Tata Auto Comp systems eyes more foreign acquisitions in quest to expand

12 June 2017

Tata Auto Comp Systems (TACO) is preparing for a major expansion, as the automotive component arm of the $103 billion Tata Group eyes opportunities in India and abroad. The company plans to invest Rs 1,000 crore over the next 3-4 years for organic expansion and to also scout for acquisitions, managing director Ajay Tandon said.

On its list is an overseas acquisition that could be worth more than $200 million (Rs 1,300 crore) and happen over the next six months to two years. Earlier this year, Tata Auto-Comp acquired Swedish powertrain component supplier TitanX, which will help it triple the contribution of overseas revenue from 12 per cent in fiscal 2016, and has given it confidence to go for more foreign deals. The acquisition had come after a process it initiated three years ago as part of an aim to grow into one of the top 10 auto component makers in India by 2021 and among the top 5 by 2025. Under an exercise with McKinsey, it screened more than 3,500 companies and the Swedish company was among about 32 they selected for close tracking. The deal gave Tata Auto Comp access to advance technologies and geographical reach, Tandon said. “We call it dream targets. The acquisition can only work if either there is a PE company involved or the owners do not have the second line, they want to let go of the business. The third filter is a very critical filter, that is feasibility,” he said. “That is the challenge. It has to be sustainable and profitable. You have to be a hunter, you cannot be hunted.” TACO deals in plastics, sheet metal, composites, supply chain and engineering. It is expecting to generate about $700 million in revenue in the current fiscal year that started in April, 50 per cent more than the year before. Profit, too, is expected to grow in a similar pace. The company didn’t share further numbers. The company has also been diversifying operations beyond cars and trucks to two-wheelers, tractors and off-the-road vehicles. TitanX, which generates an annual turnover of $200 million, gives TACO an opportunity to interact with global biggies like Volvo, Daimler and Scania and an entry into the markets of the Americas and Europe. TitanX already has a solution for the Bharat Stage VI emission rules that India is scheduled to adopt in 2020. In 2013, Tata AutoComp had set itself an ambitious target of generating $2.1 billion by 2020-2021. To reach there, it needs to make a big leap. “I can’t get there just through organic growth, there has to be another acquisition. We may look at an acquisition in the next 6-24 months,” Tandon said. He said the strategy itself needs a relook now. “Context was very different in 2013. Today it is about connected vehicles, autonomous vehicles, emissions, alternate fuels and shared mobility. The context of the world is changing, the types of companies you will look at will also change. You have to think big.” While the TitanX acquisition enables Tata AutoComp to cater to meeting the emission requirement of its clients, Tandon said the evolution of electric, hybrid and connectivity technologies interests him, hinting at his new target.

SOURCE: Mumbai samachar