The Hindu Business Line : Bharat Forge ties up with FAW Corp to enter China

BHARAT Forge Ltd (BFL) on Thursday announced that it has signed a joint venture contract with FAW Corporation for its forging business to make an entry into the Chinese forgings market.

BFL is to hold 52 per cent stake in the company, which is being named as FAW Bharat Forge (Changchun) Ltd.

"The domestic Chinese forgings market is four times bigger than the Indian market. So there is a huge opportunity in China," Mr B.N. Kalyani, Chairman, BFL, said at a news conference in Mumbai jointly addressed by the two companies.

BFL's 52 per cent is through cash, while FAW's 48 per cent is through its assets, Mr Kalyani said. He declined to furnish the financial and other details of the investment, but said that BFL is acquiring a 52 per cent stake in FAW Forgings, a wholly owned subsidiary of FAW.

BFL will fund the stake acquisition from its internal accruals. These funds will be used for modernisation of the FAW Forgings' facilities in China, he said. FAW has a forgings capacity of 100,000 tonnes, but not all of it is being used at present. The manufacturing facility is at Changchun in northern China.

"This joint venture will be the largest forgings company in China. This joint venture can act as a large low cost base for global sourcing," Mr Kalyani said. The inherent advantage in entering into a joint venture with FAW is the fact that this group is the largest automobile company in China, therefore, offering it a captive market. FAW, which has annual revenue of $14 million, makes one million vehicles per year. Of this, 30 per cent comprise commercial vehicles.

The joint venture is with effect from April 1, 2006.

Shares of Bharat Forge moved up by Rs 4.60 to Rs 385.90 on the BSE on Thursday.

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