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03. July 2008

India - Amtek Auto may buy German KSM Castings

MUMBAI: Amtek Auto is learnt to have emerged as the front runner for the Frankfurt-based KSM Castings, a supplier of light metal casting products for the automotive industry.

The deal size is expected to be around e250 million (around Rs 1,700 crore). If the deal goes through, it will be one of the largest acquisitions by an Indian company in the automotive forging space.

Incidentally, Amtek Auto had won the ‘Emerging Company of the Year’ honour at the ET Awards for Corporate Excellence in 2006. A banker close to the development said the bidding for KSM has entered the second round.

Two global private equity players are also understood to be in the race. However, it will take some more time for the deal to be consummated, they added. When contacted, Amtek Auto managing director Arvind Dham declined to comment.

The proposed acquisition is part of Amtek’s strategy to consolidate its business in the European market, said a source. Amtek enjoys around 40% market share in Western Europe. KSM Castings is a leading manufacturer of security and complex, light metal castings for the global automotive industry.

Its clientele includes Volkswagen Group, Daimler, BMW, Ford, Porsche, Bosch, and Mann & Hummel. KSM last year reported sales of e355 million.

Amtek Auto manufactures automotive components and assemblies at its production facilities located across North America, Europe and Asia.

The company has capabilities to manufacture sub-assemblies, iron, gravity and aluminium castings, forging, complex machining and ring gears flywheel assembly. It has a market capitalisation of Rs 3,300 crore.

Recently, Amtek bought another UK-based gear company called Triplex Ketlon. The group’s first acquisition was the US-based ring gears manufacturer Midwest Manufacturing in 2002 followed by the UK-based companies GWK and Lloyds Brierly Hill.

Other companies that it has acquired in the past include Sigmacast Iron and the aluminium casting facility of Germany-based Zelter.

More than 75% of the company’s revenues are contributed by sale of components to passenger carmakers including BMW, Hyundai, CNH Global, Scania, Delco Machining, Land Rover and Renault. Amtek is adding capacity organically by setting up domestic facilities. It is setting up around 10 greenfield facilities in India with capital expenditure of around Rs 300 crore.

In the past two years, Amtek, Bharat Forge and Mahindra & Mahindra have been active in striking deals in European markets. As more and more vehicle manufacturers look at sourcing from India, local auto component makers are looking to scale up through both domestic and overseas acquisitions.

Says a leading Delhi-based components maker, “Since tier-I suppliers control the global components industry, the cost advantage should be leveraged to attract these players to set up manufacturing bases in India. However, low-cost labour is not a factor for long-term competitiveness as improvement in scale, quality and technology in critical processes are necessary to sustain cost competitiveness.”

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