Aiming for more overseas M&As
Indian auto component manufacturers appetite for partnerships and overseas acquisitions is getting bigger at a time when an appreciating rupee is bringing down revenue from exports. To expand globally and improve their bottomlines, all automobile component companies, including Amtek, Bharat Forge, M&M and Sona, are aggressively pursuing foreign deals. Industry experts point out that overseas deals will increase as a growing number of Indian auto component companies achieve higher scales. Acquisitions in regions such as Europe and North America give these companies access to advanced technology and a global client base. The rupee, which rose over 12% in a year, further encouraged the Indian companies to scout for acquisitions abroad. Setting up their own business in a foreign market takes a lot of time. So many Indian companies are expanding their footprint in global markets by acquiring established firms in other countries. Although most of these acquisitions are small, the trend is likely to continue with Indian companies going in for big-ticket deals as they create a scale in the next five years, says Abdul Majeed, partner, automotive practice, PriceWaterhouse Coopers. In one of the biggest overseas acquisitions by an Indian auto component company, Sona Group firm Sona Okegawa recently bought the precision forging business of Germanys ThyssenKrupp Technologies, which is 10 times its size, for Rs 1,740 crore. The precision forging business of ThyssenKrupp is the second largest globally, and the acquisition made Sona Okegawa the world leader in the segment. In November, Amtek Auto acquired UK-based precision machining firm Triplex-Ketlon. Bharat Forge has set up a joint venture in China to take advantage of the low costs the country offers. Apollo Tyres will set up a greenfield manufacturing facility in Hungary for passenger car radials with an investment of 200 million euros. Rico Auto is also entering into a number of joint ventures for diversifying its client base. M&M clinched two deals last yearGerman forging company Jeco and Schoneweiss.