How will Volvo-Ashok Leyland deal beneft both cos?

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Swedish truck maker Volvo is eyeing a stake in India's Ashok Leyland . CNBC-TV18 reports on how the deal could benefit both companies.

 

Ashok Leyland puts 56,000 new trucks on the road every year, while Volvo sells just 650. There is little wonder then that it wants a pie of the growing Indian transport market.

 

Volvo's not the first. In the last one year, American company Navistar joined hands with M&M , Germany's MAN signed a JV with Force Motors and Swedish Scania tied up with L&T .

 

Growth is one benefit, Volvo will also get access to Ashok Leyland's strong distribution network as well as an opportunity to tap the company's high volume low cost production base in India.

 

These deals tend to work both ways. Analysts say that Ashok Leyland will get access to Volvo's high-end technology and it's presence in over 100 international markets.

 

This mutually beneficial deal is at 'a fairly advanced stage', that's all an Ashok Leyland official was willing to say right now. It's not clear yet how large a stake Volvo hopes to buy. But sources say that Ashok Leyland may be willing to part with upto 15%, because that's how much Italian CV maker Iveco held before selling it back to Leyland's promoters, the Hindujas.

 

It's the price that's moot. Sources say the Hindujas are negotiating for between Rs 65- 75 per share. That's an over 35% premium to Thursday's closing price of Rs 48. Either ways the deal is expected to be concluded this month.