Tata Capital has invested INR 3 billion ($49.9 million; €36.4 million) in Varroc Engineering, a holding company for auto component manufacturing business the Varroc Group, according to a statement.
The firm has made the investment from its flagship private equity vehicle, the Tata Opportunities Fund, which closed on $600 million in May last year – the largest amount ever raised in India for a first-time fund, according to the firm.
Varroc, which specialises in the manufacturing of plastic, polymer and metallic parts, as well as electrical components, for cars, generates around $1.15 billion in revenue each year and counts among its clients Ford, Bentley, Honda and Yamaha.
Tata’s capital injection will be used to expand the Varroc franchise into new market segments across all geographies. As well as its 21 manufacturing plants in India, Varroc has manufacturing locations in Mexico, China and the Czech Republic and management teams in the US, Europe and China.
Tata will support existing management and appoint more than one team member to join the board.
The investment is the Tata Opportunities Fund’s first in the manufacturing sector, as well as its first in a company not owned by its parent, Indian conglomerate the Tata Group. The fund’s prior investments include Ginger Hotels and Tata Sky, a joint venture with Rupert Murdoch’s 21st Century Fox (formerly NewsCorp).
Other private equity firms have also weighed in on the opportunity to invest in India's automobile sector, with The Blackstone Group taking a 98 percent in auto parts maker Agile Electric in July last year in a rare control deal in India, PEI reported earlier. Kohlberg Kravis Roberts, Bain Capital, Warburg Pincus and Singaporean sovereign wealth fund GIC Private have also made India-based investments in the sector.
“The fund believes India has excellent engineering and management capabilities which can be leveraged to create global leaders in manufacturing. While retaining a Tata bias in its investment strategy, the fund is actively pursuing investments into other such companies that have a history of operational excellence and robust governance led by dynamic management teams,” Padmanabh Sinha, managing partner of the Tata Opportunities’ advisory team in India, said in the statement.
Prakash Telang, former chief executive of Tata Motors and current senior advisor to Tata Capital Private Equity, added, “Varroc brings together the unique agility and vision of Indian entrepreneurship under [founder] Tarang Jain, with world class quality and technology ably championed by seasoned professionals at multiple levels.”