Leyland to shift castings unit to Ennore

Ashok Leyland is to transfer its castings business to Ennore Foundries for Rs 62 crore. Shareholders of the two Hinduja group companies approved the deal on Saturday at separate extraordinary general meetings.

The Rs 62 crore that Ennore Foundries is to spend, is a part of its Rs 227 crore investment to more than double its capacity to about 136,000 tonne over in the coming years.

R J Shahaney, Ashok Leyland's chairman, told shareholders that Ennore Foundries is to set up a 50,000 tonne greenfield foundry near Chennai. The greenfield project would cost the company about Rs 120 crore.

Ennore Foundries also plans to invest about Rs 45 crore to increase its own capacity and also that of the unit acquired from Leyland. The move comes in the backdrop of a marked growth in the foundry sector on the back of demand from automotive.

Shahaney said the increase in Ennore Foundries' scale would help it access more modern technology, and improve access to cheaper funds.

Leyland and Ennore Foundries have common directors. To arrive at the valuation for the casting business, both companies constituted committees that were made up of independent directors.

Leyland appointed PricewaterhouseCoopers to carry out valuation, while Ennore Foundries appointed Ernst&Young. The sale includes physical assets, business connections, pending orders and trained employees.

Shahaney said that Leyland had earlier acquired the castings unit for Rs 11 crore, and, subsequently, spent Rs 6 crore there.