Kolkata:The privately held Ruia Group, which in December 2005 entered the auto component industry by buying struggling tyre maker Dunlop India Ltd, announced on Wednesday that it had concluded agreements in the first week of May to acquire two overseas companies that produce rubber sealing systems for cars.
The group did not disclose the amount to be paid for these acquisitions.
The two firms to be acquired—Turkey’s Standard Profil AS and Germany’s Meteor Gummiwerke KH Badje GmbH and Co. KG—had a combined turnover of €400 million (Rs 2,575 crore today) in 2010, making them the biggest overseas purchases by the group. Both firms are profitable.
The acquisitions will make the group one of Europe’s leading manufacturers of rubber sealing systems for cars, according to Pawan Kumar Ruia, chairman of the Ruia Group.
In the past five years, Kolkata-based Ruia Group has acquired four foreign companies that manufacture auto components, besides Dunlop and Falcon Tyres Ltd in India. The combined turnover of the group’s overseas firms is expected to approach $1 billion this year, said Ruia. Earlier this year, he told reporters that the group could consider a listing in Germany where it has acquired several companies.
Ruia said his group had applied for clearances from local competition authorities for the proposed takeovers and that the deals would be closed as soon as clearances were obtained. It could take around one-and-a-half months to obtain the regulatory clearances, he added.
While Standard Profil will be acquired from Bancroft Group LP, a private equity fund headquartered in the UK, the German company is being sold through a “government-appointed trustee”. Meteor Gummiwerke was in financial distress when the government took control of its operations a year ago, Ruia said.
Standard Profil, which has manufacturing bases in Turkey, Bulgaria and South Africa, registered an operating profit of €38 million on a revenue of €178 million in 2010. Its key customers are car makers such as Renault, Volkswagen, Audi, Fiat, General Motors and Ford Motor.
With a revenue of €222 million in 2010, Meteor Gummiwerke is a slightly bigger company, but its profit margins are under pressure. In 2010, it posted an operating profit of €7 million, supplying rubber sealing systems to customers such as BMW, Daimler, Audi, Porsche, Renault and Fiat. Besides Germany, it has factories in the Czech Republic and the US.
Standard Profil and Meteor Gummiwerke currently employ 3,498 and 2,445 people, respectively.
The Ruia Group would have to infuse funds into the operations of Meteor Gummiwerke, said Ruia, refusing to elaborate on the amount of investment.
In the past three-four years, firms that manufacture rubber sealing systems have typically been valued at two to seven times their revenue, Ruia said, giving an indication of what the acquisitions could have cost.
He said he could mortgage the assets of the two firms to raise money for the acquisition. “We haven’t finalized the funding arrangement; it would be decided only at the time of closing the deal,” he said.
Going forward, Ruia said he had plans to consolidate the assets abroad under common holding companies. There would be separate firms to own assets in each vertical such as rubber sealing systems and fasteners, he added, but the group would immediately focus on integrating operations.
Consolidation will help the Ruia Group gain more bargaining power with customers and create a stronger balance sheet to raise capital, according to analysts.
“But the group remains deeply indebted—that’s one of the key concerns,” according to a Kolkata-based equity analyst, who did not want to be named.
Ruia refused to disclose the total outstanding debt of the group or whether it has managed to pare money owed by firms it has acquired.