Bangalore: United States (US) audio systems maker Harman International Industries Inc is in late-stage talks with Tata Motors for a ‘large’ contract, as it seeks to grow its India business five-fold to about $250 million within five years.
“Tata and Harman are working very closely and something should come out of it fairly soon,” Harman chief executive officer (CEO) Dinesh Paliwal told the news agency in an interview on Monday.
The Stamford, Connecticut-headquartered company, whose brands include Harman Kardon, JBL, AKG and Infinity, currently has sales of about $50 million in India, and is chasing contracts of $50-$100 million to hit its $250 million target, Paliwal said.
While unable to comment on the exact timing of a deal with Tata Motors, as the talks are still in process, Paliwal said an agreement should be struck within months.
The deal with Tata Motors - part of the salt-to-software Tata conglomerate and the maker of the ultra cheap Nano car - could be a business catalyst for Harman in India.
“I’m looking at various places in Pune, Chennai and Gujarat to set up our first manufacturing facility in India,” said Paliwal during a business visit to Bangalore.
Harman, which recently started operations at its manufacturing facility in China, is shifting some plants to so-called BRIC nations - Brazil, Russia, India, China - to lower its costs and increase margins.
Setting up a manufacturing facility in India would involve investment of about $100 million, Paliwal said. “My board is very comfortable with an investment in that range,” he said.
Harman does engineering work for audio systems for BMW and Audi from a research and development center in Bangalore.
“The manufacturing facility will not be designed just to do work for Tata. It will be designed to work for BMW, Audi and others,” Paliwal said. “The day we decide we are setting up a manufacturing facility in India, within 8-9 months from then we’d be in full production.”
Harman provides audio products for cars made by BMW, Audi, Volkswagen, Daimler, Toyota, Fiat SpA and Ferrari.
Harman, co-founded by stereo magnate Sidney Harman, plans to invest tens of millions of dollars in engineering in India, seeking to develop audio systems that will fit local consumers’ price requirements.
Harman, which competes with Bose, Yamaha, Panasonic Corp, Sony Corp and Denso Corp, ended fiscal 2011 with about $1.5 billion in liquidity. It is looking at acquisitions to boost its growth in India.
Harman is interested in companies with technology it doesn’t have and firms that can help it rapidly expand and gain market access in India, Paliwal said.
“I would accept higher multiples (than in the US or Europe) and still buy companies in the BRIC nations because these are high growth regions that we’re betting on,” he said.
Harman shares have fallen nearly 40% in the past 10 weeks. The stock closed at a two year low of $28.58 on Friday on the New York Stock Exchange after its biggest one-day drop in 6 weeks - since it posted a lower quarterly profit on 10 August.