Offshore funds will pick up 40% in MLR Motors

BANGALORE: A clutch of offshore funds is set to pick up a little over 40% equity in MLR Motors which is setting  up a greenfield automotive unit in Hyderabad
to roll out a hatchback and a “cross-over SUV” by the end of 2009.

The project, promoted by M Lokeshwara Rao  of Lokesh Machines Ltd (LML) at an initial  investment of Rs 1,050 crore, will have a capacity of 1.3 lakh vehicles, including a sub-one tonne light commercial vehicle, a hatchback in two versions and a SUV.

PricewaterhouseCoopers has carried out a valuation exercise on the project and is helping out with the financial closure which will be complete within the next 45 days, Rao told DNA Money.

Under the earlier arrangement, while Rao was to hold 31% equity in the company, former Hyundai president BVR Subbu was to hold 20% stake. Subsequently, however, the equation has changed and the offshore funds are now being roped in. However, Rao refused to name the funds as the deal was yet to be formalised.

Of the total Rs 456 core equity, the promoters have put in Rs 200 crore while the Andhra Pradesh state government has taken up equity worth Rs 50 crore.

The company is raising approximately Rs 555 crore as debt from a consortium of banks which is being finalised.  

Meanwhile, the company is also close to inking a deal with a European major for diesel engine technology for cars which will be based on the Fiat Uno platform. The technology for petrol version engines is being sourced from Fiat. The diesel engine components will be manufactured by Lokesh Machines which, in turn, will be assembled by MLR Motors.

Lokesh will invest between Rs 100-150 crore to set up a new line for the car, Rao said. Lokesh Machines is the biggest engine block maker in the country with Mahindra & Mahindra as its biggest customer and all the Scorpio engine blocks being made at its plant in Hyderabad.

Ashok Leyland is also a major customer apart from others like Tata Motors, Bajaj Auto, Eicher and Honda. Roughly 50,000 diesel cars and SUVs will roll out from the plant when it is complete. While the hatchback will be priced between Rs 3.5 lakh and Rs 4 lakh, the basic version of the SUV will be priced attractively at Rs 4.5 lakh to Rs 5 lakh. However, much before these offerings MLR Motors will roll out its commercial
mini-van. The technology for this has been indigenously developed.