Minda Industries has entered a joint venture agreement with Kosei International Trade and Investment Company Ltd to manufacture aluminum alloy wheels. The Kosei Group is a leading Japanese alloy wheel manufacturer.
In an interview to CNBC-TV18, NK Minda, chairman, Minda Industries says the joint venture is worth Rs 300 crore and the operations for the same will begin on April 2016.
The company has already received a letter of intent (LoI) from Maruti Suzuki, says Minda.
Below is the verbatim transcript of NK Minda's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Take us through the details. How much is the money you are putting in and what exactly is the game plan. When does the production start?
A: The project cost would be around Rs 300 crore and the capacity will be about 1 million pieces per year. We will start production by April 2016.
Sonia: What will you produce? Will it be switches?
A: No. This is an alloy wheel; an aluminium alloy wheel. The percentage of aluminium alloy wheel is increasing in the car industry. Originally it use to be steel wheel but now it is increasing the percentage, consumption is increasing and there is a capacity shortage in the industry. Our customers will be Maruti Suzuki and in the near future we will go for other customers such as Mahindra, Honda etc.
Latha: What is the margin in these aluminium based alloy wheels?
A: Difficult to say but EBITDA will be double digit.
Sonia: For Rs 300 crore investments, how will you be funding it? Will it be through your internal accruals or will you look to raise any money?
A: Minda Industries’ equity is 70 percent basically more than 50 percent and our collaborator is 30 percent, both will be capital plus some debt and internal accrual.
Latha: What is the equity of the joint venture? How much you have to shell out as equity?
A: 120 crore.
Latha: The entire project cost of Rs 200 crore is being met with the equity capital only at this point in time?
A: The project cost as I said is Rs 300 crore so 40:60 as of now but going forward we will generate our internal accrual.
Sonia: You said Maruti and M&M; apart from that any global players you will be looking at since your JV partner is Japanese?
A: There is a lot of demand in exports; there is a lot of requirement in US as well as Europe. Our collaborator is exporting already. We have a plant in south with their majority stake. We are already exporting to Japan.
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