Pune, Feb 23: Kirloskar Oil Engines Ltd's (KOEL's) joint venture with US company Briggs & Stratton Power Equipment Pvt Ltd will initially be for distribution of small engines -- under 800 cc -- for the non-automotive segment. The two partners will hold an equal stake in the new company, Kirloskar Briggs & Stratton Power Equipment Pvt Ltd, which will have a capital of Rs 2 crore.KOEL vice-chairman and managing director Atul Kirloskar said the venture would initially involve distribution of pumps and generator-sets. This was being done as volumes would have to be built up before they could compete on the basis of price with US-produced goods. The US major manufactures 9 million sets annually, giving it economies of scale. Once volumes in India build up, they could be manufactured here. In the US market, Briggs & Stratton supplies engines mainly for the lawn-mower and gardening-implements segments.
While KOEL would distribute pump-sets, the venture would handle the distribution of generators. Since thejoint venture will be involved initially in only distribution and marketing, the small equity capital -- of Rs 2 crore -- would be adequate for the next two years, Kirloskar said. The engines would be imported and aggregates added on, for pumps or generator- sets, depending on the requirments.
The venture gives KOEL an entry into the petrol and kerosene-engine sectors. The kerosene-engine, which it would introduce in the market has been specially designed for local conditions. Competitors in the small gen- set segment include Honda and Yamaha.
The company's extraordinary general meeting (EGM) was held here on Monday to get shareholder approval, among others, for setting up of the venture and allowing the board of directors to issue non-convertible debentures (NCDs) worth Rs 25 crore to bank and financial institutions (FIs). Group chairman Vijay Kirloskar said the NCDs were being issued in view of the high-cost borrowings of KOEL. They would be issued at a time when interest costs would be the lowest forKOEL, he added. Interest costs for the company, as noted in the balance sheet for 1996-97, were Rs 24.5 crore. The resolutions were passed with a majority, with one voting against them. Shareholders were unhappy that Rs 2 crore, realised through the sale of KOEL's stake in Kirloskar Cummins Ltd, was not passed on to them. It was instead invested in sister concerns like Shivaji Works, now referred to the Board for Industrial & Financial Reconstruction. y
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
