TVS Motors against takeover of Bengal unit

Chennai-based TVS Motors has said it is not interested in taking over the Uluberia facility in West Bengal.

The company, which entered into a technical collaboration with the promoters of the facility, has been asked to buy out the entire facility.

S G Murali, executive vice president, finance, TVS Motors said, “TVS Motors extended the technical consultancy to establish that facility. Subsequently the party requested us to use the facility to assemble two wheelers on conversion charge basis. The fee agreed with them was payable over a period of five years. The party is requesting takeover of the facility without any further cash consideration, and asking to adjust the fees payable".

TVS, however, will continue to assemble its two-wheelers at that facility for the time being.

"On capital concession of variable issues, the company has decided not to take over the facility, while we will use this facility for assembling the two wheelers," added Murali.

TVS had shown interest in producing two-wheelers from this facility, with an aim to have a manufacturing footprint in the east. The company presently has facilities in Uttarakhand, Karnataka and Tamil Nadu.

Though the reason behind TVS not buying the Uluberia facility remains unspecified, experts support the idea of having less number of facilities with the road for implementation of goods and services tax (GST) now looking clear.

With the roll out of GST, manufacturing companies may look to integrate their factories and have large facilities rather than have many smaller facilities spread across the country.

In 2011, TVS Motors had proposed to manufacture bikes in their franchise-operated two-wheeler plant at Uluberia in the outskirts of Kolkata.

According to the then proposal, TVS Motor would use 45 out of the total 63 acres at Uluberia plant to set up its manufacturing unit. 

Mahabharat Motors, jointly promoted by Indonesia’s Salim Group and the Universal Success Enterprise based in Singapore, was incorporated in 2006 to produce two wheelers based on Chinese technology. Later in 2008, TVS Motors tied up with Mahabharat Motors as their contract manufacturers. According to the proposal, the facility was to manufacture 1,000 bikes per month from October 2009 onwards.

The production capacity was supposed to be expanded to 10,000 per month by 2011. However, it failed to match the estimated production and, finally following the economic slowdown in 2009, TVS stopped sourcing from Mahabharat.