Business Daily from THE HINDU group of publications
Thursday, Sep 28, 2006
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Business Daily from THE HINDU group of publications Thursday, Sep 28, 2006 ePaper |
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Industry & Economy - Automobile Components Auto components majors put off overseas acquisition plans Neha Kaushik
Speed breakers Chinese companies too have joined the race to establish a footprint in Europe. Omax says that European firm was quoting around 10-12 times the EBITDA rather than the traditional 5-8 times
New Delhi , Sept. 26 The increasing trend of overseas acquisitions by Indian auto components companies may just slow down this year with European and American firms quoting higher valuations. Major auto component companies including Amtek and Omax have said their acquisition plans have been postponed in view of the higher valuations cited by western firms. According to Mr A.K. Taneja, President, Auto Component Manufacturers Association (ACMA), earlier it was only the larger Indian companies which were eyeing acquisitions in Europe. However now, not only has there been a jump in the number of domestic auto component firms eyeing overseas purchases but Chinese companies too have joined the race to establish a footprint in Europe. The Omax Autos Executive Director - Finance, Mr Naresh Tandon, points out that the company was in talks to acquire a European auto components firm 2-3 months ago but, however, decided against the acquisition since the European firm was quoting around 10-12 times the EBITDA rather than the traditional 5-8 times. Similarly, Amtek Auto's big ticket acquisition plans have been delayed by valuations shooting up in the western markets. "The overseas acquisitions are getting a bit delayed since we feel that the valuations are still on the higher side. Valuations of manufacturing firms in the western markets have gone up due to interest shown by companies based in India, China and South-East Asia. However, we feel that the valuation will come down in the near future," Mr S. Singhi, CFO, Amtek Auto, said earlier. Amtek Auto, which has strong cash reserves of about $300 million, is in talks to acquire European and American companies, which have a turnover ranging from $50 million to $700 million. Sources point that a couple of Indian companies may also have dropped out of the race to acquire Turkish components major Doktas due to the high valuations. Ashok Leyland, Rico Auto (for purchase of the castings business only) and Mahindra & Mahindra along with a handful of European firms and a Brazilian firm are learnt to be in the fray for the $250-million Doktas. Industry officials, however, add that the slowdown in overseas acquisitions by Indian auto components firms may only be a short-lived phenomena as the number of "serious" contenders are only few. "Most of the Chinese and South-East Asian firms are only window shopping, rather than offering any serious expressions of interest. Valuations may have increased for now but they are bound to come down," an official from a domestic auto components manufacturer said.
Related Stories: More Stories on : Overseas Investments | Automobile Components
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