Amsted Rail plans cast-wheel unit in India
Joins hands with JP Morgan One Equity Partners and Hyderabad’s Patil Rail Infrastructure.
By Nevin John, TNN |
MUMBAI: Chicago-based Amsted Rail, world’s largest producer of rail cast wheels, is joining hands with JP Morgan One Equity Partners and Hyderabad’s Patil Rail Infrastructure (PRIL) for setting up a cast wheel manufacturing unit in India. This is first such JV company to approach the railway ministry as the country saw an unprecedented growth in the rail sector on the back of various metro rail projects, replacement of existing tracks, port connectivity projects and proposed freight corridors.
Sources said executives of the companies have already met top railway ministry officials and submitted a Rs 500-crore investment proposal.
“The proposed greenfield facility will be owned by a separate company, in which Amsted will hold a 30% stake and JP Morgan OEP will have 25%. The remaining 45% stake will be owned by Patil Rail,” said a source. In Patil Rail, the New York-based private equity fund JP Morgan OEP holds 40% stake. JP Morgan had picked up the stake early 2007 by paying around Rs 160 crore.
The new manufacturing facilities are being set up to cater to the growing requirements of rail wheels for the freight wagons by Indian Railways. Currently, wheels are supplied by Rail Wheel Factory, which can manufacture 1.2 lakh wheels a year. An additional 70,000 wheels are produced by the Durgapur steel plant of SAIL and the balance is imported from companies including Amsted. Indian Railways requires close to 3 lakh wheels a year, which is expected to grow 20% annually for meeting additional demands.
The proposed freight corridors, metro rail projects, replacement of existing tracks and port connectivity work are the major drivers of growth in the sector. The railways have turned hugely profitable during the past couple of years, and the government spending on track extension and new tracks has gone up substantially.
The proposed JV company will raise Rs 150 crore as debt and the remaining will be the equity contribution of the companies, said sources. “We remain committed to build a plant at Chhapra in Bihar with 1.5 lakh wheels a year capacity. The cost-effective plant will be run on the technology of Amsted,” added sources.
The Indian Railway had already invited bids for a 1-lakh wheels a year plant at Chhapra. L&T and Tata Projects had submitted the bids and the result is expected soon. But the investment for the project is expected to be above Rs 1,000 crore as Indian companies have to hire technology from outside.
Sources said executives of the companies have already met top railway ministry officials and submitted a Rs 500-crore investment proposal.
“The proposed greenfield facility will be owned by a separate company, in which Amsted will hold a 30% stake and JP Morgan OEP will have 25%. The remaining 45% stake will be owned by Patil Rail,” said a source. In Patil Rail, the New York-based private equity fund JP Morgan OEP holds 40% stake. JP Morgan had picked up the stake early 2007 by paying around Rs 160 crore.
The new manufacturing facilities are being set up to cater to the growing requirements of rail wheels for the freight wagons by Indian Railways. Currently, wheels are supplied by Rail Wheel Factory, which can manufacture 1.2 lakh wheels a year. An additional 70,000 wheels are produced by the Durgapur steel plant of SAIL and the balance is imported from companies including Amsted. Indian Railways requires close to 3 lakh wheels a year, which is expected to grow 20% annually for meeting additional demands.
The proposed freight corridors, metro rail projects, replacement of existing tracks and port connectivity work are the major drivers of growth in the sector. The railways have turned hugely profitable during the past couple of years, and the government spending on track extension and new tracks has gone up substantially.
The proposed JV company will raise Rs 150 crore as debt and the remaining will be the equity contribution of the companies, said sources. “We remain committed to build a plant at Chhapra in Bihar with 1.5 lakh wheels a year capacity. The cost-effective plant will be run on the technology of Amsted,” added sources.
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The Indian Railway had already invited bids for a 1-lakh wheels a year plant at Chhapra. L&T and Tata Projects had submitted the bids and the result is expected soon. But the investment for the project is expected to be above Rs 1,000 crore as Indian companies have to hire technology from outside.
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