Indian auto parts companies buying global firms

Indian auto parts companies are increasingly getting hungrier for overseas acquisitions. This is a tranition from their earlier supporting role in the global automotive scheme.

In the last 24 months alone, at least 11 deals have been struck, with more to come. That Omax Auto has just appointed KPMG to scout for acquisitions is another indicator that the appetite remains far from satiated.

According to Ashok Taneja, president of Automotive Component Manufacturers Association (ACMA), "There is a clear realisation that exports and international business are not the same. Acquiring global customers can be a long and tedious process. Buying out companies abroad is an efficient and smart way of getting global customers."

Though the domestic automobile industry provides ample opportunities for component suppliers to grow exponentially, they have drawn up global plans for expansion.

The most recent announcement of such a buyout came from the world's second largest forging company, Bharat Forge. It bought Imatra Kilsta AB of Sweden, along with its wholly-owned subsidiary Scottish Stampings at an market estimated price of Rs 250 crore (Rs 2.50 billion). This is Bharat Forge's fourth such buyout in the last 21 months.

Taneja adds that getting the latest technology plays an important role in securing big business. The challenge of high level of competition in the developed countries and the ability of Indian component supplier to deliver the goods at a lower cost has created a win-win situation.

"In the West, OEs and component suppliers work closely to develop new products. This has resulted in flow of know-how to the latter. Acquiring these companies abroad gives Indian companies access to technology that was not available to them," says Vishnu Mathur, executive director, ACMA.

Even smaller companies have made startling announcements on this front. Casting, forging and components manufacturing group Amtek, after acquiring three companies in the last two years, are eyeing two more -- one each in the United States and the United Kingdom. Resources for acquisitions are being raised through the FCCB and the debt route.

A company official said large customers like Ford, Jaguar, BMW, Renault, CNH, Honeywell would become customers of Amtek Group though the proposed acquisition in the UK.

Apart from acquiring customers, technology and capacities abroad, some part of the acquired business is also brought back to India because of the low-cost advantage here.

The industry, according to analysts, is capable of achieving an export revenue of $20-25 billion by 2015 and an equal amount in domestic sales. This would mean a pan-industry investment of Rs 5,500 crore (Rs 55 billion) per annum for the next 10 years.