Mumbai: Japan’s Mitsubishi Corp. is set to increase its 3% stake in TVS Automobile Solutions Pvt. Ltd (TASL) to 25%, the companies announced on Monday in Chennai.
Mitsubishi, which had bought a 3% stake in TASL last year, is investing in excess of ₹250 crore to increase its stake through primary investment and secondary purchase, subject to approval by the Competition Commission of India (CCI) and other authorities, TASL director R. Dinesh said over the phone.
The secondary purchase included the acquisition by Mitsubishi of some portion of the stake held by Kitara Capital, the first equity investor to have picked up a minor stake in TASL, Dinesh said.
The new arrangement will help TASL to source parts from Japanese auto parts suppliers directly for India’s automotive aftermarket, while Mitsubishi, along with TASL, would replicate the latter’s business model in other similar markets such as West Asia and Africa as part of global business expansion, according to Dinesh.
“The intent was to prove what we are now seeing as potential opportunities overseas can be exploited. Mitsubishi brings two big value propositions to us—access to Japanese spare parts to the Indian aftermarket and replication of the model in similar markets overseas, including developing countries, starting from Africa. So they will expand their portfolio and we will expand our business," said the TASL director.
Mitsubishi is also one of the largest distribution houses in Japan and, in that capacity, it has access to all the auto parts made by Japanese suppliers, he said. TASL is a leading independent aftermarket player in India and part of the $8.5 billion TVS Group. With a revenue of ₹1,300 crore, the company plans to expand its overseas footprint and double sales to ₹2,500–2,600 crore in the next two years.
TASL, which has a substantial presence in the UK and West Asia, reported domestic revenues of around ₹750 crore last year, Dinesh said.
The automotive aftermarket in India stands at $8 billion, with an annual growth rate of 10-15%, according to TASL executive director Srinivasa Raghavan.
“The aftermarket is highly fragmented with more than 100,000 garages if we consider passenger vehicles, and more than 400,000 garages if we include the two-wheeler segment. There are around 40,000 retailers and at least 4,000 distributors," said Raghavan, who believes that these are all the livelihood players who are desperately looking for a platform that can empower them through skilling, supply chain enhancement, and technologies to sustain and grow. TASL caters to the unorganized aftermarket, which stands at 70% of the whole segment, through genuine spare parts, technologies, processes, and training, he said.
“Our current reach is across a network of 20,000 retailers and 25,000 garages and provide parts to a fleet of 60,000 vehicles on road. In the next two years, we plan to increase it to 30,000 retailers, 30,000 garages and provide parts to a fleet of 100,000 vehicles," Raghavan said.