Ashok Leyland forms JV with Finnish company

Commercial vehicle major, Ashok Leyland, has entered into an agreement with Finland-based Alteams Group to form a 50:50 joint venture to produce high -pressure die casting (HPDC) aluminium products for the automotive and telecom sectors.

"The requirements in the automotive and telecom sectors will grow significantly in the domestic and overseas markets and the JV provides Ashok Leyland an opportunity to broaden its portfolio to new industries, particularly the telecommunications sector," said Ashok Leyland Managing Director R Seshsayee addressing a press conference.

The yet-to-be-named company has drawn up a two-phase investment programme. In the first phase, it will pump in Rs 175 crore through a combination of debt and equity to set up its manufacturing facility, which is expected to be located near Chennai.

The company is expected to zero in on the location within the next couple of weeks and has already shortlisted 2-3 areas (25-30 acres) in and around Chennai. It is likely to generate employment opportunities, directly and indirectly, for over 1,000 people over five to six years.

The JV, subject to statutory approvals, comes close on the heels of robust growth in the automotive and telecommunications sectors in India.

The JV is expected to garner a turnover of Rs 280 crore in 2008-09.

Alteams Group Chief Executive Officer Panu Routila said the JV provided a window of opportunity to serve clients in the Asian region and Ashok Leyland brought its expertise and experience in the automotive segment to the joint venture.

The ¤130 million Alteams Group is a leading light metal foundry in Europe and is a manufacturer of cast light metal components with manufacturing facilities in Finland, Sweden, Russia, Estonia and China.

Seshasayee added that Alteams had the know-how of HPDC for customer applications, particularly in the telecom sector, and was serving companies such as Nokia and Motorola.

However, Ashok Leyland is already present in foundry business through its associate company Ennore Foundries, which is engaged in production of grey iron casting and aluminum gravity die-castings.

Phase I of the project will primarily service the burgeoning demand for HPDC aluminium products in the telecom sector.

While the JV will produce components for the telecom sector such as those fitted in transmission and receiving equipment, it will also partly meet Ashok Leyland's captive requirements for components for engines and gearboxes.

The new manufacturing facility is expected to start full operations by the end of next year. In the interim, it will begin operations shortly out of a leased facility.

"The JV would immediately get into the operation mode and part of the operations would include execution of finishing works for the products sent in semi-finished forms from Alteams' Chinese facility. This facility would cater to customers such as Nokia in the telecom industry," said Seshasayee.

In phase II, the cumulative investment by the JV will go up to Rs 335 crore and the JV will enhance its product portfolio with HPDC components for the automotive sector including passenger cars and for non-automotive applications both in domestic and overseas markets.

After phase II expansion, the JV is expected to achieve a turnover of Rs 650 crore with equal contributions from the automotive and telecom segments.

Seshsayee said the JV with Alteams was part of the firm's diversification programme and the company was likely to make more such announcements, particularly in the high technology component space, before the year end.