Sundaram-Clayton recast cleared

5-year-old business recast plan for Sundaram Clayton (SCL) has been finalised by TVS group and the US partner, Wabco, part of American Standard (AS). The board of SCL on Monday cleared the transfer of the brakes business to its wholly-owned subsidiary, Wabco-TVS (India), with assets and liabilities as on January 1, 2007. SCL will remain a separate entity by retaining the non-brakes businesses like aluminium die castings and holding investments directly and through its subsidiaries in TVS Motor, TVS Electronics and TVS Finance.

Currently, in the Rs 18.96-crore paid-up capital, TVS holds 40.83%, Clayton Dewandre Holdings (CDH), UK, a part of Wabco division of AS, 39.17% and the public 20%. The equity will be split equally between Wabco-TVS and SCL. As part of this, it is proposed for every existing share of Rs 10 paid-up currently held in SCL, shareholders will receive one share of Rs 5 paid-up of SCL and one share of Rs 5 paid-up of Wabco-TVS. Since all the shareholders of SCL will be issued shares in Wabco-TVS on a proportionate basis, there will be no change in the overall shareholding pattern on the date the demerger becomes effective. Post demerger, shares of Wabco-TVS will be listed on the same exchanges where the shares of SCL are listed. It is intended that within two years from the date of listing of the shares of Wabco-TVS, TVS group will retain majority control and management of SCL. Similarly, the majority control and management of Wabco-TVS will be vested with Wabco during the period. In line with this objective, CDH will transfer the shares held by in SCL to TVS group and the latter will share its shares in Wabco-TVS to CDH. Listing of the new entity is expected to take place in April 2008 after securing all approvals.

In a statement, SCL said both partners have decided to focus on their respective core competencies to more effectively capture future growth opportunities. The brakes business requires new technology to maintain its market leadership and respond to the future needs of the Indian commercial vehicle markets for enhanced braking and advanced safety and performance systems.This is primarily driven by a significant increase in road and highway infrastructure and expected regulations for improved safety and environmental compliance. This will enable Wabco to provide access to technology as well as leadership to pursue growth opportunities in the overseas markets for the brakes business. Sources in SCL, in a couple of years, brakes export is expected to touch Rs 100 crore.On the other, the foundry business requires focused attention to enhance operations and further develop export markets, which will be pursued by the TVS group.