The Hindu Business Line : MTAR Tech plans joint venture cos to tap new biz opportunities

Hyderabad, Jan. 8 MTAR Technologies, the indigenous precision equipment manufacturer for strategic sectors, has firmed up plans to float new joint venture companies targeted at capturing business opportunities in space, nuclear and Defence, oil and gas sectors.

The Hyderabad-based company, which recently raised Rs 255 crore from the Blackstone Group through complete equity, is already in talks with public and private players. It hopes to crystallise the first company by the end of March, according to Mr P. Ravindra Reddy, Chairman.

MTAR will hold majority stake in the joint venture company, which will try to tap business from multinational corporations (MNCs) as well exploit the offset policy of the Centre, which stipulates a minimum of 30 per cent of contract value to be indigenous contribution.

In a way, MTAR has made a beginning in that direction by bagging big orders from an MNC and executing them in the area of oil field engineering. The new joint venture companies would be located in Hyderabad.

The move is part of the five-year expansion plan taken up by MTAR, deploying the funds raised from Blackstone. The company offloaded 26 per cent equity to Blackstone Group. The balance equity is held by three main promoters —Mr P. Ravindra Reddy, Mr K. Satyanarayana Reddy and Mr P. Jayaprakash Reddy.

The investment by Blackstone is perhaps the first private equity flow into the Indian Defence and nuclear space. The PE had evaluated the enterprise value of MTAR Technologies at around Rs 1,000 crore.

The company, which has made contributions for the cryogenic engine and several critical components for space, supplied major equipment to atomic energy in the face of sanctions and Defence projects like Agni missile, nuclear power corporation for the reactor and aerospace, is beefing up its development and manufacturing facilities around Hyderabad using the funds.

MTAR has planned to set up two new facilities — one would be a completely export-oriented unit and the other a backward integration initiative. The company is targeting exports as a major growth segment, Mr Ravindra Reddy told Business Line in an interview.

In the Indian context material procurement is a major issue, which is often causing delays of up to 18 months in strategic projects. MTAR, which is involved in several projects, wants to create facilities to meet this demand. Similarly, investments in new generation machines, obtaining quality certifications through upgradation of facilities, and having refining and forging are priorities, he said.

The company is also in the initial stages of exploring the creation of a special economic zone for engineering. The signing of the Indo-US nuclear deal can give a major boost to the sector and MTAR wants to be fully geared to take advantage of the opportunities, he said.

The company which has a turnover of around Rs 130 crore now, is betting on doubling it during 2008-09 and thereafter grow rapidly, Mr Reddy said.

More Stories on : Alliances & Joint Ventures | Diversification | Engineering

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