JV between India’s Mahindra & Mahindra with Sri Lanka’s Ideal Group to benefit country’s automotive industry

JV between India’s Mahindra & Mahindra with Sri Lanka’s Ideal Group to benefit country’s automotive industry

Sri Lanka’s Ideal Group has reportedly said the country’s automotive industry would greatly benefit in the wake of India’s Mahindra & Mahindra Ltd’s achievement of high market capitalization in the Bombay Stock Exchange.
“With the shares of the Mahindra & Mahindra Ltd (M&M) surging more than 2 per cent to hit an all-time high, thus steering the automaker to join the club of Rs 1 lakh crore market capitalisation on the Bombay Stock Exchange, Sri Lanka can only but benefit as M & M will soon be setting up their automotive assembly plant, here in Sri Lanka,” founder Chairman of the Ideal Group, Nalin Welgama has been quoted as saying in the media.
The local media recently reported the joint venture (JV) the Indian company had entered into with Ideal Motors Ltd, a fully owned subsidiary of the Ideal Group, to assemble automotive vehicles in Sri Lanka.
Mahindra will hold a 35 per cent stake in the JV, while Ideal Motors will have a 65 per cent stake.
Welgama has said that with this venture Mahindra will strengthen its presence in Sri Lanka.
The plant will be built over the next one year under the expertise of the Mahindra team, and will incorporate global technology.
According to Welgama, Mahindra & Mahindra Ltd is now bigger than the Tata group’s carmaker Tata Motors, in terms of market capitalisation.
The local media reported that this was the first time that a genuine automobile manufacturer has entered the vehicle assembly arena, he told the Business Times noting that the Indian company will begin Mahindra ‘people’s car’ assembly in Sri Lanka with an initial investment of around US$15 to 20 million.
Ideal Motors will initially manufacture the Mahindra KUV 100 sports utility vehicle, the ideal ‘people’s car’ for Sri Lanka.
Almost all the ground work has been finalised to set up the vehicle assembly plant in a two acre block of land in the Colombo suburbs probably in Horana, Welgama has said.

OSL take:

The joint venture between the Indian company and the Sri Lankan company indicates the strong trade ties between the two countries. The growth of India’s Mahindra & Mahindra in India and its presence in Sri Lanka would definitely boost the automotive industry in the island nation. The setting up of the vehicle assembly plant in Sri Lanka indicates the market within Sri Lanka and the business friendly environment in Sri Lanka. This would be an encouraging sign for foreign businesses/investors to look at forming JVs with local companies using the business conducive environment in Sri Lanka.

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Article Code : VBS/AT/03052018/Z_3

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