The Hindu Business Line : Michelin picks up 14.9% stake in Apollo Tyres

Mr Edouard Michelin, Head of Michelin Group, with Mr Onkar S Kanwar CMD, Apollo Tyres Ltd, after signing an agreement in the Capital on Monday. - - Kamal Narang

New Delhi , Nov. 17

GLOBAL tyre major Michelin and Apollo Tyres Ltd (ATL) on Monday inked an agreement to set up a joint venture company - Michelin Apollo Tyre Ltd - for the manufacture and sale of truck and bus radial tyres in the country.

The joint venture will manufacture tyres under the brand names of both Michelin and Apollo. Michelin will hold 51 per cent share in the company. The partners plan to invest $70 million (Rs 322 crore) in the manufacturing facility.

Michelin will also pick up 14.9 per cent equity stake in ATL through the preferential allotment route for a consideration of about $28 million (Rs 129 crore).

It can by virtue of this investment nominate two members to the board of ATL.

Mr Onkar Kanwar, Chairman, ATL, told newspersons: "Our partnership with Michelin marks a new chapter in Apollo Tyres's history. It's a win-win situation for both of us."

He added that the manufacturing facility would be located in the State that gives the best incentives for investment. "We will have to choose between States like Maharashtra, Karnataka or Tamil Nadu. Our effort would be to start commercial production by September 2005."

On the price at which the preferential allotment would be made, Mr Kanwar said that the allotment would be at a price computed under the SEBI norms for preferential allotments.

Commenting on the partnership, Mr Edouard Michelin, Head of the Michelin group, said: "The partnership is based on shared values and mutual respect."

Michelin has been testing its tyres in India in the recent years.

"We feel that we now have the right tyres for the Indian market", Mr Michelin said, even as he ruled out any attempts to undertake large-scale import of tyres into the country.

"Imports are not on our agenda. There are also no plans to outsource tyres from India."

Mr Kanwar however, said that ATL would import truck and bus radial tyres from Michelin's South-East Asian facilities from April 2004.

As per the partnership agreement, Michelin would also offer technology support to ATL for manufacture of passenger car radials.

Indications are that Apollo Tyres may manufacture other brands of Michelin.

Meanwhile, the share price of ATL closed at Rs 258.25 at the National Stock Exchange (NSE) on Monday, down Rs 18.65 from the previous close of Rs 276.90.

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