Finnfund

Alteams Oy of Finland and India’s second largest manufacturer of commercial vehicles, Ashok Leyland Ltd., established a joint enterprise in India in July 2007. In autumn 2009 Ashley Alteams India Pvt. Ltd. began producing aluminium pressure die castings at its plant near Chennai.

Alteams Financial director Matti Tirkkonen says that the two companies make a dream team. Alteams is an expert in the technology of pressure die casting and Ashok Leyland has skills in manufacturing vehicles as well as excellent local relations. “We realised from the outset that we have a lot of common interests. We are in exactly the right place at the right time,” he says.

Subcontractor follows customers abroad

Alteams Group is part of the Kuusakoski group of companies and one of Europe’s largest producers of diecast aluminium components. The company also offers component-related services such as design and tooling, as well as processing the castings to make assembly-ready components.

Alteams Group turnover is about 100 million euros and it employs more than 1400 people. Its customers are major international companies operating in the fields of vehicle production, communication networks, electronics, manufacturing and meditech. Their global operating model requires the same mobility from their subcontractor. Apart from Finland and India, Alteams has production and logistics centres in Sweden, Estonia and China.

“We began in China back in 2001,” Tirkkonen points out. “Our experience there has now been put to good use in India. We also have some of the same customers in both countries.”

A joint venture the best option

Alteams began to look at opportunities in India in 2004. After a two-year hiatus the research continued and two options emerged: acquiring a local foundry or establishing a new company with an Indian partner.

During its planning for an Indian presence, Alteams was supported by Finnpartnership, a business partnership programme managed by Finnfund and financed by the Finnish Ministry for Foreign Affairs. Tirkkonen says that the Chennai region was a logical choice because it contains one of the greatest concentrations of information technology in India.

Alteams crossed paths with Ashok Leyland at various exhibitions. “They were seeking a partnership with a company that had world-class skills in making lighter and more environmentally friendly components for commercial vehicles. We in turn were looking for a partner who knew the Indian market and had good relations with the authorities,” Tirkkonen explains.

“There is no reason to fear India but a large country with a complex administration deserves a certain respect. Having a good local partner in a joint enterprise avoids many a problem.”

Financed by a Finnfund investment loan

Ashok Leyland is owned by the Hinduja Group which is one of the leading investment and banking groups in India. Ashok Leyland’s networks helped to find a suitable plot for the production plant in Cheyyar, about an hour’s drive south-west from Chennai. The joint enterprise makes aluminium pressure die castings for communications networks, commercial vehicles, and so on. The components are used, for example, in the base stations of mobile phone networks and in truck engines.

The investment in the first phase of the production plant is about 20 million euros. Initially the plant has some 230 workers but the aim is to increase the number of employees to about 400.

The foundry has created jobs in a poor rural area. Recruitment has been relatively easy, Tirkkonen says. Compared with China, for example, India has more advanced skills in die casting. This makes it easier to train employees for their duties.

The environmental impact of the production plant has been carefully considered. “Pressure die casting technology is not harmful to the environment. In addition the aluminium we use is 100 percent recycled.”

Finnfund has financed the project with an investment loan. Tirkkonen says the participation of a Finnish source of finance is important in a joint enterprise such as Ashley Alteams.

“Another thing that makes Finnfund a sought-after partner is that India has granted it exemption from withholding tax on interest payments. This was good news for our Indian partner, too,” he adds.

In the right place at the right time

The global financial crisis and recession have been felt in India and the investment in the joint enterprise was ultimately postponed about half a year. Tirkkonen says that despite the small delay the timing was perfect.

“We are in exactly the right place at the right time. Our customers in information technology are making a strong push in India, and we are in place one step ahead of our competitors.”

He expects competition to become tougher in the future, though, and recommends a humble approach to the growing capability of local foundries.

“Our trump card is the combination of an Indian production culture with our skills, automation, cost effectiveness and agility. These factors have made us successful in China and they are sure to pay off in India too.”

“We take the lead from our customers but prefer to be in place before them. We study market developments and the directions that customers are taking. We make our own operations as proactive as possible.”

For more information, please contact Ms Helena Arlander, Investment Director, tel. +358 9 3484 3355, email firstname.lastname@finnfund.fi