Japanese major Sumitomo Corporation has bought 49 percent stake for Rs 1,181 crore in the joint venture, Mukand Sumi Steel (MSSL), a speciality steel supplier for the automotive and engineering industry. Mukand will retain 51 percent equity in the new company.
The partners state that the opening net worth of the company is around Rs 2,039 crore and had a sales turnover of around Rs 2,200 crore. Last year the two entities had signed an MoU to enter into a JV, that would form MSSL, which is engaged in the business of rolling, finishing and marketing of alloy steel wire rods and bars made from blooms and billets procured exclusively from Mukand’s Hospet plant in Karnataka.
The JV has 100 acres of land adjoining Mukand’s existing plant at Hospet for the proposed construction and commissioning of new steel rolling facilities by mid-2020 at an approximate cost of Rs 600 crore.
The annual manufacturing capacity of MSSL is 365,000 MT, and the company saw sales of around 345,000 MT last year. The company’s product is used in transmission parts, engine components, steering components, high tensile fasteners, fuel injection pumps, bearings, braking systems and suspension parts in the automotive and engineering industry.
The company claims it is the preferred supplier of speciality steels to all global manufacturers in the Indian automotive sector for their critical components and is betting on the booming sector to deliver returns. Maruti Suzuki India, Toyota Motors India, Honda Motors India, Nissan India, GM, Hyundai Motors India, Ford Motors India, Tata Motors, Honda Motorcycles and Scooters India, Bajaj Auto and Hero MotoCorp are the main clienteles for MSSL. While its clients in the component sector includes Bosch, SKF, JTEKT Koyo Toyoda, NSK, Sundaram Fasteners, Schaeffler, Timken, Nexteer automotive and Sona.
For the Japanese major the investment marks its largest equity investment in a manufacturing company in India and is claimed to be the biggest by any Japanese corporation in FY2018.
Commenting at the announcement, Makoto Horie, senior managing executive officer and general manager, Metal Product Business Unit, Sumitomo Corporation, said “It is a very proud moment for Sumitomo Corporation today as we are keen to strengthen our presence in India, which is one of the fastest growing markets in the world.”
He stated that the corporate value systems of both the companies are aligned and he is highly confident on the success and growth of the JV.
According to Niraj Bajaj, chairman and managing director, Mukand, the partners have already been working harmoniously and closely together for the past five years in another joint venture and he sees a similar synergy and strength in the new JV from both the companies.
Rajesh V Shah, who presides as the chairman of the new JV and co-chairman and managing director of Mukand, said that Japan is synonymous with high quality products across all industries. Mukand being a pioneer in India in adopting rigorous quality processes in steel manufacturing and this joint venture is committed to deliver superior and complex speciality steels to the automotive and engineering industries.
Speaking to Autocar Professional, Makoto Horie revealed that Sumitomo Corporation was bullish on Indian automotive sector and sees this JV contributing a significant portion of speciality steel to the industry. He mentioned the company is also involved as a key-supplier for India’s ambitious bullet train project. Additionally, on the investment front, the company is also exploring new businesses and startups in India which could play a key role in the disruptive environment.
The partners have also agreed that while there is a huge demand for speciality steel in the country, which accounts for a small portion or five percent of the global supply for the speciality product, the current capacity will be completely utilised soon. And the venture might explore expanding production capacity in the next two- to three-years.