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Toyota Cuts Investment

By Motortrend India Staff   |   12 October,2009

Toyota Kirloskar Motor Limited has reduced by one-fourth its proposed investment in a second plant in India for its small-car debut in the country.

The savings are from lower construction costs, local sourcing of equipment and a favourable currency exchange rate.

The Indian arm of Toyota is also in talks with banks for raising Rs 900 Crore, which is the company's first fund-raising in the country.

The lower investments and savings are crucial for Japan's Toyota Motor Corporation as the company has reported its first loss in seven decades in 2008-09 and has put on hold several projects.

Shekar Viswanathan, Deputy Managing Director, Toyota Kirloskar, said the company will invest Rs 2,400 Crore in the second plant, near its existing factory at Bidadi on the outskirts of Bangalore and not Rs 3,200 Crore as announced in November.

The lower investment will not affect the planned capacity for 100,000 cars a year in the second plant, he added.

Toyota Kirloskar will also stick to its deadline of constructing the factory by December 2010 and launching the small car in early 2011.

The total investment in the second plant, however, may increase by Rs 300-500 Crore depending on future exchange rate movement and cost overruns on software and other aspects, he said.

The rupee has strengthened 2.9% against the yen so far this year, making imports from Japan cheaper.

Cost-saving measures are routine in all capital intensive projects but "more people are asking questions now", said Viswanathan.

As for Toyota Kirloskar's fund-raising, the firm is in discussions with a clutch of banks including State Bank of India, ICICI Bank Ltd, HDFC Bank Ltd and Hong Kong and Shanghai Banking Corp. Ltd to raise Rs900 Crore between April and December 2010.

The remaining amount will be funded from internal accruals, which currently stand at Rs 1,600 Crore. "We will go for a bank borrowing, buyer's credit or a deferred payment guarantee," Viswanathan said.

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