Dissolution of Joint Venture for Manufacturing and Supplying Ductile Iron Pipes for Waterworks in India
March 28, 2013
Kubota Corporation (hereinafter "Kubota"), Metal One Corporation and Tata Metaliks Limited (hereinafter "TML") decided on March 25 to dissolve their joint venture for manufacturing and supplying ductile iron pipes for waterworks in India, Tata Metaliks Kubota Pipes Limited, (hereinafter the "Joint Venture") and reached an agreement that Kubota and Metal One would sell all their shares in the Joint Venture to TML.
1. Background that led to agreement on dissolution
- The Joint Venture was established in October 2007 as a supply base of iron pipes for waterworks in India, where the development of water supply and sewerage systems has been an urgent national task, and also as a manufacturing base of Kubota products targeted at markets in the Middle East and Southeast Asia. Since then, Kubota has increased its cost competitiveness by local production and has promoted its production system that ensures high quality of Kubota products.
- However, we are now facing a severe business environment in India, where sales competition has become increasingly fierce since many local and foreign manufacturers have entered the market to meet rapidly growing demand. Kubota and TML concluded that, to enhance cost competitiveness, it was necessary to implement drastic business structural reforms, such as integrated production control system starting from raw materials, investment in sintering furnace and coke oven, and more efficient operation of blast furnace. The two parties agree that since the Joint Venture depend on TML for supply of molten metal, raw materials for casting metal ,and such facility investment involves pig iron manufacturing, a core business of TML, these business reforms should be implemented solely by TML, and that Kubota will not engage in the reforms. Therefore, Kubota and TML decided to dissolve their joint venture contract.
2. Plans for the future
- Kubota and Metal One plan to complete the sale of their shares in the Joint Venture to TML by the end of March 2013. The Joint Venture will continue its business as a wholly-owned subsidiary of TML (hereinafter the "New Company").
- The New Company will continue to be an OEM supplier to Kubota. Kubota will export such OEM products to countries in the Middle East and Southeast Asia.
- Overseas water supply infrastructure markets are expected to continue to grow in the future. Seeking further business expansion by leveraging its strength, Kubota aims to promptly create an effective and efficient production and supply system to offer products that meet local market needs.
3. Profile of the Joint Venture
|Company Name||Tata Metaliks Kubota Pipes Limited|
|Location||Head office : Kolkata, West Bengal, India|
Plant : Kharagpur, West Bengal, India
|Capital||Rs. 1794 million|
(approx.2690 million Yen at the exchange rate of 1.5 Yen to 1 Rs. )
|Investment Ratio||TML 51%, Kubota 44%, Metal One 5%|
|Business||Manufacturing and sales of ductile iron pipes and accessories|
|Revenues||Rs. 2960 million (approx.4440 million Yen at the exchange rate of 1.5 Yen to 1 Rs.) (FY2012)|
|Number of Employees||640|
[Profile of TML]
|Company Name||Tata Metaliks Limited|
|Location||Head office : Kolkata, West Bengal, India
Plant : Kharagpur, West Bengal, India
|Capital||Rs. 1250 million(approx.1880 million Yen at the exchange rate of 1.5 Yen to 1 Rs.)|
|Business||Manufacturing and sales of pig iron for casting|
|Revenues||Rs. 5980 million (approx.8970 million Yen at the exchange rate of 1.5 Yen to 1 Rs.) (FY2012)|
|Number of Employees||620|
[Profile of Metal One Corporation]
|Company Name||Metal One Corporation|
|Location||Head office : Minato-ku,Tokyo,Japan|
|Capital||100 billion Yen|
|Business||Sales of steel products and investments in Japan and overseas|
|Revenues||2.473 trillion Yen(FY2011,Consolidated)|
|Number of Employees||10,000 (as of June 2012)|