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Mr Suresh Krishna, Chairman and Managing Director, Sundram Fasteners Ltd, flanked by Mr Sampathkumar Moorthy, President (left), and Mr V.G. Jagannathan, President (Finance), at a news conference in Chennai on Thursday.

CHENNAI, March 6

SUNDRAM Fasteners Ltd, part of the TVS group, is setting up a factory in China to manufacture high tensile fasteners. To be set up as a 100 per cent subsidiary in Zhejiang province in south China, the factory will come up with an initial investment of $5 million, to be made over five years.

Sundram Fasteners Ltd (SFL) plans to invest up to $12.5 million depending upon how the business develops, Mr Suresh Krishna, Chairman and Managing Director, SFL, told a press conference here on Thursday. This is the first project to be set up by an Indian engineering industry in China.

SFL proposes to incorporate a company named Sundram Fasteners (Zhejiang) Ltd. The installed capacity of the factory will be 6,000 tonnes per annum, and it is expected to commence production in the first half of 2004.

The plant will largely manufacture value-added special fasteners and standard fasteners. The size of the Chinese fastener industry is estimated to be about 2,00,000 tonnes.

SFL had a branch operating in China for the past two years and an assessment of the Chinese market had indicated the need for a reliable, high quality fastener supplier to meet the needs of the growing automotive industry.

The market demand for automobile components is vast in China as the country produces 1.7 million commercial vehicles and buses, and one million cars, according to an SFL press release.

Mr Suresh Krishna said that the Chinese plant would initially manufacture fasteners for commercial vehicles and then for passenger cars. SFL had got letters of interest from major players in the Chinese automobile industry such as General Motors, Volkswagen and Delphi. These letters of interest would have to be translated to letters of intent after the plant commenced production. SFL had been supplying components to Cummins in China.

He said that it was no longer possible to ignore the Chinese automobile market, which was witnessing growth of 25 to 40 per cent, depending upon the segment.

"We are sanguine that it is a move (to set up a plant there) in the right direction," Mr Suresh Krishna said. The Chinese market was quite competitive in terms of cost and it was accepted that automobile manufacturers would increasingly source their components from China and India. Therefore, it was better that SFL had a presence in China and fulfil its growth needs.

A number of multinational automobile manufacturers had established manufacturing facilities in China and were importing a substantial portion of their requirement of high quality fasteners. Chinese automotive manufacturers were also upgrading the quality of components in line with international standards.

Over time, the Chinese subsidiary would also export fasteners to nearby Asian markets such as Korea and Japan, in addition to meeting the requirements of the Chinese domestic market, Mr Suresh Krishna said.

The Chinese plant would source raw material locally, but was open to the idea of sourcing it from Korea or Taiwan, if they were price-competitive, Mr Suresh Krishna.

The plant would employ 60-70 people initially, with most of them being Chinese. Initially, SFL would have some managerial staff posted from India but over time this number would come down. Mr Suresh Krishna was confident that over time, the Chinese operations would grow into a fairly large company by itself.

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