Ashok Leyland, the flagship company of the Hinduja Group, will pick up 26 per cent equity stake in the U.K.-based bus maker Optare plc.
This follows an agreement inked between the two for a long-term strategic co-operation. The investment will be $7.5 million.
V. Sumantran, Executive Vice-Chairman, Hinduja Automotive Group and member of Ashok Leyland board, told a press conference here on Thursday that the stake buy in Optare was being facilitated through a fresh offer at a “competitive market rate”.
The move to buy a stake in the U.K. bus company was a logical extension of a well thought-out strategy of Ashok Leyland to insulate itself against the cyclical nature of the commercial vehicle business and get into unexplored adjacent sectors and also spread to new geographical locations, he reasoned.
Mr. Sumantran listed three significant benefits for Ashok Leyland from the deal. First, it would help the company gain access to the design and wide product offerings of Optare. Second, it would help it participate in the innovation exercise of Optare. And finally, it would help Ashok Leyland to get an opportunity to co-develop future range of buses.
Under the agreement, Ashok Leyland would nominate two of its representatives on the board of Optare. The tie-up would also benefit Optare, he said. Optare could improve its competitiveness in the U.K. and its export markets through access to Ashok Leyland's lower-cost supply chain, co-operation in new product development and improved management of working capital.
Founded in 1985, Optare has a turnover of around $125 million. It employs around 500 people on two manufacturing sites at Leeds and Blackburn and produces a wide range of buses of its own design, including double-deckers and mini coaches.
“This strategic alliance is a critical part of our ‘Global Bus’ programme, which is under development,” Ashok Leyland Managing Director R. Seshasayee said.
Meanwhile, Optare Non-Executive Chairman John Fickling said,“This new venture will deliver direct benefits to U.K. bus customers while propelling Optare on to the global stage.”