Deal focus: MOPE re-enters India’s automotive market

Happy Forgings is only the second investment by Motilal Oswal Private Equity (MOPE) in India’s automotive industry since 2009, but the firm believes it represents the best of both worlds: an established company with a proven and capable management, but eager to expand its slice of a growing market.

While the first was in evidence when MOPE encountered the company in 2013, Happy Forgings had yet to demonstrate the latter. Over nearly 35 years, it had built a solid business as a supplier of forged components to the automotive industry. Yet growing beyond a local power base had proved difficult because Happy Forgings didn’t stand out enough to draw significant attention from major manufacturers.

The company took a major step forward by adding machining capacity – a process that is more expensive than forging, but which allows higher quality in the end product. Happy Forgings paired this expansion with an aggressive push to recruit new, high-profile customers.

“We have been watching for over five years as they’ve scaled up and deepened their customer relationships,” says Vishal Tulsyan, a managing director and CEO of MOPE. “For example, the way they were able to penetrate Ashok Leyland, which is the largest commercial vehicle manufacturer in India after the Tata Group, and pick up a large portion of their business is something that we were very impressed with.”

MOPE aims to help the company build on its evolution with a INR2 billion ($27.2 million) investment that will support the construction of new facilities and the installation of new equipment. It is the third deal from MOPE’s latest fund, which recently closed at INR23 billion ($325 million).

An automotive supplier is a departure for MOPE, which typically invests in the financial services, healthcare, and consumer sectors. However, it expects more opportunities to arise in the industrials space due to growth in global demand. “There’s a massive opportunity in exports for many of these products, so we plan to work closely with the company to achieve at least 25-30% of revenues from exports in the next five years,” Tulsyan says. “There are a lot of pure play engine manufacturers globally that Happy Forgings is targeting to build relationships.”

MOPE also sees significant growth ahead in the domestic market. Happy Forgings is already a major supplier of crankshafts and other components to car, tractor, and locomotive manufacturers, and its established reputation for speed and quality will be significant assets as it cements new relationships.

“This company is very efficient in terms of setting up capacity at the lowest cost, with high production and operational efficiency,” says Tulsyan. “It’s extremely competitive on the cost front, while maintaining top quality. This isn’t just about exports – whether it’s an Indian company or a global firm like JCB with a base in India, their need for quality and consistency is the same in India as in the rest of the world.”   

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• Industrials
• Expansion
• India
• Growth capital
• automobiles
• manufacturing