Hyundai Supplier Song Gets Nod To Set Up Shop

South Korean automobile major Hyundai Motor's Indian subsidiary has brought in its wake one of its hi-tech ancillary supplier Cheong Song Electric Co Ltd into the country.

Cheong Song, which manufactures sophisticated and hi-tech industrial robots and factory automation systems, has received the government permission to set up its 100 per cent subsidiary in India. The company in its application to the government seeking approval had indicated that the immediate need of setting up the subsidiary would be for maintenance of hi-tech robotics and factory systems in the manufacturing facilities of Hyundai Motor India.

The Foreign Investment Promotion Board (FIPB) at its meeting on Saturday approved the Korean company's proposal to set up its wholly-owned subsidiary under the policy guideline that 100 per cent subsidiaries will be allowed in areas where proprietary technology is being brought into the country.

 

However, the FIPB, on recommendation from the Ministry of Industry has rejected the company's proposal for its Indian subsidiary to pay out 7 per cent of total domestic sales earnings in 10 years to the Korean parent as royalty payment.

The industry ministry had vetoed the royalty proposal on the grounds that it involved transfer of technology by a company to its wholly-owned subsidiary and not to any outside party.

Cheong Song proposes to initially bring in Rs 3.6 crore as its equity investment in the subsidiary for setting up a manufacturing base near Hyundai's plant at Sriperumbudur in Tamil Nadu.

The proposed investment in plant and machinery is about Rs 3.24 crore, nearly three-fourth of which will be for imported equipments. In its application to the FIPB, the company had indicated a total outflow of foreign exchange worth Rs 23.84 crore over 10 years.

Besides the Hyundai contract, Cheong Song also plans to have similar agreements with other international automobile manufacturers that have set up production facilities in the country.

Either through joint ventures or through subsidiaries, and thereafter diversify to other manufacturing activity sectors.