TVS Group buys UK auto parts distribution firm

Vidya Padmanabhan, vidya.p@livemint.com

TVS Group, the Chennai-based automotive conglomerate, has acquired a 90% stake in Universal Components UK Ltd, a wholesale distributor of commercial vehicle parts, for Rs.100 crore.

The acquisition is its second in the UK after group company TVS Logistics Services Ltd bought logistics firm Multipart Holdings Ltd in 2009.

“This acquisition will give increased scale and size to strengthen our relationship further with global suppliers,” said R. Dinesh, managing director of TVS Logistics Services.

“We will utilize Universal Components’ marketing expertise and best practices in our businesses in India and other Asian markets.”

TVS Group has made the purchase using internal accruals from two group companies, tyre-maker TVS Srichakra Ltd and Associated Auto Parts Pvt. Ltd, which have together set up a special purpose vehicle, TVS Europe Distribution Ltd, for the acquisition.

TVS Europe Distribution would consider further acquisitions in Europe in the coming years, said Richard Slee, chief executive of TVS Automotive Europe Ltd.

With the acquisition, the TVS Group’s turnover would cross Rs.1,000 crore in the UK.

Universal Components would help TVS improve its forecast and planning capabilities and deploy advanced computer systems in India and other markets such as Sri Lanka and Bangladesh where it distributes spare parts, Dinesh said.

The TVS Group has an annual revenue of $6.6 billion (around Rs.33,600 crore today), with its parts distribution business contributing $1.6 billion. Universal, with annual revenue of £20 million (around Rs.162.5 crore), employs around 100 people.

“This (acquisition) seems to fit in,” said Kumar Kandaswami, senior director and country leader for manufacturing at consultancy Deloitte Touche Tohmatsu India Pvt. Ltd. “The TVS Group has companies that have component manufacturing capabilities. This would help it expand its distribution channels.”

TVS Supply Chain Solutions, the group’s European logistics company, for its part, would be eyeing acquisitions in Scandinavia and Poland, and expand its presence in Spain and Germany, Slee said. An acquisition would likely be made in Turkey in the next 12 months, he said.

(Source: http://www.livemint.com/2012/03/27223508/TVS-Group-buys-UK-auto-parts-d.html?atype=tp)

Ghaziabad’s auto ancillaries face labour shortage

Shivendra Kumar Singh, ET Bureau Mar 8, 2012, 11.35AM IST


GHAZIABAD: Ghaziabad, home to over hundred auto ancillary units, worth approximately Rs 600 crore is going through an acute manpower shortage despite rise in demand from the sector. While many players are contemplating automation of their units, government apathy and indifference from the banking sector have added to their woes. "We are under a lot of pressure to meet the demands of spare parts from our customers.

The sector is in the pink of its health, but not for us here in Ghaziabad," said Nand Lal Sharma, vice-president of the Kavi Nagar Industrial Area and director of Janus Auto. The two and half decade old company, Janus Auto, has been supplying spare parts to various transport departments of states like Gujarat, Himachal Pradesh, Andhra Pradesh, Tamil Nadu and the national capital Delhi.

(Source : http://articles.economictimes.indiatimes.com/2012-03-08/news/31135801_1_spare-parts-ancillaries-banking-sector)

Varroc leads Charge of the Indian Component Brigade Read more: http://forbesindia.com/blog/business-strategy/varroc-leads-charge-of-the-indian-component-brigade/#ixzz1q1kpIvee

03/13/2012 | 1 comments | 273 views


Varroc, an automobile components company based out of Aurangabad has announced that it will buy out the lights business of Visteon Corporation, a $ 8 billion US based auto components company. Varroc says it has paid about $92 million for the acquisition. It will now become India’s largest automotive lighting manufacturer. It could, in fact, rank among the top three automotive component manufacturers in India.

It is possible that you might not have heard of Varroc before. You should now- for various reasons.  Here is a homegrown automotive components manufacturer with its sights on the global stage. Tarang Jain, the company’s managing director doesn’t lack for ambition- he aims to grow Varroc to a $ 4 billion company by 2020. The new path not be through licences or technology agreements with multinationals like many of its peers. Vineet Sahni, president of Varroc’s electrical division and only six months old in the company (he was earlier at Minda) says that he has seen enough ‘begging for technology in the auto components space’. Varroc plans to have its own resources and technology. The downturn has thrown up quite a few opportunities, and there are good assets on sale, he says.

So what is Varroc’s background? It was founded by Naresh Chandra Jain, an entrepreneur who has for long been suplier to Bajaj Auto. Tarang is the son of Naresh Jain and Suman Bajaj-Jain, who is Rahul Bajaj’s sister. In the last 20 years Varroc has grown to become a Rs. 3, 200 crore company. It is still a private company though where two wheelers account for almost 80 percent of its business. Varroc has three business verticals; polymers (rear view mirrors, body panels and stuff), electrical (headlights, instrument clusters) and metallic (forging, catalytic converters, crankshafts etc). Each business accounts for roughly a third of its turnover.
Varroc figures as a prominent supplier to the two and three wheelers industry in the plastics and electrical space. It supplies to Bajaj Auto, Yamaha and Royal Enfield. But it has been sometime now that Tarang has been looking at opportunities to break into the big league. The lighting business, could well be his chance to do this.
In  December last year, Varroc bought a majority stake (80 percent) in Italy’s lights manufacturing company Triom. The Itallian company has a market share of almost 60 percent in Europe and supplies to Yamaha, Ducati and Honda. And it has plants in Italy,Romania and Vietnam. But even when this deal was taking shape, back in October 2011, Varroc began closely looking at Visteon’s lights business which was up for sale. Visteon manufactures lights for the passenger vehicles market.
Varroc didn’t have any presence in the car lights business. Visteon had the technology and the low cost manufacturing base. Tarang says the acquisition comes with an engineering center with 400 engineers and manufacturing base in Czech Republic, Mexico, India and a joint venture in China. And Visteon’s major customers are Ford, General Motors, Volkswagen and Jaguar Land Rover. Visteon’s lights business recorded revenue of $ 531 in the year 2011. Varroc decided it was a good buy.
The question though is if that be so, why did Visteon want to sell? In the last few years the company has been downsizing and getting rid of what it calls non core businesses. It has been in chapter 11 protection for two years. Visteon posted a loss of $ 26 million in Q4 earnings declared last month. So it doesn’t come as a surprise that it decided its lights biz is non core. Tarang quotes the example of another component maker- Delphi which at one point had revenues of more than $ 30 billion. “But it never made money,” he says. Over the last few years Delphi has gone the same way trimming down its businesses to bare essentials.
It is interesting how this acquisition will change Varroc’s profile. Cars rarely get developed for a single market anymore. With the Visteon buy, Varroc gets the scale and size of a global supplier. It will also have to scale up to deal with the complexity of running a global business. The total employee count is about 9, 000- spread across several geographies. Execution will be key to the success of the venture. Tarang will need  to grow Visteon’s existing business deeper into the US, European and India markets. He has to grow Varroc’s two-wheeler business in the far eastern countries. That’s a lot of hard work.


(Source : http://forbesindia.com/blog/business-strategy/varroc-leads-charge-of-the-indian-component-brigade/#ixzz1q1lO8bRy)

Rajkot components industry woos auto majors

Vimukt Dave / Mumbai/ Rajkot Mar 16, 2012, 00:53 IST



The Rajkot based auto components industry seems to have attracted major auto companies including Tata Motors, Asia Motor Works (AMW) and Peugeot once again.

At a buyer-seller meet held on Thursday in Rajkot, major auto companies evinced interest to work with auto components manufacturers from Rajkot. Organised by The Confederation of Indian Industry (CII), in association with Rajkot Engineering Association (REA), the meet saw participation from more than 90 companies.


"Peugeot is in the process of setting up a manufacturing unit in Gujarat and for our components requirement we will come to Rajkot. Safety and quality is priority for us and if any component manufacturer matches our requirement, we will be happy to do business with them," said Purvish Shukla, India vehicle project purchasing manager, PSA Peugeot Citroen.
Even Asia MotorWorks (AMW), which currently importing its cabin from China, is looking for increased localisation. "We have three vendors in Rajkot and as we are focusing on localisation, Rajkot seems to be the best option for us as it is nearest place from our factory," said Nagesh Azad, senior general manager - materials, AMW.

Similarly, Tata Motors also evinced interest for the region even as its officials met vendors in the CII buyer-seller meet. "We have two direct suppliers from the city and we are looking the vendors that have new technology and who can match our measurements. Further, Rajkot definitely has good potential to grow more. However, the city needs to concentrate more on quality," said Prashant Saxena, senior general manager, vendor development and procurement, Tata Motors Limited. Already, Rajkot based Bhavani Industries and Amul Industries are supplying parts to Tata for Nano. Meanwhile, according to VM Jha, deputy director, MSME development board of India, the meet will also motivate the small and medium enterprises (SMEs) to produce value added products. "There are so many small manufacturers in auto components industry at Rajkot and they are growing by 15-20 percent every year," said Jha. There are 500 auto component manufacturers at Rajkot. Out of these around 50 are suppliers to original equipment manufacturers (OEMs) while the remaining are small players which supply to the retail market. The industry in Rajkot produces more than 300 types of parts for the automobile industry and employs about 10,000 people. Turnover of the industry is around Rs 800-1000 crore per annum.

(Source : http://www.business-standard.com/india/news/rajkot-components-industry-woos-auto-majors/467850/)

Budget 2012: Focus on MSMEs welcome, says ACMA

16 MAR, 2012, 10.08PM IST, AGENCIES 



NEW DELHI: The Automotive Component Manufacturers Association of India (ACMA) on Friday welcomed the Union Budget 2012-13 and its focus on the manufacturing and MSME sectors.

"ACMA welcomes the focus on manufacturing, especially the Micro, Small and Medium enterprises (MSMEs). MSMEs constitute over 70% of ACMA's membership and access to capital has been one of the major constraints for the sector. We hope that setting up of the Rs. 5,000 crore 'India Opportunity Venture Fund' will enable the sector access the much-needed capital," it said in a statement.

It also said that it was happy about the weighted deduction of 200% on expenditure on R&D being extended for another 5 years, which will motivate the industry to focus on innovations and new product development.

"Shortage of skilled manpower has been an issue of significant concern to the industry; the introduction of weighted deduction of 150% on expenditure on skill development of employees will help in mitigating the concern," it said.

(Source : http://economictimes.indiatimes.com/news/emerging-businesses/sme-sector/budget-2012-focus-on-msmes-welcome-says-acma/articleshow/12296750.cms)

Duty hike will add further burden to auto component cos:ACMA

Monday, March 19, 2012


NEW DELHI: The Indian auto component makers have expressed their displeasure over the government's decision to raise excise duty, saying the step will adversely impact the already struggling automobile sector.

The industry also said the increase in customs duty of flat rolled steel, which is a key raw material, will affect the manufacturers.

"Enhancement of excise duty would adversely impact the prices of vehicles and in turn their consumption. This is of concern to the auto component sector as the sector grows in tandem with the vehicle industry," Automotive Component Manufacturers Association of India (ACMA) Executive Director Vinnie Mehta said.

The automobile industry is already struggling with sluggish demand during the current financial year due to rising fuel prices, inflation and high interest rates. From the beginning of this year, sales started improving slightly.

"Further, increase in customs duty on the 'flat-rolled' steel from 5 per cent to 7.5 per cent could unfavourably impact the auto component sector as this is one of the key input materials for the industry," Mehta said.

Flat rolled steel is used in sheet metal works that goes into many parts of a vehicle like body panels and chassis.

Expressing similar sentiments, steering major Sona Koyo said any price hike will surely impact the market sentiments.

"Of course the price hike will impact. However, if the interest rates come down, people may still be able to afford EMIs for purchasing vehicles," Sona Koyo Chairman Surinder Kapur told PTI.

Another component maker, Motherson Sumi Systems' Chief Financial Officer G N Gauba said the company will pass on the additional burden to the vehicle makers.

ACMA's Mehta, however, said the thrust given to the small manufacturing sectors in the Budget is a positive move.

"We welcome the focus on manufacturing, especially the micro, small and medium enterprises. MSMEs constitute over 70 per cent of ACMA's membership and access to capital has been one of the major constraints for the sector," he added.

He further said the setting up of the Rs 5,000 crore 'India Opportunity Venture Fund' will enable the sector access the much-needed capital.

"We are also glad that the weighted deduction of 200 per cent on expenditure on R&D has been extended for another five years, which will motivate the industry to focus on innovations and new product development," Mehta said.

Apollo Tyres' Chairman Onkar S Kanwar said the Budget struck a balance between economic growth and fiscal deficit, and hence should be able to build a positive sentiment.

(Source : http://economictimes.indiatimes.com//articleshow/12304906.cms)

Budget 2012: Auto components will not worsen further

Budget Highlights

• Increased excise duty by 2 per cent on auto components

• Retained the custom duty rates on auto components

• Basic customs duty on non-alloy HR and CR coils hiked from 5 per cent to 7.5 per cent. HR. This can lead to more pricing power for steel, and increase in steel cost of the auto sector

• To Set up Rs 5,000 crore India Opportunities Venture Fund with SIDBI

• Policy requiring Ministries and CPSEs to make a minimum of 20 per cent of their annual purchases from Medium & Small Enterprises (MSEs) approved. Of this, 4 per cent earmarked for procurement from MSEs owned by SC/ST entrepreneurs

• Increase in excise duty by 2 per cent on two wheelers, three wheelers, cars and commercial vehicles

• Excise duty reduced from 10 per cent to 6 per cent on specified parts of hybrid vehicles

• Extended weighted deduction of 200 per cent for R&D expenditure in an inhouse facility for a further period of 5 years beyond March 31, 2012

• Proposal to provide weighted deduction at 150 per cent of expenditure incurred on skill development in manufacturing sector

• No change in the corporate income tax rates

Budget Expectations Not Met

• Eliminate customs duty on alloy steel and secondary aluminum alloy

• Reduce customs duty on SS wirecloth stripe from 10 per cent to 5 per cent and on washcoat from 7.5 per cent to 5 per cent used for manufacture of catalytic converters and their parts

• To allow input credit on diesel procured for internal power generation & industrial use by manufacturing unit

• To provide 100 per cent Cenvat Credit on capital goods in year of purchase. Currently 50 per cent Cenvat Credit is allowed on capital goods in year of purchase, balance 50 per cent to be availed in subsequent years

• No interest for differential excise duty paid due to price increase subsequent to sale of goods in case supplies made to OEM's

• Phase out central sales tax by either removing it or reducing it from 2 per cent to 1 per cent pending GST

• Reduce corporate tax rate for domestic companies from current 32.445 per cent (including surcharge of 5 per cent and education cess 3 per cent) to 30 per cent

• Increase depreciation rate on capital goods from current 15 per cent to 25 per cent to encourage investments. It has also recommended charging a higher depreciation rate for domestically manufactured capital goods

• To extend weighted deduction for in house R&D that expires on 31st March 2012

• To provide 100 per cent tax benefit on corporate social responsibility activities

Budget Impact

The impact of hike in excise duty on auto components, depends on which segment a player caters to. In respect of supplies to OEM, there is no direct impact, as hike in excise duty is a pass through item.  The indirect impact can happen through easing of demand for auto, which can in turn affect demand for auto component. Given the relatively marginal impact of the hike on vehicle prices, this impact is marginal.

In respect of supplies to after sales/replacement market, there will be a pressure on margins.

The players have to hike prices to offset the hike in service tax and excise duties.  But in certain segments this may not be possible to due to intense competition from unorganised players and imports.  In such cases, the players have to partially absorb the increase in costs, and can only pass on a part of the hike.

In respect of auto component exports, we expect the Ministry of Commerce and Industry to hike duty draw back rates in June 2012, factoring in higher service tax and excise duty.  In the process, the margins for exporters can actually improve, depending on the extent of hike in duty draw back rates.

Within auto component manufacturers, players catering to commercial vehicles may be in comparative better position owing to large allocation to infrastructure industry - the prime customer for CVs.

Nonetheless, government's focus on MSEs augurs well for the auto component industry as 70 per cent of the companies in industry are MSEs. Also extension of 200 per cent weighted deduction on in-house R&D will continue to encourage companies to work towards innovative auto parts- a need for the industry especially to be recognized globally. Further introduction of weighed deduction on expenditure incurred on skill development would benefit all the auto parts players as skill training is basic pre-requisite for these companies in manufacturing field.

Outlook

The hike in customs duty on HR/CR coils may lead to marginal increase in domestic prices.  As regards hike in excise duties, it will be neutral for supplies to OEM, negative for supplies to replacement market, and turn positive for auto component exports.

The good news is the retention of the customs duty on auto parts at the existing levels. The countervailing duty equivalent to domestic excise duty is now 12 per cent from 10 per cent earlier. The auto component industry is already facing issues with growing imports as 21 per cent of domestic demand is met through imports. Though this step may not lower the imports, it at least wouldn't worsen the situation.

(Source : http://www.rediff.com/business/report/budget-2012-sector-auto-components-will-not-worsen-further/20120319.htm)

Auto component industry fears prices may go up on steel customs duty hike

Friday, 23 Mar 2012


BL reported that Indian auto component industry fears pricing pressure with the customs duty increase on flat rolled steel. The Budget has proposed a customs duty increase on non alloy, flat rolled steel from 5% to 7%. This, the ancillary industry feels, will effectively push up landed costs and create a benchmark for domestic steel manufacturers to hike prices.

Mr Vidyashankar Krishnan MD of MM Forgings said that “Domestic steel makers are talking of increasing prices to keep up with market forces. Some have already increased prices. This will directly impact the auto component manufacturers who have no choice but to pass on the price increase to customers. This will, of course, depend on the nature of contract and relationship with the customer.”

Mr Srivats Ram past president of the Automotive Component Manufacturers Association and MD of Wheels India said that “Steel is a primary product for the auto component industry and component makers importing steel will incur huge costs. With the rupee depreciation already acting as an automatic protection for the domestic steel industry and demand and growth for steel at the moment low, there was no reason for the customs duty to be raised.”

Completing the double whammy effect is the two per cent rise in excise duty from 10% to 12%. Mr Ram said that “At a time when inflation is at its peak, this hike will harm the auto and auto parts industry marginally.”

Source – http://www.steelguru.com/indian_news/Auto_component_industry_fears_prices_may_go_up_on_steel_customs_duty_hike/255742.html)

Varroc to acquire US-based Visteon Lighting for $75-100 mn

12 MAR, 2012, 08.20PM IST, PTI 


MUMBAI: Aurangabad-based privately-owned Varroc Group today announced signing of a deal with US-based Visteon Corporation to acquire the latter's global lighting business for USD 75-100 million (about Rs 500 crore).

"We have signed a deal with Visteon Corporation, a global automotive components maker, to acquire its global lighting business for USD 75-100 million. The deal will include acquisition of six manufacturing operations employing over 4,000 people which includes an engineering centre with over 400 engineers located in low cost countries like Mexico and Czech Republic," Varroc Group's majority shareholder and Chief Executive Tarang Jain told PTI here.

The company is expected to raise funds required for acquisition through private equity, Jain said.

The two companies expect to complete the deal in the third quarter 2012.

With this acquisition Varroc Group will become the largest Indian automotive lighting manufacturer and it will be amongst the top three component manufacturers in the automotive industry in the country, the company claimed.

Varroc Group provides components for two-three and four-wheel passenger and commercial vehicles and has 26 plants, of which 20 are in India, five in Europe and two in Southeast Asia employing around 5,000 people.

The acquisition is a major step in our vision of achieving USD 4 billion revenues by 2020 against USD 613 million in FY 12. Our annual revenues will be close to Rs 6,000 crore with this acquisition, Jain said.

The acquisition will also help Varroc to enter into global automotive exterior market for 4 wheelers. The company presently has strong presence in two wheeler lighting business, Verroc's president of electric division Vineet Sahni said.

(Source : http://economictimes.indiatimes.com/news/news-by-industry/cons-products/electronics/varroc-to-acquire-us-based-visteon-lighting-for-75-100-mn/articleshow/12235401.cms)

Automobile components industry to see stable growth

By G Balachandar Mar 01 2012 , Chennai


Despite changing growth patterns in the vehicle sector, auto parts industry is forecast to register a decent growth of 8-10 per cent in the domestic market for the present financial year.

“The fourth quarter is likely to be decent, as in some segments especially commercial vehicles the fourth quarter is always the strongest quarter. There is some growth in the passenger car segment in the fourth quarter especially given the poor showing in the third quarter. However, the agricultural tractor segment is showing some signs of slowing down in the fourth quarter,” Srivats Ram, managing director of Wheels India and former president of Automotive Component Manufacturers Association of India (ACMA) told Financial Chronicle.

In the recent past, the passenger vehicles was under some pressure, while light commercial vehicles including small commercial vehicles, tractors and two-wheelers did well and recorded good growth.

“The performance of the vehicle industry comes to the auto component industry as a 'mixed-bag'. We expect the overall growth for the auto component industry to be in the range of 8-10 per cent in the present financial year,” Vinnie Mehta, executive director, ACMA said.

“The medium & heavy commercial vehicle (M&HCV) segment recorded a volume growth (Y-o-Y) of six per cent each in Q1FY12, and Q2FY12 and 11 per cent in Q3FY12. While it may appear that the growth in the M&HCV segment picked up well in Q3FY12, it must also be noted that the corresponding period last year ie, Q3FY11 was relatively weak given the pre-buying that had happened in Q2FY11 in view of the scheduled change in emission norms from October 2010. Thus, volume growth of the M&HCV segment is unlikely to be in double digits in Q4FY12 (the growth was five per cent in January 2012). LCV segment will continue to post strong double digit growth,” said Subrata Ray, senior vice president – corporate ratings, Icra said.

Volumes in the passenger vehicle segment are to gain traction from Q4FY12 onwards as most of the concerns related to supply constraints (Maruti Suzuki labour unrest, Thailand floods) are now behind the industry. While the high base of Q4FY11 and the continued consumer scepticism on demand front, may still restrict growth in Q4FY12 and it is less likely to be as strong as it was in FY10 and FY11. However, performance in Q4FY12 will be better than the preceding quarters of this financial year, Ray added. Two wheeler industry is to report a volume growth of 14-15 per cent.

(Source : http://www.mydigitalfc.com/news/automobile-components-industry-see-stable-growth-965)