27926 - VW-India Pvt. Ltd.

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Summary of Proposed Investment

Project Number

27926

Company Name

VOLKSWAGEN INDIA PRIVATE LIMITED

Date SPI Disclosed

Mar 12, 2009

Country

India

Industry

Manufacturing

Projected Board Date

Apr 15, 2009

Status

Completed

Sector

Automotive and Light Vehicle

Date Revised SPI Disclosed

Feb 23, 2010

Department

Regional Industry - MAS Asia & Pac

Environmental Category

B - Limited

Previous Events

Approved : May 21, 2009
Signed : Jun 29, 2009
Invested : Aug 5, 2009

Project Description

The project will support the completion of a EUR580 million integrated car manufacturing plant, with an initial capacity of 110,000 units in Pune, India (the “Project”), by Volkswagen India Private Ltd. (the “Company”). The Company was incorporated in 2007, and Project implementation started in 2007. Construction of the plant building and ancillary facilities is expected to be completed in the second quarter of 2009. The Company will target the small to compact car segments of the Indian market and expects to create a cost-competitive base for large-scale market expansion, which is expected to be achieved through a high degree of localization of the supplier base.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management	22.0
Guarantee
Loan	78.02
Equity

Development Impact

The Project will have a number of important development impacts, and is expected to:

- Increase competitiveness of the Indian automotive sector: Through the Project, VW AG will transfer technological know-how and help develop technical and management skills in the automotive cluster in Pune, which will help to strengthen competitiveness of India’s growing automotive sector.

- generate employment and provide training: The Project will benefit the local population by generating significant new employment (about 2,500 direct jobs as well as around 10,000 indirect jobs through the value chain from suppliers to distributors and dealers).

- provide strong demonstration effect: In the context of the ongoing global liquidity crisis, successful completion of a Project undertaken by a world-class OEM is expected to provide a positive demonstration effect to other foreign investors and encourage more foreign direct investment into India.

- improve energy consumption in product manufacturing and product usage: VW AG’s technology is more efficient in terms of energy consumption in the manufacturing process than is currently the norm in the Indian automotive industry. In addition, the vehicles to be produced in India are expected to have lower fuel consumption and thereby positively affect climate change, due to lower emissions throughout the product cycle.

In light of the on-going liquidity crisis and the specific challenges faced by the automotive industry, IFC’s expected role in the Project includes provision and mobilization of long-term financing necessary to complete the Project, which is not available under the current financial market conditions, as well as the provision of local currency financing through swap intermediation, which may not be available under the current market conditions. In addition, IFC will explore the possibility of provision of advisory services to further develop the VW AG’s local supplier base.

This investment has been categorized as B based upon application of IFC''s Policy on Social and Environmental Sustainability. The key environmental, social and health & safety issues associated with this investment include: (i) management of air emissions and liquid effluent discharges; (ii) solid and hazardous waste minimization and management; (iii) workplace health and safety standards, including managing exposure of the workforce to hazardous chemicals; and (iv) community health, safety and security.

Further details on the potential environmental and social impact of the Project and guidance on how and where information about the Project can be obtained are provided in the IFC Environmental & Social Review Summary.

Contacts

For Inquiries About the Project, Contact

Mr. Jeffrey Dehate
Volkswagen India Private Limited
E1, MIDC Industrial Area (Phase II)
Pune, Maharashtra, 410501
Telephone: +91 2135 661024

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Local Access of Project Documentation

Volkswagen India Private Limited
E1, MIDC Industrial Area (Phase III)
Village: Nighoje Mhalunge, Kharabwadi,
Tall: Khed, Chakan, Pune, - 410501
Maharashtra, India.
Telephone: +91 2135 661024

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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