Sri Lanka's Ideal Motors to Set up an Assembly Plant to Make Mahindra Three Wheelers & Motorcycles

23rd February 2011, www.dailynews.lk, By Harshini Perera

Ideal Motors will set up a plant to assemble Mahindra three wheelers and motorcycles for the Sri Lankan market.

“We have purchased another one acre property in Ratmalana to set up an assembly plant which will be utilised to assemble three wheelers and motorcycles. Mahindra motorcycles will be launched in the near future,” Ideal Motors, Chairman Nalin Welgama told Daily News Business.

Mahindra Group together with Ideal Motors will put up a technical college in motor mechanism in the near future. Sri Lanka will train young people who expect a career in motor mechanism. Mahindra Group also has shown interest in investing in the IT and tourism sectors of the country in the future.

Ideal Motors has tied up with an Indian tyre giant, ‘Apollo Tyres’ of India as an authorized distributor to import and distribute passenger, commercial and agri tractor tyres as there is a significant expansion in the vehicle market in Sri Lanka. The new tie up with Apollo will be launched in June and Apollo tyres will be available islandwide. Ideal Motors will launch its new product Mahindra Maximo which will be branded in Sri Lanka as ‘Ideal Lokka’ at the end of March. It will be a light commercial vehicle with the latest CRDE technology and expected to sell around 400 units per month at the initial stage.

Though there was a huge boom in the automobile industry after the tax reduction for passenger vehicles, there was no impact on commercial vehicles.

The interest rates are low for borrowings from commercial banks and hence there is a growth in the market. This will increase the affordability of a vehicle through a finance scheme and buying a vehicle will be much more affordable than earlier.

“We had remarkable growth and profitability for nine months during the financial year 2010 and 2011 and it was 35 percent higher than we forecasted. We will concentrate on going for an initial public offering in three to four years time,” Welgama said. “Since the taxes have come down for dual purpose vehicles and vans (double cabs), we are aggressively marketing Mahindra Double cabs ,” he said.

“We expect to increase the sales dealer network to 36 from current sales dealers of 22 and will appoint fresh network for Mahindra motor cycles and three wheelers”.

“We will tie up with Automobiles Association (AA) of Sri Lanka in providing further customer support for new vehicles. Ideal Motors together with Mahindra & Mahindra will provide technical knowledge, training and diagnostics for these customer support unit which will be set up islandwide,” he said. Anand Mahindra in keeping with his pledge will be holding the Mahindra Annual Blue Chip Conference in Sri Lanka in December this year with a delegation in excess of 1,000 overseas participants.

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A top US multinational has invested its pension fund in the Colombo bourse while top investment delegations from India, China and Germany are due to visit the island next month as Sri Lanka draws foreign investor interest at the end of the conflict.

“There was no point in time in history when the country received so much interest. This is solely due to these two reasons,” External Affairs Minister, Professor G.L. Peiris told an eminent gathering in his address as the Chief Guest at the inauguration of the 31st annual conference of the Institute of Chartered Accountants of Sri Lanka (ICASL), on Thursday.

He said the recent past saw US-based General Electric (GE) deciding to invest its pension funds in the Colombo Stock Exchange (CSE) while Janus Fund has already bought large holdings in blue chips. “Shangri-La Chairman Ian Koch spent 3-days on invitation to Sri Lanka and has decided to build a hotel in Colombo and another in the deep South. Ananda Mahindra of the Indian Mahindra and Mahindra Group will come into the leisure sector in a very significant way,” he said. He said other top delegations from India, China and Germany are also due to visit Sri Lanka.

He said that in this regard, the removal of road blocks by the government this week was a conscious decision to improve the ‘optics of this situation (to attract more investment)’ and also in the reduction of emergency rule.

He said that a report on the modalities for simplifying the tax structure is out now and asserted that this will make the tax structure predictable, which in turn will facilitate foreign investment. Delivering the keynote address, Attorney General Mohan Peiris noted that Sri Lanka is on the springboard of development and prosperity. “We are witnessing a resurgence of foreign direct investment from all parts of the world. The 31st ICASL National Conference is taking place at a time when reconstruction, rebuilding and the march towards peace, brotherhood and economic prosperity have become the clarion call of all citizens of the country. We have promising signs of development emerging in all parts of the country that tell us how resilient we are in moving towards economic prosperity and millennium development goals,” he said.

He also noted that the CSE became the second best performing bourse in the world, while development has commenced in the areas of ports, shipping and aviation. “The indicators of development are manifest today when one notes the drop in inflation, interest rates, the existence of forex reserves of almost $6.5 billion which is equivalent to six months of imports.

These factors coupled with a stable government in place sans an election for the next six years gives Sri Lanka the potential for its growth in investment and makes it the cynosure of all eyes,” he noted.

Mr. Peiris noted that the accounting profession comes into contact with the drivers of economy – namely the multinational companies and foreign investors at various stages. “When a year draws to a close, annual reporting is a mandatory requirement and the corporate world looks to you for the proper preparation and presentation of financial statements. The auditors, in the auditors’ report, express their opinion on the truth and fairness of the financial statements and an investor would be looking at your unqualified opinion in order to make his investment,” he asserted, adding that it’s this statement that the

investor will use as a monitory mechanism of the buoyancy or of the company.

Some pertinent questions were also posed by Mr. Peiris to the accountants. “What happens if those investors claim that they have relied on your opinion to make a decision and they suffer loss owing to wrong opinion given by the auditors in the auditors’ report? Are the auditors liable to third parties for negligent misstatements in the auditors’ report? For example, the auditors express the opinion that the financial statements truly and fairly present the financial position and results of the operation of the client company but in fact the financial statements contain material misstatements.

Of course there would be sanctions imposed by regulatory bodies such as the Accounting and Auditing Standards Board and impaired professional reputation. But could there be litigation by the investors? How does the legal liability of the Accountants for misstatements stand at the moment? These are the questions I would like to look at as the world sees opportunity in Sri Lanka,” he said.

Image: Seen here former BOI Chief and now a Singapore - based investment banker, Arjuna Mahendran (right) in conversation with local businessmen at the conference.

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Mahindra & Mahindra Ltd., India’s largest maker of sport-utility vehicles, may provide auto loans and set up resorts in Sri Lanka as the island’s economy recovers after the end of a civil war.

“There are huge opportunities,” Vice Chairman and Managing Director Anand Mahindra said in the capital Colombo today. Mahindra & Mahindra Financial Services Ltd. may provide auto loans and also lend for rural housing, the company said in a statement.

Officials of the group, which owns software-services providers, runs resorts, and provides loans for purchase of SUVs in India, will separately return to Sri Lanka for meetings to set up the businesses, Mahindra said. Last week, Mahindra was named as the preferred bidder for a South Korean automaker, as the Mumbai-based company aims to expand its overseas business.

The group also plans to expand tractor sales in Sri Lanka and is gauging investment opportunities in property development and economic zones, he said. Mahindra Holidays & Resorts India Ltd. may set up projects as more Indians visit the island, according to the statement.

The end of Sri Lanka’s 26-year war in May 2009 has lured back tourists to the teardrop-shaped island and helped the South Asian nation’s benchmark index climb 60 percent this year, the best performance among the Asia-Pacific region’s 16 biggest markets. President Mahinda Rajapaksa’s government is aiming to accelerate economic growth to 7 percent in 2010, the fastest pace since 2006.

The Mumbai-based automaker was named preferred bidder for a controlling stake in Ssangyong Motor Co.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net