Announcement of Investment in India on January 6, 1964

L INTERNATIONAL FINANCE CORPORATION . 1 8 1 8 H STREET, N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 IFC PRESS RELEASE NO. 64/2 For AM Newspapers Monday January 6, 1964 SUBJECT: Investment in India The International Finance Corporation has agreed to provide loan and share capital amounting to $3,155,000 to a new Indian industrial company, the Mahindra Ugine Steel Company Limited (MUSCO), for the construction and operation of an alloy steel plant in the State of Maharashtra, India. The project is being sponsored by Indian and French industrial interests and leading financial instit- utions in India are providing additional loan capital and underwriting the new Company's initial public share offering. The Continental International Finance Corporation, a subsidiary of the Continental Illinois National Bank and Trust 4I Company of Chicago, is participating in IFC•s loan and share investment. The Indian sponsor is Mahindra & MaM.ndra Limited (Mahindra), of Bombay, manufacturers of jeeps and trailers, agricultural tractors and implements, diesel engines and textile machinery and also an important importer and distributor of steel in India. The French sponsor and technical adviser in the project is Societe d'Electro-Chimie, d'Electro-Metallurgie et des Acieries Electriques d 1 Ugine (Ugineh a leading alloy steel producer in Europe. Ugine, together with Compagnie Financiere de Suez in Paris and the Comptoir National d 1 Escompte de Paris, has formed for this purpose a subsidiary company, Societe Inde-Ugine, which will hold a participation in MUSCO. The new steel plant will be located at Khopoli, 65 miles from Bombay, conven- iently sited to serve the Bombay industrial area which, together with the Calcutta • area, is the most important market for alloy steel in India. In the first stage ltnt  • 2 - the plant will have a capacity or 18,000 tons a year of finished alloy steel pro- ducts but it has been designed so as to allow a later increase of its capacity. • The plant is expected to come into operation by 1966. Production will include alloy steels used in mechanical industri~'ls (machine-tools, automobiles, etc.). The total cost of the project will amount to Rs. 65 million (the equivalent of $13,650,000), of which Rs. 32.5 million will be f:inanced by long-term loans, Rs. 30 million by an initial stock issue consisting of ordinary and preference shares to be made by the Company and the remaining Rs. 2.5 million by suppliers credits. IFC 1 s financial contribution, accounting for 23 percent of the total capital cost of the project, consists of a loan of $2.3 million repayable by MUSCO in 20 semi~annual installments beginning in 1968, and a subscription of Rs. 4 million (the equivalent of $845,000) in shares. • The government-sponsored Industrial Finance Corporation of India (IFCI), New Delhi, is also providing loan capital to the extent of Rs. 15 million. An- other loan, amounting to Rs. 6.5 million, is being made to MUSCO by the privately- owned Industrial Credit and lnvestment Corporation of India (ICICI), from foreign exchange resources already provided by the World Bank to the ICICI. Nearly half the capital cost of the project will be covered from the proceeds of the company's initial stock issue consisting of Rs. 25 million in equity shares and Rs. 5 million in preference shares. In addition to the IFC subscription, Mahindra and Inde-Ugine will each take up Rs. 4.15 million in eq~ity shares. The shareholders of Mahindra and staff of Mahindra and its associated companies will be offered equity shares in the amount of Rs. 2 million; the remainder of the equity • shares and all of the preference shares are expected to be subscribed by Indian tJt"W ·ewt···· t e tu I 1 .. . .. • - 3 - financial institutions and private investors in India. The public offering of the equity shares will be underwritten by a group of Indian public and private entities, including the IvICI, the IFCI, the Life Insurance Corporation of India, the Maharashtra government, and brokers. The new steel plant is one of the largest French-sponsored projects in the private sector in India. Through its active participation in the project the important French company, Ugine, will make a significant contribution to the ind- ustrial development of India. In addition to its equity participation, Ugine will provide MUSCO with technical know-how and assistance in the construction and op- eration of the plant and will train in its own installations enginee~s and staff required for the plant's operations. t9 The development of the alloy steel industry has been given high priority under the Indian Government's current five-year plan. Output of common steel doubled in India during the period from 19.59 to 1962, and has nou reached over .5 million tons. A large steel expansion program is still under way to meet the demand arising from the rapid increase in industrial production planned for the next few years. In association with the increase in demand for common steel, imports of alloy steels have also increased sharply, despite restrictive import controls which have been imposed because of the shortage of ff:>reign currencies. An important demand for alloy steels, however, still remains 'to be satisfied. Production at the Khopoli plant will therefore help to satisfy the demand and will help to assure India of its continued industrial development. In particular, by replacing imports it will help to conserve the country's foreign exchange • •