Auto cos, ICICI Venture eye Italy’s Lombardini

Industry:    April, 2016

Auto cos, ICICI Venture eye Italy’s Lombardini

This is tipped to be the biggest ever overseas buyout in the Indian auto component industry. Two Indian companies and one private equity firm are making a bid to acquire Italian diesel engine maker Lombardini SRI. It is learnt that Mahindra & Mahindra, Mumbai-based Zoom Auto Ancillaries and ICICI Venture are locked in what is expected to be over a Rs 1,200-crore deal.

According to industry sources, the deal is expected to be a leveraged buyout considering the size of investment involved. When contacted by ET, a spokesperson from Lombardini’s parent, London-based private equity firm BC Partners, confirmed the development.

“Lombardini is up for sale. There has been strong interest from Indian firms and we are in an advanced stages of discussions with one of them,” he said. Hemant Luthra, executive VP-corporate strategy, M&M, declined to comment.

However, Renuka Ramnath, CEO, ICICI Venture, confirmed that they were “bidding alone at this stage” for the Italian company. According to sources, the deal should materialise by November end. Several calls to Zoom’s CMD, Vijay Choudhary, and an e-mail query failed to elicit a response.

Emilia-based Lombardini has revenues of around E210m and an EBITDA margin of 10%. In 1999, a debt-ridden Lombardini was acquired for $148m by Mark IV Automotive, an OEM headquartered in the US and Italy.

Subsequently in ’00, BC Capital became the majority stakeholder in Mark IV in a transaction estimated at close to $2bn. BC Partners in turn is a leading European PE firm with funds worth $4.5bn under management.

While automaker M&M recently acquired a 67.9% stake in Germany’s Jeco Holdings, ICICI Venture is a well known private equity firm. But, Zoom Auto could well turn out to be the dark horse in this race backed by a financial investor.

The Mumbai-based company is engaged in the manufacture of plastic fuel tanks. It earlier acquired a fuel tank production facility from Nissan Motor in UK. Zoom is part of the Rs 500 crore, Zoom Developers.

It has interests in mining, waste management, petrochemicals, business process outsourcing and automotives, among others. Zoom tried to gain access to the Italian market earlier as well when it took part in the auction to acquire Tecnimont, the engineering company of Edison, two years back.

Lombardini entered India in ’03 with a 100% subsidiary and $10-12m R&D centre. At that time, it began with a manufacturing capacity of 75,000 engines annually.

However, with the rise in demand, the company has doubled its production capacity to 1.5 lakh. Lombardini India is currently making diesel engines primarily for Piaggio, which has its plant in Baramati (Maharashtra), Bajaj Auto and M&M.