Eco Auto forms JV with Italian firm

Eco Auto Component (formerly Escorts Auto Components) has entered into a strategic alliance with Italian firm, Dell'Orto, by taking a 26 per cent stake in an yet-be-set up joint venture company, Dell'Orto India. The deal also includes Dell'Orto picking a 26 per cent stake in Eco Auto for an undisclosed sum.

Eco Auto's managing director Bharat Caprihan said the deal would create a win-win situation for both companies with the Italian company sourcing carburretors from the Indian partner.

The joint venture would see a fresh investment of Rs 6 crore creating capacity to manufacture a million units of carburretors employing 200 people. Caprihan said the first year operation would see the joint venture's turnover at Rs 20 crore. Commercial production under the joint venture is expected to commence by mid-2006.

Eco Auto, last year, was in talks with Ucal Fuel for a possible sale of stake in the company. The deal, however, did not materialise as the two parties did not agree on certain key issues regarding transfer of ownership.

Of the 26 per cent stake in Eco Auto offered to Dell'Orto, the first tranche of 10 per cent will be offloaded by Bharat Caprihan.

The deal would also result in Eco Auto supplying components for the joint venture and the Italian JV partner.

Caprihan said Eco Auto reported profit in 2004-05 (for a nine month period), after a gap of three years. In the first nine months of the company, since the management changed from Escorts to Bharat Caprihan & Associates, Eco Auto reported a sales of Rs 12 crore and a net profit margin of seven per cent, Caprihan said. Sales for the current financial year, is expected to be Rs 18 crore, he added.