Axles India, which is part of TVS, has chosen to sell a part of their auto parts business to Dana Holding Corp., their American JV partner. The US company will the product portfolio for commercial vehicle parts of AIL for a sum of $13mn.
Founded in 1983, AIL comprises Sundaram Finance Grp, Wheels India as well as Dana Holding Corp. This company annually supplies 180,000 presses axle housings for manufacturing heavy and medium duty commercial vehicles from two different facilities. Under their agreement terms, Dana will take whole ownership of final axle and axle drive head assembly operations.
The primary products in this business, which has Mahindra & Mahindra and Ashok Leyland as its main customers, include ring gear, pinion, bearings, differential lock, lube pump as well as yoke located inside the axle housing.
Dana announced that they would take responsibility for the engineering, sales and marketing of the heavy and medium duty axles. Company officials were reported as saying that this transaction would lead to Dana obtaining AIL assets at Pant Nagar, Uttarakhand and Sriperambadur located near Chennai.
This deal will let Dana expand in the commercial auto parts segment. Last year, in December, he company invested $20mn to set up their technical hub in Pune for supporting customers of their commercial vehicles and off-highway and automotive vehicle manufacturers. AIL is an unlisted entity which has Rs.25.49 crore as paid capital, with TVS Grp and Dana holding a stake of 47.5 % each.
Sundaram has a stake of 38.51%, with Wheels India, holding the rest of the stake along with some public shareholders. AIL posted Rs. 383 crore turnover for 2009-10, with Rs. 85 lakhs net profit. AIL will continue manufacturing their axle housings for Dana as well as other customers. Dana said in a statement to NYSE that with its $13mn investment, they expect their new business to generate $50mn as annual revenue.
This would mean that a major part of the JV in being moved to Dana. Two years ago, TVS Grp exited from their four decade long air brake business to partner with US based Wabco. TVS began the air brakes production through Sundaram Clayton owned by Venu Srinivasan. Later on this business was moved into a JV with Wabco. By 2009, TVS Grp exited this venture for Wabco, which in turn gave up their stake in Sundaran Clayton.