An official at Fuchs Petrolub AG said yesterday that the company expects the government of India to postpone a deadline for it to divest 24 percent of its subsidiary there, and hopes the government will eventually do away with the requirement altogether.
The Mannheim, Germany, lubricant company also said it is expanding in India and plans to triple the size of its business there within four years.
We are doing fine on our own and we want to continue marching forward in that way, said Alf Unterstellar, executive vice president for the Indian subcontinent, Central Asia, the Middle East and Africa. It is still a young company, but it is growing and should begin to turn a profit in a few years.
Unterstellars comments to Lube Report came in response to a recent article in the Indian press reporting that Fuchs has tried unsuccessfully to fulfill the divestiture requirement, set by Indias Foreign Investment Promotion Board in March 1999 when Fuchs bought Balmer Lawries stake in their 50-50 joint venture, Balmer Lawrie Fuchs. The board gave Fuchs five years to sell 24 percent of the venture to another Indian partner, a requirement similar to those set in other cases where foreign companies had bought out domestic partners.
Fuchs has been approached by several potential investors, Unterstellar said, but has turned them away. In fact, the company submitted an application to the board late last year requesting a five-year extension. Unterstellar said the company expects its request to be granted soon.
This kind of requirement seems to have been common, but we believe there are calls now for the rules it was established under to be eliminated, Unterstellar said. We are fairly certain that in another five years the requirement wont exist.
In its application, Fuchs argued that an extension is warranted because it provides all of the financial and technical support received by the Indian subsidiary, and because a partnership would keep it from importing technology that it now contributes. Fuchs said it is especially important for it to retain full ownership at this time because it is expanding rapidly.
According to Unterstellar, sales increased 74 percent over the past three years to Rupees 400 million (U.S. $8.8 million), and Fuchs expects the business to triple in size within the next four years. The subsidiary has introduced new products, expanded its distributor network and plans soon to begin exporting to other countries.