TVS to pump $50 mn into Indonesian plant

The plant will have an initial annual capacity of 120,00 units.

TVS Motor's governing board today approved proposals to invest about Rs 419 crore in three manufacturing facilities, including $ 50 million(about Rs 219 crore) in a two-wheeler facility in Indonesia, the third largest two-wheeler market in the world.

The other investments are to be made in Himachal Pradesh for a two-wheeler facility at a cost of Rs 90 crore, and a three-wheeler facility in Mysore that will cost Rs 100 crore.

CP Raman, president, TVS Motor, told a press conference that all three plants were likely to be ready in a year's time. The Indonesian plant, to be located in Java, will have an initial annual capacity of 120,00 units.

The Himachal plant's initial annual capacity will be 300,000 units and the Mysore plant's 100,000 units.

Raman said TVS looked at Thailand, too, before picking Indonesia for its plant. Indonesia is to be the company's springboard for the Asean region.

"For all international players, Indonesia will be a logical place," said Raman.

The plans are to be financed by a $ 100 million (about Rs 438 crore) line of credit, primarily from HSBC and ABN Amro banks. TVS Motor's balance sheet for March 2004 showed a total debt of Rs 119 crore, and equity capital of Rs 575 crore.

Raman said that Indonesian market's volume was about 4 million two wheelers a year, largely step-thrus. The market is growing at about 35 per cent a year, he added. The only larger markets are China and India.

As compared to Indonesia, the Indian two wheeler market's size was 5.14 million units (April-December 2004), and it has grown at a compound rate of 12 per cent over the last 10 years. However, the step-thru market here has shrunk, down to 32,990 units in 2003-04 from 2.15 lakh units in 1994-95.

Raman said that TVS had not yet finalised product details for the Indonesian market. "We are working on market research," he said.

TVS Motor has also not finalised the nature of entry in to Indonesia; a local partner has not been ruled out. Raman said once the details are finalised and approved by the board, TVS Motor would seek Indonesian government clearance.

In India, the Himachal plant would be used largely for motorcycle production, the mainstay of the Indian two wheeler market with about 80 per cent share.

Himachal's sales tax deferrals was the key selling point among competing states, said Raman. The Himachal plant is the company's first one in North India.

Three wheeler manufacture would be a new line of business for TVS Motor.

However, given a Rs 3,000 crore three wheeler market with just Bajaj Auto a significant player in the petrol segment, there is potential there, said Raman.