American earthmoving equipment maker Caterpillar has agreed to consider a price of 3375 million rupees ($US73 million) to acquire the earthmoving equipment division of Hindustan Motors (HM), writes Arjab Basu. Setup in 1969, HM's earthmoving division has two facilities in south India; one at Thiruvallur in the state of Tamil Nadu and a second at Pondicherry. The agreed selling price is inclusive of net current assets of both the manufacturing facilities plus Hindustan Motors' engineering and education centres.

After the deal is concluded, Caterpillar plans to manufacture off-road trucks, wheeled loaders, and track type tractors at the plant at Thiruvallur and produce back hoe loaders at Pondicherry.

The agreement would be mutually beneficial because Caterpillar would be able to leverage HM's wide retail network and established plants to introduce new products to the Indian domestic market.

There is also the possibility of making the country a base for Caterpillar exports to other countries in South Asia, South East Asia and Africa.

HM's earthmoving equipment division already manufactures dumpers, loaders and track type tractors under licence from Caterpillar. Turnover was approximately 3550 million rupees ($US77.1 million ) during fiscal year 1999-2000.

The company enjoys a market share of about 50 per cent for dumpers and 70 percent for loaders. It employs 1400 people and the manufacturing and warehousing facilities cover an area of 532,000 square feet. An additional 100,000 square feet is devoted to Engineering and Education Centres.

To read about why HM sold out to Caterpillar, please click here.