Volvo, Eicher roll out joint venture terms

Volvo and Eicher Motors Ltd today formalised their joint venture, in which the latter would invest Rs 1,082.1 crore.

Eicher will own 54.4 per cent in the venture and Volvo will hold the rest.

Volvo, which has an 8.1 per cent stake in Eicher, will have a total interest of 50 per cent in the venture. The two companies today signed a letter of intent to this effect.

Eicher Motors CEO and managing director Siddhartha Lal said, “Eicher Motor’s commercial vehicles business and related components and design services will be transferred to the joint venture company on a slump basis at a value of Rs 202.2 crore. The joint venture will be our unlisted subsidiary.”

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

Par Ostberg, executive management member and chairman of Volvo Trucks Asia, said the move was part of the truck manufacturer’s plans to tap the commercial vehicles market in Asia.

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

All Volvo group truck projects in the country will be routed through the joint venture and Volvo may also look at entering the commercial vehicles financing business.

The joint venture will manufacture and market independent Eicher and Volvo-branded trucks. Eicher trucks will be in the 5-50-tonne category and the Volvo trucks will be heavy-duty.

Lal said Eicher Goodearth Investments Ltd, the holding company of Eicher Motors, would buy back shares equivalent to 13.2 per cent of public shares (14.08 lakh shares) in Eicher Motors at a price of Rs 691.68 each.

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

The joint venture is expected to start operating by July this year.

As part of the agreement, Eicher Motors 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 still be manufactured from the Pitampur plant, which has a capacity of about 4,000 units per month, while Volvo will also continue manufacturing trucks at its facility in Bangalore.

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