Successful businessman Alexey Belyayev expands his Poprad-based empire of Tatravagónka eastwards. Prominent European producer of freight wagons wishes to expand to India after having entered the Russian market. Daily HN believes that Tatravagónka will establish a joint venture with a local producer in the second most populous country in the world. Their key focus should be production of railway wagons.
Expanding the empire
The company refused to provide further details on the transaction. However, new acquisition has been confirmed by three sources from the company independent of one another. Members of Tatravagónka top management presided by owner Alexey Belyayev visited India to meet local partners.
According to experts, this is a part of Belyayev’s plan to expand his railway empire. The company has recently left the Polish market after four years and sold its shares in Fabryka Wagonów Gniewczyna and now it is looking for new sales options.
One of the reasons of this step is the economic slump on the Russian market affected by economic sanctions imposed by western countries. “Business with Russia has been in major crisis, therefore I think that entering new markets is a rational decision not only from the perspective of Tatravagónka, but the whole Slovak industry,” said Pavol Kajánek, expert from Transport Research Institute in Žilina, for daily HN.
Successful establishment on the Indian market could be a springboard into Asia that the company has been trying to penetrate for several years. “India is indeed a gateway to Asian markets,” said Kajánek. Ľuboš Vančo, Managing Partner at KPMG, shares his views. “These markets are one of the few ones that are experiencing growth. Furthermore, potential for growth of railway transport in Asia is immense.”
Vančo believes it is good that the company decided to create a joint venture instead of purchasing a local Indian producer or establishing their own company. “This is the right way to penetrate the market. Each form of alliance with a local partner makes sense if the company is not familiar with the local situation,” explained Vančo.
Belyayev cannot complain about lack of advice on particularities of making business in India. At the beginning of this millennium, Svit-based Terichem, a company co-owned by Slovak chemical giant Chemosvit Svit and Finnish Ab Rani Plast Oy, tried to make it in India.
Backed out from India
Terichem entered the Indian market in 2004 by establishing a joint venture with a local partner. Terxpro FilmsPrivateLimited concentrated on the production of electrofoils and the joint-stock company from Svit held a 50% share. Ladislav Dulovič, Financial Manager at Terichem, said that market conditions were thoroughly analysed before the joint venture was established.
The analysis was carried out for Chemosvit by an international consulting company. “The second step was to prepare legal arrangements and contracts to establish a business. This was done by a contracted legal office from India,” explains Dulovič.
Diverging opinions on management and future of the joint venture – this was the main experience that one of the global leaders in electrofoil production gained. These issues resulted in Terichem leaving the Indian market. “I was surprised how different our cultures were,” stresses Dulovič. For example, managers refused suggested lean management structures. In context of these structures, the number of managers remained the same, only their formal relations changed. “It might have been the impact of historical social hierarchy in India,” concludes Dulovič.
Tatravagónka has vast experience with joint ventures
Tatravagónka used to have a joint venture with National Russian Railways focusing on development and production of bogies for wide gauges in Russia. The Slovak railway wagon producer signed contracts for the supply of special railway wagons for container freight with Transkontajner, a Russian Railways subsidiary. Poprad-based Tatravagónka established a partnership with Tichvinskij vagonstrojiteľnyj zavod concern, a Russian innovator and producer of original spare parts for freight wagons. Its largest client is the Russian national company.
Bogies for a new wagon-making plant in St. Petersburg have been developed and produced by Tatravagónka and affiliated companies. In 2012, Belyayev and Optifin group launched a joint venture with Russian mother of TVZ concert, United Wagon Company in Prakovce, Slovakia. The new railway industry castings company is managed by a young joint-stock company Railway Casted Components which received a subsidy of EUR 10 million from the government lead by Robert Fico. Production of casted components for the new bogie named Barber created 400 new jobs. At the end of last year, sales to Russia plummeted by approximately one third.
Following the difficulties faced by the Romanian IRS, Tatravagónka became the largest freight wagon producer in Europe. The company portfolio includes Vagónka Trebišov plant, Serbian subsidiary Bratstvo Subotica and since 2012, a wagon-making plant in Halle, Germany. Rumours had it that Belyayev and Tatravagónka Poprad were also interested in another German freight wagon producer DB Waggonbau Niesky. However, the company falling under the portfolio of national railways Deutsche Bahn was bought by Quantum holding from Munich.