Leyland is looking to raise Rs 600 crore for the joint venture facility located near Chennai, which is the equity participation of the company for the combined investment of about Rs 2,400 crore. Nissan will pump Rs 600 crore as equity, while the balance of about Rs 1,200 crore will be raised through debt.
K Sridharan, CFO, Ashok Leyland, said: "We are looking at prospects of (our) shareholders participating in the JV with Nissan. We aim to raise part or full amount of our equity participation in the joint venture for which we may look to incentivise our shareholders by providing them with some kind of entitlement." The official was speaking at an analyst meet here.
The company so far has not yet decided on the means to raise the required funding but stated that it was considering a preferential share issue, rights issue or convertible bonds, which will lead to scaling down of Ashok Leyland's holding in the three joint ventures.
There is also a possibility of forming a holding company for the three companies as Ashok Leyland considers the three separate JV companies as one entity.
Earlier this year, the company formed three distinct JV companies with Nissan, Japan's third largest auto making company. These companies will look into manufacturing vehicles, powertrain and technology development.
Ashok Leyland Nissan Vehicles (ALNVPL), the first of the companies, will manufacture light commercial vehicles. Leyland owns 51% stake in the company while the rest is held by Nissan. in the first phase, the company will produce 100,000 units. It will make eight LCV models in the range of 1.25-3 tonne, which will be both passenger as well as goods carriers, and will be rolled out by 2010-11.
Nissan Ashok Leyland Powertrain (NALPPL) will be the powertrain making company where Nissan will hold 51% with Leyland holding the balance stake.
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Nissan Ashok Leyland Technologies (NALTPL), the 50:50 JV, will develop technology.
It was also said today that the JV will invest Rs 3,000 crore over the next three years, which will be used to fund product development and technology upgradation mainly in the medium and heavy commercial vehicle business of trucks and buses.
The companies (Ashok Leyland and Nissan) have also tied up for loans to the tune of Rs 1,000 crore that will be utilised for capital expenditure in the next financial year. The JVs will also utilise about Rs 850 crore worth of funds that it raised through an external commercial borrowings (ECB) in January. The balance of capex will be funded through internal accruals.
Leyland made a small investment in Germany-based Albonair GmbH, a Hinduja Group company, for development of vehicle emission treatment, control systems and products. However, company officials declined to comment on the size of the investment.