Flextronics picks stake in SemIndia

ACQUISITIONS AND BUYOUTS GAINS GROUND

Singapore-based original equipment manufacturer Flextronics has picked up a minority stake in the $3 billion semiconductor project, SemIndia, promoted by an NRI consortium.

While Flextronics did not divulge the investment quantum, the alliance will allow SemIndia to sell its semiconductor chips to Flextronics for use in cell phones, set-top boxes and personal computers.

"We will make a minority investment but I can't quantify it," said Peter Tan, president and MD, Flextronics Asia.

Under the strategic partnership between the two firms, Flextronics will manufacture electronics products for SemIndia.

The project, which has a 2:1 debt-equity ratio, will also have equity from the Andhra government. "The state government will not put any direct fund in the project. Instead, it will offer incentives in terms of land, infrastructure and tax concessions," said Vinod Agarwal, CEO, SemIndia.

The $1 billion equity will have $250 million each from the central government and strategic partners including Flextronics and $500 million investment will come from private equity investors. The $2 billion debt has been arranged from global and Indian financial institutions.

The project to be set up in Hyderabad is two phased, with the assembly and testing plant coming up in the first phase followed by the chip manufacturing facility.

"While the assembly and testing phase will cost about $100 million, the chip manufacturing plant will involve a cost of about $1 billion," Agarwal said.

Andhra Pradesh Chief Minister YSR Reddy was present at the MoU signing ceremony between the two companies in the capital. He said the project give a major economic boost to the state through employment creation and investment flow.