Warburg Pincus buys stake in Avtec, paves way for Actis’ exit

Fresh from its multi-bagger exit in the automotive sector, private equity major Warburg Pincus has picked up a minority stake in auto component maker Avtec Ltd. However, details of the transaction are not disclosed.

The latest investment will be used to provide exit to current investor Actis and also to fund future growth of the C.K. Birla Group company.

Actis paid $17.8 million to acquire 30 per cent stake in Avtec in February 2005.

The investment from Warburg Pincus comes days after it sold a controlling stake in the Alliance Tire Group to KKR & Co for over 4x returns.

“We are positive about the long-term prospects of the auto and off-highway industry in India, and have been impressed by Avtec’s differentiated capabilities as an aggregates and components supplier,” said Niten Malhan, managing director at Warburg Pincus India. Warburg is also an investor in auto parts maker Amtek Auto.

ATG, too, is a major player in the off-highway auto components, being one of the largest tyre makers in the segment and catering to agricultural, forestry and construction industries.

Actis, which has $5.2 billion of funds under management, has been exiting some its old investments and this is its third exit from the automotive sector in the past 14 months. Last year, it sold its stake in auto components maker Sandhar Technologies to GTI Capital and also exited commercial vehicle maker SML Isuzu through market sales.

But the emerging market-focused private equity firm has not written off all its bets in the sector as it remains a controlling shareholder in Halonix, a major player in the automotive lighting business. Also, it has recently invested $71 million into the auto component maker Endurance Technologies.

Avtec is one of the largest independent manufacturers of powertrain and precision-engineered products in India, manufacturing engines, transmission and intricate components such as cylinder head, cylinder block, crank shaft, cam shaft, cam rod and high precision transmission gears for the automotive and off-highway segments. It has around 1,600 employees at its four manufacturing facilities in India, located at Hosur and Chennai in Tamil Nadu, Pithampur in Madhya Pradesh and Kharagpur in West Bengal.

The company also has a design, patenting and batch production facility in Switzerland through its acquisition of ASSAG. Last year, Avtec acquired ASSAG in a Rs 120 crore deal. Avtec’s customers include global players like General Motors, Ford, Caterpillar, Eaton, ALLISON, Daimler and Renault Nissan, and domestic majors such as BEML, TATA and M&M.

Avtec is part of the multi-billion-dollar C.K. Birla Group, which has interests in cement, paper, building materials, ITeS, consumer electricals and construction equipment. The group holds stake in Avtec through various companies like Hindustan Motors, Hyderabad Industries and Orient Paper.

In FY12, Avtec earned revenues of Rs 650 crore, compared to Rs 537 crore in FY11, with profit after tax of around Rs 30 crore, as against Rs 27.4 crore in the previous year.

(Edited by Sanghamitra Mandal)

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