Canadian auto-parts maker Magna International Inc. is set to exit its powertrain joint venture with Indian parts maker Rico Auto Industries Ltd. after the latter agreed to purchase Magna's stake in the company.
Rico first announced the deal at a Feb. 12 earnings call, a transcript of which was filed at the Bombay Stock Exchange on March 7.
Arvind Kapur, Rico's chairman, CEO and managing director, told analysts that the company "had the option" of buying Magna's stake in Magna Rico Powertrain Pvt. Ltd. Magna recently sold its stake in its fluid pressure and controls JV with South Korea's Hanon Systems for nearly $1.23 billion.
The transaction value of Magna's stake sale to Rico was not disclosed in the call, but Kapur said the price that Magna offered was "attractive."
Magna Rico had a total turnover of nearly 900 million rupees in fiscal year 2018. Rico manufactures its oil pumps and water pumps at its joint plant with Magna. The JV's major customers in the two-wheeler industry are India's Hero Motors Ltd., which accounted for up to 35% of the JV's total turnover; Bayerische Motoren Werke AG and GKN PLC, which accounted for a combined 15% to 16% of Magna Rico's total turnover; and Renault SA, which accounted for about 13%. Magna Rico also counts Maruti Suzuki India Ltd. as its client, accounting for close to 7% of the JV's turnover.
Post-transaction and after obtaining necessary approval, Rico and its subsidiaries will become 100% owners of Magna Rico, which will be renamed Rico Power and Hydraulics Ltd.
As of March 6, US$1 was equivalent to 70.04 Indian rupees.