Tatas To Limit Stake In Auto Parts Ventures To 30%

Chairmen to be Tata nominees

The Tatas have unveiled a stakeholding plan for their proposed automotive component joint ventures with various domestic companies.

According to the plan, Tata Industries-promoted Tata Auto-comp Systems (Taco) will reduce its stake in the new ventures from over 50 per cent initially to about 30 per cent.

The Tatas will control the post of the chairman and hold the casting vote in these ventures, while the managing director will be jointly selected by the two partners.

Taco, which acquired an equity stake of 50 per cent in JB Machine Tools (JBMT) through preferential allotment, plans to reduce this stake to 30 per cent.

 

The JBMT holding pattern will serve as a model for future joint ventures. In cases where the Tata holding is as high as 70 per cent, Taco proposes to dilute it to 30 per cent.

The Tatas-controlled auto ancillary company is slated to enter into six new joint ventures with existing domestic auto part manufacturers within the next three-six months.

These joint ventures will be set up in the areas of sheet metal parts, wiring harness, casting, forging, plastic and rubber parts. Taco proposes to initially pick up a stake ranging between 50-70 per cent in the existing manufacturing units.

Taco proposes to invest between Rs 10 crore and Rs 200 crore for acquiring stakes in each of these companies. The valuation process of the companies identified by Taco is currently on, and the joint ventures are expected to be in place by the end of the year.

Companies were intensely scrutinised before being short-listed as potential partners by Taco. The list of requirements included a good track record in quality, productivity, and cost control; a strong existing customer base; and a willingness to accept the Taco joint venture policy.

Taco proposes to invest Rs 3,500 crore to develop the auto ancillary business in the country. The company plans to set up two sets of joint venture companies, namely tier one: with multinational majors primarily to source and develop technology, and tier two: with domestic auto ancillary manufacturers to translate the technology into the final manufacturing process.

Of the tier one companies, Tata Johnson Controls Automotive Ltd is already operational, while Tata Yazaki, Tata Sommer Allibert, Tata Nifco, Tata Toyo and Tata Hitachi are ready for the signing of the joint venture agreements.

In the case of the JBMT joint venture, the technology will be sourced from Krupp Camford of the UK and Allied Signal of the US.

Taco-JBMTs turnover is projected to reach Rs 875 crore by the year 2004 from Rs 51 crore in 1996-1997.