Homegrown auto component major Varroc Engineering is set to take a couple of steps aimed at strengthening its lighting business and entering into a new space. The Aurangabad-headquartered company is set to acquire a Turkish lighting company.
According to Tarang Jain, managing director, Varroc Group, the acquisition formalities are expected to be completed by the end of this month. "Turkey is going to be a key market. Its car industry is 1.7 million units strong," says Jain. The new acquisition will strengthen Varroc Lighting Systems, which currently is the world’s sixth largest in its segment.
Varroc won’t reveal the name of the acquired company yet, but according to Dunya, a Turkish news service, the company is called Sa-ba. The over-40-year-old company specialises in rear lamps and some interior lighting products for cars and commercial vehicles. It is expected to clock revenue of 50 million euros (Rs 394 crore) in 2018. The latest acquisition is part of Varroc's global growth strategy. It also plans to expand its global manufacturing footprint.
Varroc's international growth story started with its first overseas acquisition in 2006, until which it was a largely India-focused company. The acquisition of Visteon's exterior lighting division propelled it to become a major player in the global automotive lighting market.
Varroc is also set to enter the electronic fuel injection (EFI) business, its 17th product line for two- and three-wheelers. It will enter this space in a joint venture with an Italian company, Dellorto. The BS VI emission norm, set to kick in from April 2020, offers a good opportunity for this new business.
As the trend of electric mobility gains traction, Varroc is gearing up to be a supplier of electric powertrain for two- and three-wheelers. In addition to tapping the electrification megatrend, this move is also aimed at offsetting any adverse business impact due to mass-scale electric mobility. Around 16 percent of Varroc's business comes from components related to the internal combustion engine.
In the electric mobility space, Varroc's lighting business has made a good mark so far. According to Jain, his company, with a 20 percent share, is the second lighting equipment supplier in the emerging electric vehicle industry.
Varroc Engineering, a privately held business since its inception in 1990, is set to get listed in the stock exchange on July 6. A 15 percent stake will be diluted to raise close to Rs 2,000 crore. Jain will dilute 1.3 percent of his stake, while the rest will be of Tata Capital, which is exiting Varroc after remaining invested for a little over four years.
The company's Initial Public Offering (IPO) will open on June 26 and close on June 28. Varroc Engineering has set a price band of Rs 965-967 per share to raise around 1,950 crore.
The Varroc Group, manufactures and supplies exterior lighting systems, plastic and polymer components, electricals-electronics components, and precision metallic components to passenger car, commercial vehicle, two-wheeler, three-wheeler and off-highway vehicle OEMs worldwide. The Group has 36 world-class manufacturing facilities and 16 R&D centres in 10 countries.