Hyundai Planning To Raise Capacity In Phased Manner

Hyundai Motor India Ltd (HMIL) has decided to increase its production capacity in a phased manner, instead of one-time expansion.

The company was earlier planning to increase its production capacity -- calculated on a two-shift basis -- by 80,000 units per annum to 2 lakh units to meet the anticipated demand.

HMIL president A P Gandhi said: "We are planning to increase our capacity by 30,000 units to 1.5 lakh units. Then, depending upon the market environment, we would take appropriate decision".

Preliminary work in terms of feasibility study and planning has already begun and the expansion programme is likely to be completed in 15-18 months, he added.

The company has provisioned an investment of Rs 300 crore to Rs 400 crore for the initial expansion of capacity. Once completed, the expanded capacity would employ additional 600 employees. At present, the Irrungattukottai plant, near Chennai, has on its rolls 2,600 permanent employees.

Gandhi ruled out the possibility of its Korean parent, Hyundai, infusing fresh equity into capacity expansion. He added that it would be funded entirely through internal accruals and debt financing.

Out of the total capital base of $312 million, equity from the parent company is $212 million and the rest is contributed by debt of $100 million. "We have repaid all our debt to Indian banks and financial institutions. The remaining debt in the balance sheet is amount owed to foreign financial institutions", Gandhi said.

HMIL had availed loans from State Bank of India, ICICI and PNB. It was expected that the company would avail the unutilised component of loans sanctioned earlier by these banks and financial institutions, he added.

On why the company is opting for capacity expansion instead of increasing the number of shifts to three, Gandhi said: "Many shops, including engine, transmission and body, are working in three shifts. With respect to the assembly line, it is better never to exhaust, as excess capacity would act as a buffer."

HMIL is India's second largest passenger car manufacturer with a turnover of Rs 3,040 crore during fiscal 2000- 01. Currently, the company is present in three segments -- Santro in the B-segment, Accent in the C- segment (mid-premium) and Sonata in the D-segment (premium).