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Tuesday, 5 April 2016 00:10 - - {{hitsCtrl.values.hits}}
By Charumini de Silva
Sri Lanka’s cycle exporter, BSH Ventures Ltd. will increase its production capacity to 1 million by 2019 with an investment of $ 20 million to develop the facility as the manufacturing base for its hi-end exports to European market following India’s leading bike maker, Hero Cycles acquiring 60% stake in the firm.
From left: BSH Ventures CEO Jehan Peruma, Meghna Group Managing Director Mizanur Rahman, BSH Ventures Chairman Jeyam Perumal, Hero Cycles Chairman and Managing Director Pankaj Munjal, BSH Ventures COO V. Sreeram and BSH Director Rohit Maheshwari
The acquisition comes in line with the company’s aggressive intent to strengthen its global presence and to spruce up its manufacturing proficiency to rapidly rising global demand – next to Sri Lanka regaining its GSP+ status the country’s sea ports and shorter lead time for shipments to Europe were the key factors that drove Hero to this acquisition.
“This is a major strategic acquisition for us as we work to expand our global sales as well as brand presence. As Hero wants to take advantage of the benefits associated with Sri Lanka regaining the GSP+ import duty free status, we took no time to think that this was the gateway to Europe,” Hero Cycles Chairman and Managing Director Pankaj Munjal told journalists in Colombo on Friday, 1 April.
Hero Cycles Chairman and Managing Director Pankaj Munjal (centre) addressing the media, while BSH Ventures Chairman Jeyam Perumal (right) and Meghna Group Managing Director Mizanur Rahman look on
The firm also intends to export to Pakistan from Sri Lanka noting that there is a sizable market.
He said the joint venture will invest around $ 18 to $ 20 million aiming to increase the production by three folds this year, while aiming 3.5 times sales growth with 180,000 units this year.
Noting it is a private company Munjal refused to provide the investment involved in acquiring 60% stakes of BHS. “As the company was still in the process of sketching out the new plans, we are unable to provide any specific figures on investment proportions by shareholders, employment generation and so on at this juncture,” he said.
Explaining that there is a huge local market untapped, he said that the company was keen to launch the Indian entry level strategy over here, especially focusing on the retail market in Jaffna with very competitive pricing.
The ownership of the company is split between Hero Cycles with 60% of the shares; while Perumal family together with Bangladesh based Meghna Group holds 40% of stakes. Meghna Group is the largest exporter of bicycles to Europe from South Asian region.
BSH Ventures Chairman Jeyam Perumal said with Hero also joining the company they were able to marry the three major bicycle manufactures in SAARC region and to ensure to drag their business to a 1 million target by 2019.
When asked why BHS sold 60% stake to Hero Cycles he pointed out that it was a strategic move to increase the scale of production. “In a win-win situation you have to look at pragmatic solutions. We were not going to close down or look at a lifeline as GSP+ was withdrawn. What we open we never close down,” he stressed.
Currently the local value addition of BHS is about 52% to 54% and is expected to increase as the firm go along. “There will be more synergies. We will be going for backward integration like moulding parts, helmets and various other accessories. We will do all that as time goes on,” Perumal noted.
BSH Ventures COO V. Sreeram said as far as brands are concerned they would buy a lot of production out of BSH as a brand of Hero into India to cater to the mid end and premium end of the spectrum.
“Sri Lanka becomes a base and a capability for us in the frontend in setting up a strong brand presence in the global marketplace. As we venture deeper into the retail end there would be a higher demand for a host of accessories for the bicycles. These are all businesses that sustain the retail channel and we will certainly use our brand power to keep on exploiting those opportunities,” he pointed out.
Sreeram said the European market is not growing by sheer volumes at a pace as we imagine, but it is grown in terms of value and that is where this partnership comes in handy. Hero being the largest manufacture of cycles in the world brings on the table scale, efficiency and cost leadership, while Meghna’s premium built bikes into Europe brings technology and design and BSH’s most modern plant brings in capability to produce and grow productivity.
Meghna Group Managing Director Mizanur Rahman said they would continue to support this venture as a partner. “With this partnership coming into place BSH Ventures will be the biggest bicycle exporter in the SAARC region.”
“Sri Lanka is strategically located to tap the European market. At the same time GSP+ will come in next year, which is very good for Sri Lanka. I’m confident that manufacturing 1 million bikes would be a realisable target by 2019,” he added.
At present Hero makes 5% of the world bicycle production and BSH Ventures is the third acquisition of Hero Cycles in about one year. The company bought India based premium bicycle brand Firefox followed by UK based Avocet, upgrading the firm as third largest distributor in the UK.
In addition the firm will hold a mega scale dealer conference in Sri Lanka for the first time on 3 and 4 May which will be attended by Bollywood stars as well. “This will draw over 300 customers from India, leading importers from Europe and leading suppliers from Taiwan under one roof. We will create a new Sri Lanka opportunity, which has never seen before,” Munjal said.
BSH Ventures Ltd. is an export oriented bicycle manufacturing company that started operations in January 2011. It has a workforce of over 100 people and a production capacity of 250,000 bicycles annually. The state-of-art facility is located in the Biyagama Export Zone and confirms to all international standards and compliances. BSH was set up with an investment of about $ 4 million. BSH holds a licensee agreement with Raleigh International for making and marketing Raleigh bikes.
