Mumbai: Vardhman Special Steels, the Ludhiana-based manufacturer of automotive and alloy steel, said the recent investment by Japan’s Aichi Steel Corp in the company will help it improve quality and efficiency to better meet domestic demand and replace imports of autograde steel with domestic product.

Aichi Steel Corp, a Japanese steelmaker and an affiliate of automaker Toyota Motor Corp, has agreed to acquire a minority stake of 11.4% in Vardhman Special Steels and provide technical assistance for 50 crore of investment.

The two companies signed an agreement on the deal worth $7 million in a ceremony held in Aichi Prefecture, where the Japanese firm is located.

“One of our key objectives of this partnership is to develop special steel grades for automotive companies in India so as to help fill the gap of providing substitution of steel that is currently being imported. We plan to later export this special grade of steel to South Asia and Europe as well," said Sachit Jain, Vice-Chairman & MD Vardhman Special Steels.

“Now that we have Aichi on board, we expect to be far ahead of competition," Jain told Mint. “Aichi supplies 80% of the steel for the Toyota group globally. We are seeing much greater collaboration between Maruti Suzuki and Toyota, so that will be a target for us to increase our business with Maruti in India. We want to be exporting steel for Toyato group requirements in Southeast Asia."

Vardhman Special Steels, part of $1.2 billion Vardhman group, has steel melting capacity of 2 lakh tonnes per annum at Ludhiana. “Once this is fully utilized and we become the best at processes and quality, we want to expand this to 3 lakh tonnes, which requires further environment approvals. Then phase 3 will be to put up a new plant. We want to eventually reach 1 million tonnes per annum of capacity."

Vardhman Special Steels reported a net profit of 22.21 crore on revenue of 1120.76 crore in FY19.