NEW DELHI, January 18: Hero Briggs and Stratton, the 50:50 joint venture between Hero Motors and $1.3-billion Briggs and Stratton, was cleared by the Foreign Investment Promotion Board. The joint venture will manufacture engine and transmission systems for two and three-wheelers.Hero Honda managing director Pankaj Munjal told The Indian Express that "we have learnt that the proposal was cleared today, the official communication is expected in the next few days". Hero Motors is transferring the assets of its engine manufacturing facility to the new joint venture.
The total project cost is over Rs 80 crore. Both the partners would bring in $12 million as equity, while the balance would be funded through debt. Hero Motors' contribution to the equity would be in the form of the assets provided to the company. Hero Motors' facility in Ghaziabad (Uttar Pradesh) produces around 1.5 lakh two stroke engines annually. The company has not decided as yet on whether it would be rupee loans or foreign
debt.
Munjal said that the company had earlier held negotiations with two other companies including Ricardo, but it did not work out. The joint venture will commence production in fiscal 1998-99. Hero Briggs and Stratton will manufacture 50 to 150 cc two and four stroke engines. The plant will have an installed capacity of 200,000 power trains annually.
The venture would manufacture two stroke engine initially and four stroke engines after two years.
The company has plans to export a major portion of the produce. It plans to become a major global supplier of power trains. In the first year of production, the company has plans to manufacture 60,000 power trains, which will go up to 1.2 lakh later. This is amongst the first Indian companies to focus exclusively on two and three wheeler power trains.
It is understood that Hero Motors and Hero Honda would source engines from the joint venture. The engines incorporating totally new designs are expected to reach a local content of around 90% in the first
year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
