Chennai: Chennai-based commercial vehicle manufacturer Ashok Leyland Limited and Finland''s €130-million turnover Alteams group have teamed up together to make high pressure die casting (HPDC) aluminium products for automobile and telecom sectors.

The two have formed a 50:50 joint venture for this purpose and the plant will be located near Chennai. During the first phase to be completed by 2008 the yet to be named joint venture company would invest around Rs175 crore. The debt: equity for the project will be 1:1 and the partners will bring in equal amount towards the project cost.

"The JV reflects the expansion of Ashok Leyland Group''s presence in the auto components sector to take advantage of rapidly growing opportunities both in India and abroad," said R Seshasayee, managing director, Ashok Leyland.

According R Seshasayee, the total investment into the project at the end of second phase around 2013 would be around Rs335 crore and the company''s turnover would be around Rs650 crore. The venture is expected to generate direct and indirect employment opportunity for 1,000 people.

The manufacturing facility in Phase I has been planned in Tamil Nadu and the JV will produce components for the telecommunications sector such as those fitted in the transmission and receiving equipment. It will also partly meet Ashok Leyland''s own captive requirements for components for engines and gearboxes.

In Phase II, the joint venture will enhance its product portfolio with HPDC components for automotive sectors including passenger cars and for non-automotive applications as well. The target markets will extend beyond India.

Components through the HPDC technology are increasingly being favoured thanks to their high quality, capability for complex geometry and weight efficiency as also economy at higher volumes in the telecommunications and automotive sectors, which have emerged high growth areas in the past few years.

Seshasayee said the joint venture company would start commercial operations soon as Alteams has already booked orders from telecom equipment makers like Nokia Siemens Networks. The components will be fitted in transmission and receiving equipments.

"The auto components made by the new company will initially consumed by Ashok Leyland. Later we will look at other customers," Seshasayee added.

On the reason for Ashok Leyland getting into a joint venture when it already had Ennore Foundries Limited, a casting subsidiary, he said Ennore Foundries was in to grey castings and was tied up with its expansion programme. Moreover, the group felt aluminium die casting had good potential and decided to venture into the project. "The new venture is not a division of Ashok Leyland. It is a separate entity. And nothing stops Ennore Foundries from getting into aluminium die casting," Seshasayee said.

Initially the new company will import the telecom components from Alteams'' Chinese plant and assemble the same in leased premises. "We are on the look out for 25-30 acre plot to set up a full fledged plant."

According to Alteams Group CEO Panu Routila, the group''s auto component business is small. Partnering with Ashok Leyland gives us an opportunity to grow this business in a big way.

Asked about Ashok Leyland''s plans for a one-tonne truck Seshasayee said, "We are looking at that segment."