Financial institutions with exposure in Pal-Peugeot have initiated fresh discussions with two-or-three firms for the sale of the company's Kalyan-based manufacturing unit. This follows the recent Mahindra & Mahindra decision against acquiring the unit.
The financial institutions, which have dues of around Rs 200 crore from Pal-Peugeot, are hopeful of an agreeable solution to the issue, auto industry sources said.
M&M had decided against acquiring the plant following the productivity-linked wage agreements reached by the company with its workers. With new wage pacts, the productivity of the company's three manufacturing units in Nashik, Zaheerabad, and Kandivli is expected to rise sufficiently and the company proposes to take up fresh land adjacent to the Nashik unit for its new IDAM project.
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PAL had approached several companies for selling the Kalyan unit, but the talks had finally narrowed down to M&M.
However, all is not lost for Pal-Peugeot, and the capacity has several advantages, industry sources told Business Standard. The NE 118 is still in demand in the market, sources added. "The plant is close to a major port and is located in the heart of the industrial hub close to both Mumbai and Pune," the sources pointed out. And Pune is fast developing into an automobiles centre, with majors like Telco, Bajaj Auto located there. Fiat's new plant is also coming up in the vicinity of Pune.
The Kalyan location could be ideally suited for Maruti, industry analysts pointed out. If Maruti opts for a second location then Kalyan could be ideal, they said. "It is ideally located, and if Maruti plans to face the competition head on, Kalyan is a good location especially because Maharashtra is a major market," the analysts said. Besides Maruti has a Peugeot link as it is sourcing its diesel engines from the French company, the analysts added.
It may be mentioned that as part of a memorandum of understanding signed between PAL and Peugeot last November, the Indian partner was to prepare a suitable restructuring proposal for the joint venture.