Varroc eyes more acquisitions for tech

Varroc, the Aurangabad-based component major, is on the lookout for further inorganic growth steps. The company, which made two back-to-back acquisitions in the lighting space earlier this year, is now looking to climb the technology curve through the acquisition route. The areas of interest are metallic and polymer.

The company, which completed the acquisition of Visteon’s global lighting business for $72 million (Rs 398.5 crore) last month, says it will now see a jump from its current sixth position to third in the Indian auto component industry. The acquired entity has been renamed Varroc Lighting Systems. Varroc is still in talks to add Visteon lighting’s Chinese operations to its kitty, which is a 50:50 joint venture with Taiwanese company TYC. This will be a separate deal.

With two key suppliers – Visteon and Triom – in its kitty, the company expects to clock a cumulative annual growth rate (CAGR) of around 15 percent for the next decade. After the completion of the Visteon lighting division acquisition, Varroc’s revenues from domestic operations stand at 54 percent. A company spokesperson says he expects the domestic business to grow faster than exports.

Tech way to growth

Technology is being seen as a key tool for growth by Varroc. Its newest acquisition of Visteon’s lighting business gives it access to cutting-edge technology with over 100 patents. “This (Visteon) acquisition makes us the largest Indian automotive lighting manufacturer and the only lighting technology supplier in India. Visteon’s Global Lighting Business has already posted revenue of US $ 531 million (Rs 2,938.5 crore) and we are expecting to cross the US$ 1 billion (Rs 5,534 crore) mark by the end of FY 2013 to become one of the top three automotive components players in India,” says Tarang Jain, managing director, Varroc Group. “We expect the revenues of our lighting business alone to cross $1 billion over the next five years,” adds Jain.

The new acquisition will offer a boost to Varroc’s business from four-wheeler OEMs. It has helped the company to a six percent market share in the global lighting business. Varroc already has a healthy presence in the two-wheeler lighting business. Currently, 76 percent of Varroc’s business comes from two-wheeler OEM customers. But “there will be a significant shift towards more revenues from the four-wheeler market,” according to a spokesperson. The company’s revenue from OEMs outside the two-wheeler industry will also increase when it commissions its plant for commercial vehicle crankshafts. The plant, which is being set up in Aurangabad, is expected to be commissioned by Q2 of 2013.

SUMANTRA BAROOAH