Business

Eicher, Volvo finalise venture

ON TRACK: Siddhartha Lal (left), Managing Director and CEO, Eicher Motors exchanging documents with Par Ostberg, Senior Vice-President and Chairman, Trucks Asia, Volvo Group, in New Delhi on Monday. — Photo: V. Sudershan

NEW DELHI: Eicher Motors Ltd. (EML) and the world’s second largest truck maker Volvo on Monday formalised their joint venture in which the Swedish auto major will pump in Rs. 1,082.10 crore. The joint venture is expected to start operations by July.

“The commercial vehicles business along with related components and design services of EML will be transferred to the joint venture company, which will be an unlisted subsidiary of EML, on a slump basis at a value of Rs. 202.20 crore,” EML Managing Director and CEO Siddhartha Lal told reporters here.

EML will hold 54.4 per cent stake in the joint venture company and Volvo the balance 45.6 per cent. However, by virtue of its separate investment in EML for 8.1 per cent stake, Volvo will have an economic interest of 50 per cent in the joint venture.

In terms of the joint venture agreement, Volvo will transfer its Indian truck distribution and service network business to the joint venture.

After formalisation of the joint venture, Volvo Group Executive Management member and Volvo Trucks Asia Chairman Par Ostberg said the move was a part of the truck maker’s plans to tap the fast growing commercial vehicles market in Asia, and particularly India.

He said, “India is the fourth largest market for heavy trucks in the world and with the country investing heavily on improving infrastructure, there is a big opportunity for us.”

Elaborating further on their plans, Mr. Ostberg said all Volvo group truck projects in India would be routed through the joint venture and Volvo might also look at entering the commercial vehicles financing business in which it was successful globally.

The joint venture will manufacture and market independent Eicher and Volvo branded trucks with the former focussing on 5-50 tonne trucks and the latter on heavy duty trucks.

According to Mr. Lal, Eicher Goodearth Investments Ltd, the holding company of EML, will buyback shares equivalent to 13.2 per cent of public shares (14.08 lakh shares) in EML at a price of Rs. 691.68 per share.

He said the joint venture might also look at exporting Eicher brand of commercial vehicles in countries where Volvo had a distribution network to complement the Swedish major’s heavy truck portfolio.

Significantly, EML and its promoters have signed a non-compete agreement and Volvo will pay them Rs. 39.35 crore as non-compete consideration.

Eicher brand commercial vehicles will continue to roll out from the Pitampur plant in Madhya Pradesh, which has a capacity of about 4,000 units a month, while Volvo will also continue to manufacture trucks at its facility in Bangalore.

On plans to enter the small trucks segment, Mr. Lal said: “In the immediate near future we have no plans. Our aim is to enhance our position in the medium and heavy trucks segment."

About the possibility of bringing Nissan Diesel trucks, which Volvo had taken over last year, Mr. Ostberg said that was something that will be looked at in future.

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