LGB sets up export-oriented unit for Mico

In order to cash in on the current boom in the automobile sector, Mico, a subsidiary of Robert Bosch Limited, is planning to partner with Indian companies for outsourcing industrial chains and other raw materials.

Addressing a press conference, Albert Hieroninus, managing director, Mico, said India was preferred not only for the current growth it was experiencing in the automobile sector but also for the quality and skilled labour available in the country.

"Of the total turnover of the company which stands at $ 41billion, the revenue from Indian operations alone is around Euro 750 million," he added.

Mico has already partnered with Coimbatore-based L G Balakrishnan & Bros Limited (LGB), a leading supplier of transmission chains to both industrial and automobile segments.

To cater to the needs of Mico, LGB has set up its 100 per cent export-oriented unit (EOU), which will manufacture common rail direct injection (CRDI) flanges, at an investment of Rs 10 crore near Kovilampalayam on the outskirts of the city.

According to a company official, the unit has started its trial production. It is expected to become fully operational by September.

With this, the company will shift its focus to multinational auto components sourcing companies such as Visteon and Delphi. The company had acquired Bangalore-based Apten Forgings in 2004, targeting the emerging opportunities in the outsourcing business.

LGB has also chalked out domestic expansion plans by setting up new facilities at three places - Coimbatore, Pune and Uttaranchal.

Earlier, Vijayakumar told Business Standard that the company had plans to set up a forging plant in the North Coimbatore and two chain plants at Pune and Uttaranchal.

The company plans to import forging machinery from Korea and Japan. The company's forging plant in Coimbatore will become fully operational in the next six to eight months and the chain plants at Pune and Uttaranchal are likely to start operations by the end of next financial year.

For the next two to three years, LGB would invest around Rs 150 crore in a phased manner in capacity expansion and in setting up new facilities.

International Finance Corporation (IFC), the private lending arm of World Bank, has consented to provide the company a loan of Rs 90 crore.

The company plans to raise the remaining amount through the issue of optionally convertible bonds (OCBs).

The company also has a presence in industrial chains, which find application in the construction industry and the engineering sector. This is considered to be the biggest business of the company accounting for about 60% of the revenues.

The company's combined annual capacity of producing chains is around 62.5 million feet a year and that of forging is around 3 million pieces per year. The company's production capacity of forged and precision components amounts to 7,300 tonnes per month.

LGB has a 65 per cent market share in the original equipment manufacturer (OEM) drive chains segment and 50 per cent in the replacement segment. Its major OEM customers include Honda, Larsen & Toubro, Jacob & Muller, Bajaj, TVS-Suzuki, Tata Motors, Brakes India, LML, Kinetic and Kawasaki.