Mumbai: Actis Advisors Pvt. Ltd, a private equity (PE) firm that invests primarily in emerging markets, has picked up a minority stake for $71 million in Aurangabad-based auto component maker Endurance Technologies Ltd.
“We have a deep understanding of the (auto) market,” said J.M. Trivedi, head of South Asia at Actis, explaining the rationale behind the investment.
Actis has been active in the auto sector having invested in companies such as Punjab Tractors Ltd, Avtec Ltd and Sandhar Auto Components Ltd. “India is the largest market for two-wheelers after China and is emerging as a global hub for small cars and motorcycles,” Trivedi said.
Endurance manufactures aluminium die castings, suspensions, transmissions and brakes with a specific focus on the motorcycle and scooter market and high-end engine and transmission components for passenger and commercial vehicles. “The company’s growth mirrors the motorcycle market, which is driven by the rising disposable incomes and transportation needs in urban and rural India,” said Trivedi.
Kotak Investment Banking advised Endurance on the transaction.
After declining for the last four months, car sales turned positive once in November, with volumes rising 6% from a year earlier, according to a 5 December Credit Suisse report.
Standard Chartered Private Equity Ltd, which had invested $50 million in Endurance in 2007, was looking to sell its stake in Endurance through an initial public offer in 2010. Endurance had filed a draft red herring prospectus (DRHP) with the capital market regulator in September 2010. The company did not pursue its listing plans.
Trivedi declined to comment on details with regard to the deal being a primary or secondary fund infusion. “While we cannot disclose the exact holding due to non-disclosure agreement, it is a significant minority stake,” he said.
“Today, a lot of the PE deal activity is around companies that had plans to list this year, but could not go ahead with it given the volatile state of the capital markets,” said Vikram Hosangady, head of transaction services at KPMG India Pvt Ltd. While a primary round is not that easy today, a secondary round, where a P firm buys out the existing PE firms’ stake, thereby giving the latter an exit, is much easier to do, according to him.
“There are quite a few such large-ticket deals in the market today arising out of such secondary opportunities and redemptions of foreign currency convertible bonds,” he said.
According to the DRHP, Bajaj Auto Ltd is one of Endurance’s biggest customers. Sales to the firm’s top five customers represented 73.5% of net sales for the fiscal year 2010. “Our two largest customers, Bajaj Auto and Fiat Group Automobiles SpA represented 51.5% and 10.9%, respectively, of our net sales for the fiscal year 2010,” the DRHP said.