L&T buys out Demag from joint venture

After 10 years of joint operations, Larsen and Toubro (L&T) and Germany’s Demag Plastics Group have parted ways. The joint venture, which was set up in 1999 for making plastics machinery, has ended after Demag’s new parent, Sumitomo, decided to go it alone in the Indian market by floating a wholly-owned subsidiary.

“L&T-Demag Plastics Machinery, the Chennai-based joint venture company, will no longer be in existence as L&T has bought out its partner’s 50 per cent stake. Sumitomo, which acquired Demag in early-2008, has its own plan for India and it decided to break the relations with L&T,” said a company executive.

 

The purchase gives L&T complete ownership of the operations in Chennai. After announcing its exit from the joint venture, Sumitomo Demag Plastics Machinery said in a statement, “As already announced in March 2008, Sumitomo Heavy Industries is proceeding to establish a subsidiary in India.” L&T officials declined to comment on the development.

In 2002, the joint venture company had built its first factory for injection moulding machines. Three years later, it built a second factory in Chennai that doubled its production capacity to a thousand machines a year.

Sumitomo Heavy Industries inherited the 50 per cent stake in the operation when it bought Demag in March 2008. However, for more that 10 years, Sumitomo has had a technical collaboration with another Indian injection machinery maker, Windsor Machines in Mumbai.

L&T had started manufacturing injection moulding machines in 1990 in association with Demag Plastics Group. But the two formed the 50:50 joint venture company only after nine years. Soon after, the venture had emerged as the leading injection moulding solutions provider in India.

L&T Demag launched a petition last year to the India government in which it accused Chinese rivals of dumping presses at below cost in the Indian market. The government responded earlier this year by imposing anti-dumping duties of up to 223 per cent on 10 Chinese companies. Among these, three are associated with China’s largest injection machine maker, Ningbo Haitian Plastic Machinery Group.