Newspaper reports reveal that Tata AutoComp Systems Ltd. (TACO) plans to invest Rs 30 bn in a slew of fresh joint ventures (JV) over the next five years.
TACO (Tata Group's auto components holding company) already has some 12 joint ventures in place. The company has charted out ambiguous expansion plans by acquiring companies overseas. It aspires to emerge as a global manufacturer through its joint venture partners by leveraging the low-cost, high-productivity engineering skills available in the country.
The ventures will have a debt-equity ratio of 1:1. Therefore, on an investment of Rs 30 bn, the equity component constitutes Rs 15 bn. As these ventures are expected to be a 50:50 partnerships, TACO would be required to inject Rs 7.5 bn. In FY2000, the company plans to invest Rs 10 bn.
TACO has targeted the group turnover for auto ancillaries at Rs 180 bn over the next five years, from a current turnover of approximately Rs 4-5 bn. Of this, it expects 39% to come from component manufacturing, 22% from supply-chain management and international operations. The balance 17% is likely to come from engineering and after market operations. By 2005, the company expects domestic sales to account for 40% of turnover, with exports accounting for the balance.
The company has firmed plans to set up 40-50 ventures including those with US-based Eaton, Zf of Germany, Magna Atoma Roltra, UFI, and Iransa among others.
TACO ambitious plans to emerge as a global vendor of auto components are highly dependent on its joint ventures. Growth through ventures will have its pros and cons for TACO. The upside being that TACO will gain a foothold in overseas markets, and can leverage on its JV partners brand, marketing and distribution network ,as also its clientele. The downside will be that TACO may come to depend a little too much on its partner(s), which could be exploited by the latter to its benefit.
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