The Yash Birla group-owned power solutions company, Birla Power Solutions, is mulling a foray into the diesel engine segment through an acquisition in the range of Rs 500 crore (Rs 5 billion).
The company is in talks with four-five domestic and overseas companies, mostly in the unlisted space, and hopes to enter the business in 9-15 months.
"We have plans to enter diesel generator, petrol, LPG and kerosene segment, but it will be too early to comment on any specific deal," said Kalyan Bhattacharya, president and CEO, Birla Power Solutions.
"The size of the acquisition will depend on the horse power of the engines manufactured by the company. BPSL is looking at a company manufacturing diesel engines of capacities ranging between 25 horse power and 200 horse power," added Bhattacharya.
When given the estimated valuations of the acquisition at Rs 500 crore (Rs 5 billion), Bhattacharya declined to comment.
Sources close to the development said the funding would be done through a mix of debt and equity, with equity accounting for 15-20 per cent.
"In the domestic market, BPSL is looking at those companies where there is a foreign stake or in companies that have good products but lack adequate marketing skills. BPSL will provide better sales and marketing support for such companies," said a source close to the development.
Apart from the inorganic route, the firm is also exploring a green-field venture in renewable energy.
The company plans to open about 250 outlets of Birla Power Shoppe across 40 cities by March 2010 from 60 outlets at present.
"We plan to sell about 100,000 generators in two years. We hope to increase our production capacity to achieve a turnover of over Rs 500 crore (Rs 5 billion) by 2011-12, excluding the turnover of the company that could be acquired, said a senior executive close to the development. The company has registered a turnover of Rs 223 crore (Rs 2.23 billion) for the financial year 2008-09.
BPSL, the Rs 2,500 crore (Rs 25 billion) company that was established in collaboration with Yamaha Motor in 1984, presently manufactures generators catering to various power requirements. The company acquired the stake of Yamaha Motor in 2002.
Sources said that BPSL intends to increase its market share in portable generators and pump from around 27 per cent to 60 per cent by 2010-11.