Portfolio company
AVTEC |  |
|---|
Business sector | Industrials |
Country of operation | India |
Market | South Asia |
Investment status | Current portfolio |
Investment type | Growth capital |
Date of original investment | 2005 |
Office | Mumbai, India |
Background
AVTEC, India's largest independent engines and transmissions manufacturer, is a new company created to take over the auto components business of Hindustan Motors, one of India's oldest car manufacturing companies.The company consists of two divisions that manufacture engines and transmissions for automobiles and automatic transmissions for heavy-duty vehicles including dumpers, loaders and mobile cranes. AVTEC already has an established customer base with clients such as General Motors, Ford, Caterpillar, BEML, Mahindra & Mahindra and Mitsubishi in India.
India's US$6.8 billion automotive component industry is well placed to take advantage of changes in the global market. Cost pressures have led the world's largest automobile manufacturers to outsource production to low cost manufacturing destinations. India, which has strong design and engineering capabilities, is emerging as a key outsourcing destination.
Their needs
AVTEC was looking for funding to expand independently of Hindustan Motors, whilst still supplying engines and transmissions to it. They needed support from a backer with unrivalled business expansion experience to help them achieve their objectives of building export capability and diversifying their domestic customer base.Our solution
Actis's knowledge of the Indian auto components business and its huge potential, supported by extensive due diligence, enabled us to beat the competition in an auction process, resulting in an investment of US$18 million.We believed that the key to AVTEC's success lay in developing its business independently of Hindustan Motors. We obtained backing for this from the co-sponsor, GP-CK Birla Group, and also encouraged them to acquire a 21% stake in the business at the same valuation.
Actis's added value
We have introduced AVTEC to consultants to help them build a framework for continuous improvements in operations and vendor management. We are working with AVTEC to strengthen its management team by advising on the recruitment of a new CEO and CFO. We also intend to leverage our extensive global network to help AVTEC build export capability.Furthermore, the Actis ESG team visited both the power products division located near Bangalore and the power unit plant located in Indore during the due diligence process. The ESG team has made recommendations to the company which build on the already strong ESG management systems, (both plants were ISO 14001 certified when Actis invested).
Avtec is a spin-off of the engines and transmissions divisions of Hindustan Motors. Avtec currently has two divisions: " PUP (Indore), which produces fully assembled engines and transmissions (as well as their components) for passenger cars. PUP's customers include GM India, Ford (India, UK & Turkey), Eaton, and Hindustan Motors; and " PPD (Bangalore and Chennai), which produces automatic transmissions (and their components) for off-highway vehicles such as dumpers and loaders used in mining, construction, and ports. PPD's customers include Allison Transmissions (a division of GM), Caterpillar India, and Bharat Earth Movers.