Global interest in Indian automotive strengths is reviving. US-based automotive giant Federal-Mogul is learnt to have acquired a 51% equity stake in the recently-delisted Perfect Circle — part of the New Delhi-based, Rs 3,000-crore Anand group — to strengthen its presence in India. The foreign company had recently acquired the engine bearings unit from the Anand group’s Gabriel.
The combined sales of the engine bearings division and that of Perfect Circle is estimated to be around Rs 300 crore. While the acquisition of the controlling stake in Perfect Circle is at Rs 17 crore, it is a strategic step that will complement Federal-Mogul’s recent move to build an automotive friction components manufacturing facility in Chennai, besides taking over business from an Indian group that makes components for almost all vehicle and engine parts manufacturers in the country.
This would be yet another strategic move by Federal-Mogul, as the company had last year bought out industrialist Anil Nanda’s stake in his JV, Goetze India. The acquisition of Goetze India and Perfect Circle would enable Federal-Mogul to make high-grade pistons and rings needed to meet emission norms that are scheduled to kick off in India by 2010.
A Federal-Mogul spokesperson said: “We cannot comment on any on-going negotiations. However, I do wish to reiterate the importance of India to Federal-Mogul and its strategy for sustainable global profitable growth.” Mr Anand declined to comment to an email query that ET sent.
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Federal-Mogul — which makes pistons, spark plugs, bearings and other automotive parts — already has six facilities in India, and generates more than 60% of its revenue outside North America.
The Anand group, founded by entrepreneur Deep C Anand, has over 16 companies under its fold and has typically grown through collaborations with foreign automotive majors. In fact, the group’s promoters had bought automotive major Dana’s stake in Perfect Circle before selling 51% to Federal-Mogul. Of all the companies, Gabriel is the flagship company of the group with revenues of more than Rs 600 crore.
According to sources, the move by Federal-Mogul could also be a precedent to an eventual paring down of Mr Anand’s shareholding in the group as the 75-year-old chairman has no family heirs. However, as the group has been professionally-run since its inception and grooms senior executives from within its ranks, it is also widely believed that the organisation will work for retaining its senior executives.
However, Perfect Circle chairman and member of Anand group’s policy committee, KN Subramanium, said since Federal-Mogul does not have common products beyond Perfect Circle and Gabriel, “they may not look at other companies in the group”.
Sources said Federal-Mogul plans to develop its India units so that it can cater to not only growing local demand, but also serve the US-based parent as a low-cost production hub. Federal-Mogul also plans to relocate some of its facilities from high-cost locations in Europe and the US to India.
The US major, through Goetze India, is expected to tap into the demand for high technology changes expected for forthcoming emission regulations in India. Perfect Circle India is involved in manufacturing internal combustion piston engines. In addition, the company manufactures other parts and accessories used in heavy motor vehicle, motor vehicles designed to transport less than 10 vehicles as well as two-wheelers.
Source: Economic Times