Small carmakers making it big?

15 Jun 2007


Big auto component makers like Bharat Forge and Mahindra better look out. A new wave of car parts makers is building muscle through foreign acquisitions.

The front-fork components, made in Aurangabad by Endurance Technologies, are sold to Yamaha and Piaggio through an Italian company Piaoli Meccanica. Now Endurance plans to buy out the company after buying 40 per cent earlier this year.

Endurance, which has acquired three European firms for about €50 million, is part of a new wave of component makers going global and it has a strategy to avoid competition, from India or outside, while acquiring a company.

"Our strategy has been to try and avoid an auction process. We''ve tried to go in fast and close the transaction fast so that we don''t have to go through an auction process. In an auction the price goes haywire," says Anurang Jain, managing director, Endurance Technologies.

With such strategies and expansion in the domestic market, the Rs1500 crore endurance is eyeing a turnover of Rs5,000 crore in three years, and plans to list before then.

Like the bigger players, namely Bharat Forge and M&M, getting prestigious customers of Europe and N America is one of the reasons for the new wave of companies to go for acquisitions. Another reason forcing them to do so is to maintain high growth rate.

Precision, for example, says it is crucial for it to sustain the annual growth rate of about 50 per cent, which it has achieved in the past five years.

Jamshedpur-based RSB group, which is half the size of Endurance with a Rs650 crore-rupee turnover, has a similar story to tell. It bought a $30-million transmission component maker, Miller Brothers, for $19 million. That''s because besides meeting quality standards, proximity to customers is crucial to boost overseas business.

"That''s one reason why small companies are going to acquire. Another reason is product and process technology," says R K Behera, chairman, RSB Group.

RSB is now set to acquire a European company of about €10 million to expand its construction equipment component business. Others are also on a buying spree.

Bangalore-based Suprajit Engineering is looking for a company in Europe and North America and Solapur based Camshaft manufacturer precision is looking for one as well.

As pressure on component makers in the us and Europe increases from their customers, smaller Indian companies are going all out to make their mark in the global automotive industry.

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