Bharat Heavy Electricals Ltd (Bhel) is planning to acquire Hungary-based boiler maker TGR to establish a manufacturing facility in Europe. This is part of the company?s strategy to acquire companies in Europe and the United States to ramp up its manufacturing capabilities, acquire updated technology and wider market access. Once this acquisition is complete, the company plans to finalise a few more.
TGR has a strategic importance for the public sector entity as its acquisition will give Bhel a manufacturing base in Europe, from where it can supply the equipment and provide other services in the region. This is even as the PSU is expanding its manufacturing capacity to 15,000 MW by March 2010 and 20,000 MW by March 31, 2012 from 10,000 MW at the end of 2008-09.
TGR also fits in Bhel agenda as the two companies are familiar with each other?s management and operations. Bhel has a memorandum of understanding with TGR to jointly scout opportunities for supply, refurbishment and maintenance of boilers in Europe and the Commonwealth of Independent States.
?Bhel?s board is considering the acquisition of TGR. It will give them an opportunity to have a manufacturing unit in Europe through which it can serve that market. The company will also get cost advantage vis-a-vis foreign competitors,? heavy industry secretary Satyanarayana Dash told FE. The plans were confirmed by a senior Bhel official, who is also a member of the board. ?It is one of the options we are considering,? the official said.
?Generally, to serve the foreign market we either have to tie up with overseas firms or resort to unviable route of transporting equipment from India. Tying up with companies abroad has a disadvantage limiting our presence as we cannot venture in their market in accordance with the exclusivity agreement. If we buy a firm outside, we will be able to save at least 10% on logistic cost and get wider market access with updated manufacturing technology,? another official of the company said. After failing to acquire Skoda Power early this year, Bhel is turning aggressive on mergers and acquisitions abroad. It is in the process of appointing a panel of advisors for a minimum period of two years to act timely whenever an opportunity comes its way. Bhel had received orders worth Rs 126.16 crore during 2008-09, against Rs 130.88 crore a year ago, with an order book of Rs 235.73 crore.