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Tata Autocomp Lines Up $245M IPO

21 June, 2011

Auto-parts maker Tata Autocomp Systems, part of the $68 billion diversified Tata group, plans to raise at least $245 million through an initial share sale in the next 2-3 weeks, R.S. Thakur, managing director and chief executive, told Reuters.

The offer includes a fresh issue of shares to raise up to 7.5 billion rupees, which will be used to cut debt and expand capacity, Thakur said in an interview on Tuesday.

Existing shareholders Tata Motors, Tata Sons, Tata Industries and Tata Capital Ltd and Tata Investment Corp will together sell up to 35.6 million shares.

The Tata group firms together hold about 17 per cent in Tata Autocomp.

“We have already received final observations from SEBI (the Indian marker regulator). The sooner we do it, the better, as the passage of time will only increase uncertainty,” Thakur said.

The firm has appointed JM Financial Consultants Pvt Ltd, Tata Capital Markets Ltd and JP Morgan India Pvt Ltd as managers to the sale.

Tata Autocomp expects to use between 35-40 per cent of the proceeds from the fresh issue to cut debt. Its current debt – equity ratio stands at 2.2, he said.

Part of the funds would also be empolyed to expand capacity across its 47 manufacturing units. In FY11, Tata Autocomp’s had earmarked about 3 billion rupees for capacity expansion.

“The auto industry in India is going to grow, though maybe not as fast as the Chinese industry. Our focus is to harvest all the growth that is happening in the Indian auto sector. We feel that the Indian auto sector is going to grow so fast that we will have our hands full,” Thakur said.

Tata Autocomp, which counts Fiat, Ford Motor, General Motors, Volkswagen, Ashok Leyland and Eicher as clients, is in talks with Maruti Suzuki, India’s top carmaker, for business opportunities.

The firm has six global joint ventures, five of them equal partnerships in the areas of seating systems, wiring harness, radiators, batteries, commercial vehicle suspension and mirrors and control cables.

It is on track to double aggregate revenue, which includes JV sales as a whole, to $2 billion by 2015, he added.

Its consolidated revenue, which includes only its share of the JVs, is expected to rise to about $1.5 billion from about $639 million it reported in 2010/11.

India’s auto sales, which grew at a breakneck pace of 30 percent in India in 2010, are driven by a burgeoning aspirational middle class that relies mainly on bank loans for its purchases.

But consistently rising interest rates are forcing consumers to tighten their purse strings. Car sales rose 7 per cent in May, their slowest pace of growth in two years, but Thakur remains optimistic of the long term outlook.

“The growth has slowed down slightly at the moment, but we do not think it will shrink. What we believe is that this will not be a long-lasting slowdown,” Thakur said.

The fast growing local auto ancillary sector contributes some 2.3 per cent to India’s gross domestic product (GDP) and is expected to clock sales of $30 billion in 2010/11.

The industry’s apex body the Automotive Component Manufacturers Association expects turnover to touch $110 billion by 2020.

 


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Tata Autocomp Lines Up $245M IPO

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