CV major buys 26% of UK bus maker

Ashok Leyland has entered into an agreement with UK-based bus manufacturer Optare to acquire a 26 per cent stake for a consideration of $7.5 million. The company has said the acquisition would help the country’s second largest commercial vehicle manufacturer to access technology including a modern range of mid-size and full-size city buses which can appeal to both domestic and global markets.

V Sumantran, executive vice-chairman, Hinduja Automotive, and member of the board in Ashok Leyland said that with Optare, Ashok Leyland can build on synergies in the global bus business, and the two companies can simultaneously advance capabilities and access markets.

He added, this agreement will help Optare source low cost components from India, like sheet metal components and structure items.

Optare was founded in 1985 and has a turnover of around $125 million and specialises in low-carbon range of low-floor, mid-size buses as well a moden range of city business focusing on the UK market. The company has a 34 per cent market share in the UK, added Venkat Venkatesan, senior vice president - business development, Hinduja Automotive Ltd, who was also part of the deal.

He added, presently, the company has an order book of 30 million Pounds and is close to breaking even this year.

Sumantran added, both partners will also look at using their facilities to produce the existing models to cater to respective markets. “Presently, teams from both sides are jointly working to find which products from their existing bouquet suits each other’s markets. In the next 18-24 months we should get a clear picture””

Venkatesan noted, Optare’s mid-bus, which is 8-11 metre, will suit Indian market, with little bit of reengineering. These buses can be used when BRTS comes trough and can be used for feeder purpose. “This market is evolving in India and the company finds good opportunity,” he added.

Besides catering to the the domestic market, some of the other markets on which the company can focus on include West Asia, where Ashok Leyland has a plant at Ras Al Khaimah in UAE, SAARC and other neighbouring countries from India. Similarly, Optare’s facility can be used to cater to Central and other parts of Europe.

Presently, the company has a capacity of 1,000 buses a year, the proposed infusion of money will be used to expand the capacity and to pay back some amount of debt, added Sumantran.

He added, products manufactured by Optare for European market will be branded in their name and vehicles for domestic market manufactured in India, will be branded in Ashok Leyland’s name.

Asked if this acquisition will affect the Ashok Leyland TVS Irizar tie-up, which is manufacturing and selling inter-city coaches, Sumantran said “it will not,” and added, “over time a synergy can happen and we can complement each other””