M&M forms joint venture with US firm

Mahindra & Mahindra (M&M), the country's largest tractor and utility vehicle maker, has formed a joint venture with International Truck and Engine Corporation of the US to manufacture and market light, medium and heavy commercial vehicles for local and overseas markets.

Christened as Mahindra Interntional Pvt Ltd, in which Mahindra will own 51 per cent stake and the balance will be with the foreign company, the venture will be set up with an initial investment of Rs 400 crore.

M&M will transfer its light commercial vehicle (LCV) business to the venture, subject to necessary approvals.

The company will seek the consent of shareholders by a postal ballot, in addition to an amendment to object clause of Memorandum of Association of the company, in accordance with the Companies Act, 1956.

The company has appointed consultants to evaluate the benefits that the shareholders will receive after the business transfer. The valuation report will be submitted in a month.

The joint venture will produce new range of commercial trucks and buses starting by 2007 at one of M&M's automotive plants.

The factory will have a capacity to produce a wide range of commercial vehicles, and will include cab assembly, vehicle assembly and a paint shop. The vehicles will be 90 per cent localised owing o availability of quality materials from Indian suppliers.

The new company will make vehicles in the 7-35 tonne range. "The investment of Rs 400 crore will be utilised in reengineering and upgradation of M&M's plants. We have a capacity to make 15-20,000 vehicles which will be immediately expanded to 50,000 vehicles," said Pawan Goenka, chief operating officer, automotive sector, M&M.

The manufacture of vehicles will lie with M&M, whereas the design and sourcing will be looked after by the JV.

"The JV will further strengthen the automotive competencies of M&M. It is also a clear signal that the Indian market cannot be ignored by international companies," said Anand Mahindra, vice-chairman and managing director.

"The Indian market for trucks is growing and we are happy to be associated with M&M. International Truck and Engine Corporation's component sourcing from India will exceed $100 million per year by the third year of our operations," said Deepak Kapur, president, truck group, International Truck and Engine Corporation.

The JV will enable International to use India as a significant supply base for sourcing components and materials, and to provide engineering services for the design and development of truck and bus products for International globally and the JV.

Meanwhile, the board of M&M at its meeting on Tuesday, recommended an increase in the authorised share capital from Rs 200 crore to Rs 300 crore .