Exclusive: Tech hungry Endurance may make more inorganic moves

Aurangabad based Tier 1 supplier Endurance Technologies has made an acquisition move each in April and May. Its 3.5 million euro (Rs 29 crore) acquisition of Adler, an Italian supplier of clutches, gears and some other components was followed by the takeover of Grimeca for 2.25 million euros (Rs 18.6 crore), also of Italy. Both have been technology partners for Endurance Technologies. If not this month, creating a hat-trick of sorts, another acquisition may not be too far away.

“I’m still looking for lot of opportunities,” Anurang Jain, MD, Endurance Technologies tells Autocar Professional.  Jain says the key drivers for Endurance Technologies to take more inorganic growth steps would be technology and additional business. Both can help him maintain his business philosophy of profitable and better-than-industry performance. The acquisitions of Adler and Grimeca, both former technology partners, strengthen Endurance Technologies’ brakes and transmission businesses. These business arms are at the lower half of the company’s business verticals – suspension, aluminium casting, clutch/transmission, braking systems. Though at the bottom of the list, the brakes business is growing the fastest, thanks also to new regulations, and along with clutches contribute to 25 percent of Endurance Technologies’ domestic business.

Growth via the inorganic route
The Grimeca acquisition will be tapped mainly for enhancing the company’s presence in the Indian two-wheeler industry, which is witnessing a growing trend of premiumisation of products. It is learnt that Grimeca is already sitting with orders from Indian two-wheeler OEMs. One of Grimeca’s core products is a disc brake technology, which is between a regular disc brake and the premium floating disc brake.

Though done in quick succession, negotiations for Adler and Grimeca were one for close to a year. Jain could possibly negotiating with some more companies as he also looks to venture into new segments. That may include components/systems for EV and hybrid vehicles. “We are looking at new technology products which have few players, and have a scope of growth. If you have (advanced) technology and processes you have good potential for growth,” says Jain. He says that Endurance Technologies looks at making need based R&D investments, over having a fixed target as a percentage of sales. The Rs 45 crore proving ground near Aurangabad is an example, to get first-time-right products. “I’m spending where it is required,” he says.

Endurance Tehnologies’ acquisitions attract extra attention for being done during the ongoing pandemic times when cash flow is a leading challenge that’s forcing companies to stop or reduce investment plans. What’s helping Jain and his team to explore new opportunities is Endurance Technologies’ virtually zero debt status. This was not the case a few years ago.

The current pandemic times could see further consolidation in the global auto component industry, with attractive valuations of many target companies. The list of companies making inorganic moves in the global industry could include a few more Indian companies, with strong financial health and appetite for technology and business acquisitions. However, they would also keep a more stringent check on their operations and cash outflow as industry dynamics also change, some for good. “When you are running, there are many things you don’t focus on. Today we are going through each and every spend. We are finding many areas for cost saving, based on logic and facts,” says Jain.

READ MORE
Endurance Tech on an acquisition spree, buys Italian braking solution specialist Grimeca​

Endurance Tech expands global footprint, acquires Italy’s Adler