking its stake in the joint venture to 50 per cent. MAN will acquire additional equity in the joint venture – MAN Force Trucks Pvt Ltd – to reach the 50 per cent level.

The company will raise about Rs 250 crore (€40 million) as additional equity through a rights issue of shares, according to a communication from Force Motors to the BSE.

Earlier, Force Motors held a 70 per cent stake in the joint venture to make heavy commercial vehicles and MAN Nutzfahrzeuge AG, Germany, held the balance.

Force Motors’ shares were up 20 per cent on the BSE on Wednesday to close at Rs 74.40.

The value chain for supplies has also been re-organised. In addition to producing cabs, Force Motors will also manufacture a range of axles for the joint venture. The partners have also agreed to develop, produce and introduce a range of trucks and bus chassis suited to the Indian market. The import and sale of MAN’s high power TGA range of 300 HP plus trucks, also comes under the purview of the revised alliance.

Over the last few years, the joint venture company has set up facilities to produce engines, axles, cabs and assemble vehicle chassis. A local supplier base has also been created to achieve 85 per cent localisation in its products and 21 models have been developed for export. MAN is responsible for export of the products principally in Africa, Middle East, Russia and parts of Asia.

In the revised structure, the Chairman will be a Force nominee, while MAN will nominate the vice-chairman. In addition to the CTO who is today a MAN nominee, the company will have two managing directors, one from each of the joint venture partners. The MAN appointee will be responsible for Production, Technology and Logistics, while the Force appointee will be in charge of balance operations including sales, purchase and finance.

An agreement for the change in shareholding was signed in Munich on December 2.

Mr Abhay Firodia, CMD Force Motors said, “With the project phase behind us, the joint venture is ready and enabled to attain its potential.” Mr Anton Weinmann, Chairman MAN Nutzfuhrzeuge said, “MAN is happy to increase its shareholding percentage and equally its participation in the management.”

Our Mumbai Bureau adds:

The Rs 300 crore is a welcome inflow for Force Motors at a time when the commercial vehicle market is going through a slowdown.

Observers believe that it is easier for players like MAN, who have deep pockets, to weather the storm despite the slowdown quite unlike Force whose ability to invest further would be severely tested. Even market leader, Tata Motors has found the going rough lately and has had to shut down its plants to reduce inventory.

Apart from the change in the equity pattern, what is interesting is the change in business plan to make a range of axles as well as truck and bus chassis. Clearly, MAN is keen on optimal localisation of key components. The fact that the Firodias (promoters of Force Motors) also have Jaya Hind Castings in their portfolio means that supplies of parts can be made at competitive costs.

The silver lining in the cloud, observers say, is buses whose market does not seem as dismal as trucks. MAN obviously has this in mind but like other manufacturers will have to reckon with the hurdle of financing.

Related Stories:
MAN Force venture to focus on exports
Force Motors plans entry into bus segment with MAN next year

More Stories on : HCV/LCV/Tractors | Mergers & Acquisitions

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page