Mumbai: Tata Opportunities Fund-backed auto components maker Varroc Engineering Ltd plans to go public and has hired investment banks to advise it on the share sale, said two people aware of the development.
Founded in 1990, Aurangabad-based Varroc supplies exterior lighting systems, power trains, electrical and electronic parts, and body and chassis parts to passenger car and motorcycle makers in India and abroad.
“Varroc had been in talks for an initial public offering (IPO) for a while and they have appointed investment banks Kotak Mahindra Capital and Credit Suisse to manage their initial share sale. They plan to soon file their draft red herring prospectus with an eye on going public sometime this year," said one of the two people cited above, requesting anonymity as he is not authorized to speak to the media.
According to the second person, the proposed IPO could be a mix of a primary fund raising and a secondary share sale.
“Tata Opportunities Fund is likely to sell part of its stake through the IPO, while the company will look to raise funds to invest in the business. The exact quantum of these are yet to be finalized," he said. He too requested anonymity.
Tata Opportunities Fund invested Rs300 crore in Varroc in 2014. It holds a significant minority stake in the company.
Credit Suisse declined to comment on the development. An email sent to Kotak Mahindra Capital did not elicit any response. “The company is not in a position to comment on the queries," said a spokesperson for Varroc Engineering in an email response to queries from Mint.
The Varroc group has 37 manufacturing facilities, 12 engineering centres, 13,500 employees and 760 engineering experts in 10 countries, according to the company’s website. Varroc claims to be the number one two-wheeler automotive component supplier in India.
According to the company’s filings with the registrar of companies (RoC), Varroc had consolidated revenue of Rs8,372.5 crore in the financial year 2015-16, up from Rs7,021.8 crore in the previous year. In 2015-16, Varroc earned a consolidated profit of Rs245.5 crore, down from a profit of Rs303.8 crore in the previous year.
Varroc derives almost 39% of its revenue from the North American market, while India and Europe contribute around 30% and 23% respectively, data from the company’s filings show.
Varroc’s plans to go public follow a record year of fund-raising. In 2017, 36 companies raised Rs67,147 crore through the IPO route, while in 2016, 26 companies raised Rs26,493.8 crore through IPOs. Varroc is not the only auto component maker that is planning to tap the buoyant IPO market.
Last month, auto component manufacturer Sandhar Technologies Ltd filed its draft papers with market regulator Securities and Exchange Board of India (Sebi) to raise Rs300 crore through an IPO. Apart from a fresh issue of equity shares worth Rs300 crore, the public offering comprises of an offer for sale of 8 million shares by private equity firm GTI Capital.