Mahindra’s component unit close to European buy
The automotive components arm of Mahindra & Mahindra Ltd, India’s top utility-vehicle maker, is close to buying a European parts firm, a senior company official said on Monday.
"It will be firmed up in the next few days," said Hemant Luthra, president of Mahindra Systems & Technologies (MSAT).
"We are looking at overseas acquisitions of the size $300-400 million, which will give us access to technology and customer bases … this will be smaller," he said in an interview.
While there are several potential targets in the United States, the company was wary of the US automotive market.
"We are intimidated by the prospects for US Tier 1 OEMs (original equipment manufacturers), given the difficult conditions in the local market," he said.
Shares in Mahindra ended down 3 per centat Rs 623.80 in a Mumbai market that fell 3.1 per cent.
More than 400 auto-parts firms supply India’s $15 billion vehicles industry. The auto components industry is forecast to expand nearly five-fold to $33-to-$40 billion by 2015, including $20-to-25 billion in exports, according to McKinsey & Co.
Indian auto parts makers are in a rush to add capacity and scale to meet growing demand at home and abroad, as more manufacturers turn to low-cost centres such as India and China.
"When OEMs look to source from India, they are looking for scale and they want everything from one vendor," Luthra said.
MSAT comprises engineering services, sourcing and components manufacture and aims to be a fully integrated "art to part" supplier. It supplies manufacturers including India’s Tata Motors Ltd, General Motors and Ford Motor .
From 2007, MSAT will produce trucks and buses from 2007 in a joint venture with Navistar International Corp. and manufacture of a no-frills sedan in a joint venture with France’s Renault .
MSAT, which bought engineering services firm Plexion Technologies last December and UK forgings manufacturer Stokes a month later, expects to more than triple its revenue to $1 billion by the fiscal year to March 2010.
"My boss has said this is the outrageous ambition of an irrational CEO," Luthra said, referring to Vice Chairman Anand Mahindra.
"But if we remain a $125 million company within Mahindra, I won’t get the time of day from him."
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