The $4.5 billion Japanese air-conditioning major, Daikin Industries, is coming to India. The company has struck a deal with the Delhi-based Siddharth Shriram group to create a joint venture, Daikin Shriram Airconditioning, to make Daikin's global brands, such as the Sky Air range of split and duct air-conditioners.

Daikin will have an 80 per cent stake in the venture, and Shriram group company Siel will hold the balance equity. Siel will have the option to increase its holding to 26 per cent in three years.

The deal will also see the sale of Siddharth Shriram group's air-conditioning and water cooler business, now under a loss-making Siel subsidiary, Siel Aircon, to Daikin Shriram Airconditioning. The joint venture will take over the manufacturing facilities and other assets of the company for Rs 13 crore. It will also annex the sales and marketing departments of Usha International's air-conditioning division for a consideration of around Rs 3 crore.

Group chairman Siddharth Shriram believes that Indian companies cannot survive in the air-conditioning business on their own as they lack the technological expertise. The alliance with Daikin Industries will give Siel the needed technology.

Daikin, a global player in air-conditioning systems, specialises in split and duct air-conditioners meant both for domestic and commercial use. Besides making these products at the Siel Aircon plant, the joint venture will also import Daikin's speciality products like multi-splits and central air-conditioning systems. All the new products will be marketed under the Daikin brand. The venture will also sell the Shriram brand of ACs and water cooler.

Daikin has a presence in some 19 other countries through wholly-owned subsidiaries and joint ventures.

Mr Shriram said the arrangements will be subject to approval from the Foreign Investment Promotion Board and the Board for Industrial and Financial Reconstruction. The group will use a part of the funds from the sale of the plant to retire its high interest debts. The balance will be used to pick up equity in the joint venture company. Siel Aircon has accumulated losses of Rs 25 crore.

The Siddharth Shriram group has been diluting its holdings or exiting joint ventures. While its holdings in Honda Siel Cars and Siel Titzit have been cut to five per cent, the group has come out of Honda Siel Power Products.