Sundram Fasteners in JV with Germany's Bleistahl

In a departure from its earlier resistance to joint ventures (JVs), Sundram Fasteners Ltd, today joined hands with Germany's Bleistahl Produktions Gmbh & Co to float a company - Sundram Bleistahl Pvt Ltd for manufacture of valve train parts including valve guides and valve seat inserts.

The project will kickstart with an initial investment of over Rs 20 crore and is estimated grow to an investment of Rs 125-140 crore in the course of 5-7 years.

Speaking to press persons here today, Suresh Krishna, chairman and managing director, Sundram Fasteners, informed that the JV company is being floated with the Indian partners having a stake of 76 per cent, while Bleistahl will have 24 per cent.

"The initial investment of Rs 20 crore will have a 50:50 debt-equity ratio. Sundram Fasteners is investing Rs 7.5 crore to start with, as its equity participation," Krishna added.

The JV company will be buying out Bleistahl's existing plant and machinery in Germany in a phased manner (one line at a time) and transferring them to India.

Being set up as an export oriented unit, the company is likely to be housed at Hosur. "We have the toolroom, land and other infrastructure there," Krishna explained.

The unit is expected to go into commercial production by end-2005. It will initially manufacture valve guides for export to Bleistahl. Spare capacity would be used for servicing the requirement of domestic customers.

In the next phase the company will make valve seat inserts and other valve train parts, for which another Rs 25-30 crore will be invested.

"We expect this production base to keep growing and in the next 5-7 years we will be investing anywhere between Rs 125 crore and Rs 140 crore," he said.

The 50-year old Bleistahl plant has been periodically upgraded and the machinery being transferred will be aged mostly between six and seven years and a few that are one year old, Michael Kohler, chairman and chief executive officer, Bleistahl, informed.

Bleistahl has a total turnover of about 45 million Euros and facilities in Brazil, Germany, Iran and South Africa. Its production base at China is under construction. The Indian base unlike Bleistahl's presence elsewhere is a JV with the German company having only a minority stake.

For Bleistahl, this shifting of its production base is critical for its survival in a highly competitive market, though it is the world's second largest player in the products it is moving here. Besides labour costs, the German company's outsourcing move is driven by the saving India spells in terms of overheads, logistics and tool making.

For Sundram Fasteners, the investment offers are greater product and export spread. Sales from this JV is expected to be around four-five million euros initially in a full year operation, which is expected to increase to 25 million euros over a period of five-seven years, Krishna estimated. He also pointed out that this JV is a better option to contract manufacturing where the buyers have the say.