The project sponsor is one of the largest two-wheeler manufacturers in India, TVS Motor Company Limited (TVS Motor or the sponsor), having manufacturing plants in Hosur, Mysore and Himachal Pradesh in India. It is a listed company and is the flagship company of the TVS Group, one of India’s leading suppliers of automotive components. Thanks to its strong in-house R&D capabilities and supplier base, the Sponsor is able to successfully develop indigenous two-wheeler models and has a wide dealer network with a total of 2,000 service outlets and it employs a workforce of around 5,800 people. Around 57% of the sponsor’s shares are held by the promoter company – Sundaram-Clayton Limited (headed by Mr. Venu Srinivasan) and its subsidiary. Indian and foreign financial institutions hold around 23%, while Indian corporate bodies and retail investors hold the balance 20%. The project company, PT TVS was established in 2005 to manufacture two-wheelers, including components and accessories. It is 100% owned by the two investment vehicles, which are fully owned by the Sponsor: TVS Motor Company (Europe) B.V, registered in the Netherlands owns 75%, while the remaining 25% is owned by TVS Motor (Singapore) PTE Limited.

The estimated project cost is USD97 million. The proposed IFC investment is an A loan up to $20 million equivalent.

20.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
Equity

* These investment figures are indicative

The plant is located in Suryacipta, an established and largely developed, industrial estate in Karawang, about 55 km east of Jakarta, Indonesia. The sompany also has its registered office in Jakarta.

The project will support the sponsor’s ongoing efforts to expand internationally and enter the increasingly competitive two-wheeler industry in Indonesia. The sponsor will invest significantly in personnel development and training, and the project is expected to create an estimated 500 new jobs at the end of third year of its operations. In addition, the project is expected to result in significant knowledge sharing and transfer of know-how to the Indonesian subsidiary, not just in terms of manufacturing and quality processes, but also the establishment and management of a sales and service network, dealer channel etc., knowledge which has been built up over the years in the highly competitive Indian market. Furthermore, given the sponsor’s focus on product innovation and its ability to meet stringent quality standards, the project is expected to lead to technology transfer not only at the project company but also at the supplier level as well. Some of the sponsor’s key suppliers in India are exploring the possibility of establishing Indonesian operations in future to support the company. Non-quantifiable development impacts will include benefits to the consumers through improvement in the quality of products and increased competition in Indonesia, the creation of 500 new, trained employment, benefits to the local economy as a result of localization of production and development of the local supply chain, and attraction of foreign direct investment.

IFC will provide long-term debt in line with the project funding requirements, that is not easily available in the local market, particularly to a new entrant like PT TVS. In addition, the project is in line with IFC’s strategy of supporting South to South investments. The project is the first major expansion for the TVS Motor Company outside India, and TVS Motor derives a high degree of comfort from IFC’s strong local presence in the market and relationships with the government, financial institutions and other corporates. Apart from being a provider of long-term finance, IFC is an informed partner that can also contribute to the project with knowledge of the global automotive industry. Moreover, assisting a sponsor that is known for its good corporate governance and social responsibility practices will help IFC promote good business practices in the region.

This is a category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards and guidelines.

Environmental and social impacts with this project are typical of those associated with light manufacturing projects including; management of air emissions and liquid discharges; solid and hazardous waste minimization and management, workplace health and safety standards including managing exposure of the workforce to hazardous chemicals, community health, safety, security and engagement; and corporate social responsibility and community development.

PT TVS has demonstrated the capacity, and has committed the resources, to implement comprehensive environmental, health, safety and quality management systems consistent with international standards (ISO) as well as IFC environmental and social performance standards throughout its entire operation.