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Quest Global, which makes components for multinationals such as Airbus, Saab and Bosch, has spun off its manufacturing business into a separate entity.
Quest board member Aravind Melligeri, who will head the new company Aequs as its Chairman and CEO, said that the new structure will unlock value for shareholders and also make it attractive for investors who are keen on funding the manufacturing part of the business. The other entity, Quest Global will operate as an independent company for engineering services.
Melligeri said when Warburg Pincus invested in Quest Global, the company decided to have separate managements. Warburg Pincus and promoter Ajit Prabhu have 25 per cent stake each in Quest Global, while the new entity Aequs is fully owned by Mellegeri and his family.
Aequs has revenues of about ₹100 crore, which is expected to double next year. “The issue is more about how we can scale up our operations rather than the business,” Melligeri said. In 2010, the manufacturing entity had set a target of achieving one million hours of manufacturing per year in five years, and it has so far achieved half of that.
Aequs, which currently has about 600 employees, has facilities in Bangalore, Belgaum, and Houston in the US. Its Belgaum facility located in the country’s first precision engineering SEZ hosts 10 functional units.
Airbus contributes 10 per cent of revenues for Aequs, while United Technologies Aerospace contributes 25 per cent. The Houston plant caters to the oil and gas industry, while the rest cater to the aircraft industry. Airbus Executive Vice-President for Procurement Klaus Richter said the company sources about $300 million of components from India, about 50 per cent more than the previous year. It also sources doors from Hindustan Aeronautics based out of Bangalore. “India is providing us with competitive offers. Our procurement is no longer because of offset obligations; it is a free market at work here,” Richter said.
Aequs officials pointed out that companies such as Airbus are able to get savings of about 20 per cent by sourcing components from India. For example, the machine hour rate (labour wages) is about $30-$40 per hour in India, while it is double that amount in the UK or the US.
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