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Monday, November 10 1997

L&T set to sew up tractor venture with John Deere

Murali Gopalan

MUMBAI, Nov 9: Larsen & Toubro is all set to finalise a joint venture with John Deere of the US for manufacturing tractors at a greenfield facility near Pune. The cost of the project is estimated at around Rs 300 crore and it is expected to be fully operational by the year 2001.

According to sources, the 50:50 joint venture has targeted a capacity of 30,000 tractors in the 35 hp, 45 hp, 55 hp and 65 hp range. The two parties are expected to sign the joint venture agreement during the next few weeks. When this is done, L&T's activities in its group 1 profit centre will only involve joint ventures with other global giants.The first such venture was the construction equipment business at Bangalore which was hived off as a 50:50 venture with Komatsu of Japan. Next on the line is the loader backhoe business at Pithampur (Madhya Pradesh) which will be spun off with Case Corporation of the US and for which L&T is seeking shareholder approval at its extraordinary general meeting on December 3.

The other joint venture already in existence is Tractors Engineers Ltd, where the partner is Caterpillar Inc of the US. This company manufactures crawler undercarriages for excavators, mobile crushers and bulldozers. The last to join the list in group 1 will be L&T-John Deere for agricultural tractors.

It may be recalled that the same combine had bid for HMT's tractors division at Pinjore when bids were invited by private players to acquire a 51 per cent stake in the unit. L&T-John Deere along with Escorts were shortlisted from a list of four which included Mahindra & Mahindra and Eicher-Renault.

Escorts had submitted the highest bid of Rs 131 crore. But though L&T-John Deere's bid was slightly lower by Rs 17 crore, speculation was rife that the duo would bag the mandate. However, there was no progress after that and L&T withdrew from the race.

The company, sources say, sees great potential in the tractor market and with a big name like John Deere is confident of holding its own against the established players and new ones like Ford New Holland too. There is "a lot of hard work" that needs to be done like building up a distribution network but this can be carefully planned out, sources say, as the first tractor is scheduled to roll outof the Pune plant only four years from now.

Incidentally, Escorts has also planned a Rs 250 crore industrial complex to house its new tractor plant in Ranjangaon near Pune. This is not very far from the L&T-John Deere site. The company plans to manufacture 15,000 tractors here to complement its 55,000 units produced at Faridabad.

The tractor industry has been doing remarkably well for the last two years. For the period April-September this year, 1.21 lakh tractors were sold, compared to 1.04 lakh units in the corresponding period last year. Mahindra & Mahindra continues to be the leader with a share of 27.9 per cent followed by Tafe and Escorts with 20 per cent each. Swaraj has, however, grown the fastest during the first half with 22.1 per cent.

New JV for infrastructure engg The board of Larsen & Toubro has cleared a proposal to form a 50:50 joint venture for infrastructure engineering with Ramboll of Denmark. The new company will be headquartered in Chennai and has been formed primarily to bid for build-own-operate projects. Ramboll is a big name worldwide and the alliance will help L&T in its quest for bigger projects like airports, highway systems, tunnels and seaports. This joint venture will mean that L&T will now have an engineering arm to help realise its infrastructure goals.

New venture for core engineering

The board of Larsen & Toubro has cleared a proposal to form a 50:50 joint venture for infrastructure engineering with Ramboll of Denmark. The new company will be headquartered in Chennai and has been formed primarily to bid for build-own-operate projects. Ramboll is a big name worldwide and the alliance will help L&T in its quest for bigger projects like airports, highway systems, tunnels and seaports. This joint venture will mean that L&T will now have an engineering arm to help realise its infrastructure goals.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.

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