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| VW-India Pvt. Ltd. |
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| Summary of Proposed Investment |
| 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. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 27926 |
| Company name | Volkswagen India Pvt. Ltd. |
| Country | India |
| Sector | Industrial & Consumer Products |
| Environmental category | B |
| Department | Global Manufacturing & Services |
| Status | Active |
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| Date SPI disclosed | March 12, 2009 |
| Projected board date | April 15, 2009 |
| Date revised SPI disclosed | May 1, 2009 |
| Previous Events | Invested: August 5, 2009
Signed: June 29, 2009
Approved: May 21, 2009 |
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| View Environmental & Social Review Summary (ESRS), click here |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| 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. |
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| Project sponsor and major shareholders of project company |
| The Sponsor of the Project is Volkswagen AG (“VW AG”), one of the world’s leading automotive Original Equipment Manufacturers (“OEMs”) headquartered in Wolfsburg, Germany. It is a listed company and the state of Lower Saxony holds a 20.1% voting rights share, while Porsche, the other major shareholder, holds 50.8% of voting rights. The Company is a wholly owned subsidiary of VW AG, held directly and indirectly, though other wholly-owned subsidiary of VW AG. |
| Total project cost and amount and nature of IFC's investment |
| The total Project cost, including the construction of the fully integrated green-field car manufacturing plant and investment in tooling for the Company’s suppliers, is estimated at EUR580 million. IFC’s proposed investment comprises (i) an A Loan of up to EUR60 million equivalent for IFC’s own account, and (ii) a mobilization component of up to EUR145 million (comprising a B loan and IFC-mobilized parallel loans from other development finance institutions). IFC may consider an equity or quasi-equity component within the proposed EUR60 million for its own account. |
| Location of project and description of site |
| The plant is located in the Chakan industrial area in Pune, the second-largest city in the State of Maharashtra, 160 kilometers southeast of Mumbai. |
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| Anticipated development impact of the project |
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. |
| IFC's expected development contribution |
| 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. |
| Environmental and social issues - Category B |
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. |
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| 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 661060 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
| 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 661060 |
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